SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Under Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (date of earliest event reported): October 15, 1998
FUTURE PETROLEUM CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Utah 0-8609 87-0239185
(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File Number) Identification No.)
2351 West Northwest Highway
Suite 2130, Dallas, Texas 75220
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (214) 350-7602
N/A
(Former name, former address, and formal fiscal year,
if changed since last report)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 15, 1998, Future Petroleum Corporation (the "Company")
completed the acquisition of oil and gas properties in five (5) transactions
to complement its existing properties. Such acquisitions included the
following:
(1) A 100% working interest in the Cross Creek Field located
in Harris and Montgomery Counties, Texas, was acquired from Bargo
Energy Resources, Ltd., a Texas limited partnership and a principal
shareholder of the Company ("Bargo"). On the same date, Bargo had
acquired such properties from Chevron U.S.A., Inc., a Pennsylvania
corporation. The effective date of the acquisition was October 1, 1998.
(2) An interest in the Gin Unit located in Dawson County,
Texas, was acquired from NCI Properties, Ltd., a Texas limited
partnership. The effective date of the acquisition was August 1, 1998.
(3) An additional interest in the Shawnee Townsite Unit
located in Pottawatomie County, Oklahoma, was acquired from NCI 1990,
Ltd., NCI Reserves, Ltd., NCI Properties, Ltd., Southwest Sulphur &
Oil, Inc., Wayne Newkumet, and Castello Enterprises, Inc. The effective
date of the acquisition was August 1, 1998.
(4) Interests in the NE Limes Field located in Live Oak
County, Texas, the Candy Field located in San Patricio County, Texas,
the Sand Hills Field located in Crane County, Texas, the Bruce Roy
Field located in Wharton County, Texas, the Bluitt Field located in
Roosevelt County, New Mexico, and the N. Yellow Creek Field located in
Wayne and Clark Counties, Mississippi, were acquired from Bargo Energy
Company, a Texas corporation and affiliate of Bargo, and TJG
Investments, Inc., a Texas corporation of which Tim J. Goff, a director
of the Company, is the president. The effective date of the acquisition
was September 1, 1998.
(5) An interest in the Buna Field located in Jasper County,
Texas, was acquired from Pledger Partners, Ltd., a Texas limited
partnership and affiliate of Bargo. The effective date of the
acquisition was September 1, 1998.
The primary producing formations include Wilcox in the Cross Creek
Field, the Gin Sand in the Gin Unit, the Skinner in the Shawnee Townsite
Unit, the Wilcox in the NE Limes Field, the Frio in the Candy Field, the Tubb
and McKnight in the Sand Hill Field, the Yegua in the Bruce Roy Field, the
Wolfcamp in the Bluitt Field, the Pilot Sand in the N. Yellow Creek Field,
and the Wilcox in the Buna Field. The properties include interests in 78
producing oil and natural gas wells.
As of September 1, 1998, the properties have aggregate estimated proved
reserves of 791 thousand barrels of oil and 19.407 billion cubic feet of
natural gas, or 24.153 billion cubic feet equivalent.
The aggregate purchase price for the assets and interests acquired was
$11.1 million in cash, 280,000 shares of the Company's common stock, and
promissory notes in the aggregate principal amount of $4,000,000 payable to
Bargo Energy Company and TJG Investments, Inc. The Company financed the cash
portion of the purchase price of the properties by increasing the borrowing
base under the credit agreement with Bank of America established in August
1998 and borrowing such funds from Bank of America. The promissory notes
issued to Bargo Energy Company and TJG Investments, Inc., carry a 10% per
annum interest rate. Under the terms of the notes the Company will make
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quarterly payments of interest only until December 31, 2003, at which time
all unpaid principle and accrued interest will be due and payable. At the
option of the Company, the Company may elect not to pay the first seven
quarterly payments of interest on the notes, in which event the unpaid
interest will be added to principal. The Company may prepay the notes at
anytime without penalty. The notes are secured by all of the properties and
interests acquired, as well as the other assets of the Company and its
subsidiaries, subject to the priority interest of Bank of America in all such
assets.
Except for the relationships described below, the terms of the purchase
were the result of arm's length negotiations.
Because of the existing relationships of several of the members of the
board of directors with certain of the selling parties or their affiliates,
certain members of the board of directors of the Company abstained from the
voting on the approval of the transaction when deemed necessary. Because of
their relationship with Bargo, Tim J. Goff and Thomas D. Barrow abstained
from voting on the matter relating to the acquisition of the Cross Creek
properties described in item (1) above; because of their relationship with
Bargo Energy Company and TJG Investments, Inc., Tim J. Goff and Thomas D.
Barrow abstained from voting on the matter relating to the acquisition of the
properties described in item (4) above; because of their relationship with
Bargo, Tim J. Goff, Thomas D. Barrow, D. Martin Phillips, and Gary R.
Petersen abstained from voting on the approval of the Buna property described
in item (5) above; on all other matters, the disinterested members of the
board of directors unanimously approved the terms of the transactions and
believe them to be fair to the Company from a financial point of view.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
a) Financial statements required by this item will be filed by amendment
as soon as practicable, but no later than 60 days after the filing of
this report on Form 8-K.
c) Exhibits
The following exhibits are included as part of this report:
SEC
Exhibit Reference
Number Number Title of Document Location
- -------- ---------- --------------------------------------- ---------
Item 10 Material Contracts
- --------------------------------------------------------------------------------
10.01 10 Purchase and Sale Agreement between Bargo This filing
Energy Company ("BEC") and TJG Investments, Inc.
("TJG"), as Sellers, and the Company, as Buyer,
dated October 15, 1998
10.02 10 Promissory Note of the Company payable to BEC This filing
in the principal amount of $3,397,600, dated
October 15, 1998
10.03 10 Promissory Note of the Company payable to TJG This filing
in the principal amount of $602,400, dated
October 15, 1998
10.04 10 Purchase and Sale Agreement between Pledger This filing
Partners, Ltd., as Seller, and the Company, as
Buyer, dated October 15, 1998
10.05 10 Purchase and Sale Agreement between NCI This filing
Reserves, Ltd., Southwest Sulfur & Oil, Inc.,
Wayne Newkumet, and Castello Enterprises, Inc.,
as Sellers, and the Company, as Buyer, dated
October 15, 1998
10.06 10 Purchase and Sale Agreement between NCI This filing
Properties, Ltd., as Seller, and the Company, as
Buyer, dated October 15, 1998
10.07 10 Purchase and Sale Agreement between Bargo This filing
Energy Resources, Ltd. ("Bargo"), as Seller, and
the Company, as Buyer, dated October 15, 1998
10.08 10 First Amendment to Master Subordination This filing
Agreement by and among Bank of America and
Energy Capital Investment Company PLC ("ECIC"),
EnCap Equity 1994 Limited Partnership ("EnCap"),
BEC, and TJG, dated October 15, 1998
10.09 10 Subordination Agreement by and among Bank of This filing
America and ECIC, EnCap, BEC, and TJG, dated
October 15, 1998
10.10 10 Intercreditor and Collateral Agency Agreement This filing
by and among ECIC, EnCap, BEC, and TJG, dated
October 15, 1998
10.11 10 Renewal Promissory Note of the Company payable This filing
to ECIC dated October 15, 1998
-3-
SEC
Exhibit Reference
Number Number Title of Document Location
- -------- ---------- --------------------------------------- ---------
Item 10 Material Contracts
- --------------------------------------------------------------------------------
10.12 10 Renewal Promissory Note of the Company payable This filing
to EnCap dated October 15, 1998
10.13 10 Second Amendment to Pledge Agreement between This filing
ECIC, EnCap, BEC and TJG, as secured parties,
and the Company, Future Energy Corporation
("Future Nevada"), and Future Petroleum
Corporation ("Future Texas"), as debtors, dated
October 15, 1998
10.14 10 Second Amendment to Guaranty between ECIC, This filing
EnCap, BEC and TJG, as sellers, and Future
Nevada, Future Texas, BMC Development No. 1
Limited Partnership ("BMC"), Future Acquisition
1995, Ltd. ("Future 1995"), as guarantors, dated
October 15, 1998
10.15 10 First Amendment to Guaranty between ECIC, This filing
EnCap, BEC and TJG, as sellers, and NCI-Shawnee
Limited Partnership ("NCI-Shawnee"), as
guarantor, dated October 15, 1998
10.16 10 First Amendment to Security Agreement between This filing
ECIC, EnCap, BEC and TJG, as secured parties,
and NCI-Shawnee, as debtor, dated October 15, 1998
10.17 10 First Amendment to Guaranty between ECIC, This filing
EnCap, BEC and TJG, as sellers, and Future Cal-
Tex Corporation ("Future Cal-Tex"), as
guarantor, dated October 15, 1998
10.18 10 First Amendment to Security Agreement between This filing
ECIC, EnCap, BEC and TJG, as secured parties,
and Future Cal-Tex, as debtor, dated October 15, 1998
10.19 10 Second Amendment to Security Agreement between This filing
ECIC, EnCap, BEC and TJG, as secured parties,
and the Company, Future Nevada, Future Texas,
Future 1995, and BMC, as debtors, dated October
15, 1998
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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, hereunto duly authorized.
Dated: October 30, 1998
FUTURE PETROLEUM CORPORATION
By /s/ B. Carl Price, President
EXHIBIT INDEX
SEC
Exhibit Reference
Number Number Title of Document Location
- -------- ---------- --------------------------------------- ---------
Item 10 Material Contracts
- --------------------------------------------------------------------------------
10.01 10 Purchase and Sale Agreement between Bargo This filing
Energy Company ("BEC") and TJG Investments, Inc.
("TJG"), as Sellers, and the Company, as Buyer,
dated October 15, 1998
10.02 10 Promissory Note of the Company payable to BEC This filing
in the principal amount of $3,397,600, dated
October 15, 1998
10.03 10 Promissory Note of the Company payable to TJG This filing
in the principal amount of $602,400, dated
October 15, 1998
10.04 10 Purchase and Sale Agreement between Pledger This filing
Partners, Ltd., as Seller, and the Company, as
Buyer, dated October 15, 1998
10.05 10 Purchase and Sale Agreement between NCI This filing
Reserves, Ltd., Southwest Sulfur & Oil, Inc.,
Wayne Newkumet, and Castello Enterprises, Inc.,
as Sellers, and the Company, as Buyer, dated
October 15, 1998
10.06 10 Purchase and Sale Agreement between NCI This filing
Properties, Ltd., as Seller, and the Company, as
Buyer, dated October 15, 1998
10.07 10 Purchase and Sale Agreement between Bargo This filing
Energy Resources, Ltd. ("Bargo"), as Seller, and
the Company, as Buyer, dated October 15, 1998
10.08 10 First Amendment to Master Subordination This filing
Agreement by and among Bank of America and
Energy Capital Investment Company PLC ("ECIC"),
EnCap Equity 1994 Limited Partnership ("EnCap"),
BEC, and TJG, dated October 15, 1998
10.09 10 Subordination Agreement by and among Bank of This filing
America and ECIC, EnCap, BEC, and TJG, dated
October 15, 1998
10.10 10 Intercreditor and Collateral Agency Agreement This filing
by and among ECIC, EnCap, BEC, and TJG, dated
October 15, 1998
10.11 10 Renewal Promissory Note of the Company payable This filing
to ECIC dated October 15, 1998
10.12 10 Renewal Promissory Note of the Company payable This filing
to EnCap dated October 15, 1998
10.13 10 Second Amendment to Pledge Agreement between This filing
ECIC, EnCap, BEC and TJG, as secured parties,
and the Company, Future Energy Corporation
("Future Nevada"), and Future Petroleum
Corporation ("Future Texas"), as debtors, dated
October 15, 1998
10.14 10 Second Amendment to Guaranty between ECIC, This filing
EnCap, BEC and TJG, as sellers, and Future
Nevada, Future Texas, BMC Development No. 1
Limited Partnership ("BMC"), Future Acquisition
1995, Ltd. ("Future 1995"), as guarantors, dated
October 15, 1998
10.15 10 First Amendment to Guaranty between ECIC, This filing
EnCap, BEC and TJG, as sellers, and NCI-Shawnee
Limited Partnership ("NCI-Shawnee"), as
guarantor, dated October 15, 1998
10.16 10 First Amendment to Security Agreement between This filing
ECIC, EnCap, BEC and TJG, as secured parties,
and NCI-Shawnee, as debtor, dated October 15, 1998
10.17 10 First Amendment to Guaranty between ECIC, This filing
EnCap, BEC and TJG, as sellers, and Future Cal-
Tex Corporation ("Future Cal-Tex"), as
guarantor, dated October 15, 1998
10.18 10 First Amendment to Security Agreement between This filing
ECIC, EnCap, BEC and TJG, as secured parties,
and Future Cal-Tex, as debtor, dated October 15, 1998
10.19 10 Second Amendment to Security Agreement between This filing
ECIC, EnCap, BEC and TJG, as secured parties,
and the Company, Future Nevada, Future Texas,
Future 1995, and BMC, as debtors, dated October
15, 1998
EXHIBIT 10.01
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT dated October 15, 1998, is made by and
between BARGO ENERGY COMPANY, a Texas general partnership, and TJG INVESTMENTS,
INC., a Texas corporation (herein collectively called "Seller"), and FUTURE
PETROLEUM CORPORATION, a Utah corporation ("Buyer");
W I T N E S E T H:
WHEREAS, Seller desires to sell, assign and convey to Buyer, and Buyer
desires to purchase and accept certain oil and gas properties and related
assets; and
WHEREAS, Seller and Buyer deem it in their mutual best interests to
execute and deliver this Agreement;
NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual
covenants and agreements contained herein, Seller and Buyer do hereby agree as
follows:
ARTICLE I
Definitions and References
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.
"Asserted Defects" shall have the meaning assigned to such term in Section
7.1(a).
"Assignment" shall have the meaning assigned to such term in Section
9.2(a).
"Base Cash Portion" shall have the meaning assigned to such term in
Article III.
"Base Purchase Price" shall have the meaning assigned to such term in
Article III.
"Basic Documents" shall have the meaning assigned to such term in Section
4.7.
"Borrowing Base" shall have the meaning assigned to such term in the
Senior Credit Facility.
"Change of Control" shall mean the occurrence of either of the following
events: (a) any person or two or more persons acting as a group shall acquire
beneficial ownership (within the meaning of Rule 13d-3 of the Commission under
the Exchange Act, and including holding proxies to vote for the election of
directors other than proxies held by Buyer's management or their designees to be
voted in favor of persons nominated by Buyer's Board of Directors) of 33% or
more of the outstanding voting securities of Buyer, measured by voting power
(including both common stock and any preferred stock or other equity securities
entitling the holders thereof to vote with the holders of common stock in
elections for directors of Buyer); provided, however, that any acquisition of
beneficial ownership by Bargo Energy Company, EnCap Equity 1994 Limited
Partnership, or EnCap Equity 1994 Limited Partnership or their respective
affiliates shall not effect a change of control hereunder; or (b) one-third or
more of the directors of Buyer shall consist of persons not nominated by Buyer's
Board of Directors (not including as Board nominees any directors which the
Board is obligated to nominate pursuant to shareholders agreements, voting trust
arrangements or similar arrangements, exclusive of that certain Shareholders'
Agreement dated August 14, 1998, by and among Buyer, Bargo Energy Resources,
Ltd., Carl Price, Don Wm. Reynolds, Energy Capital Investment Company PLC and
EnCap Equity 1994 Limited Partnership).
"Closing" and "Closing Date" shall have the meanings assigned to such
terms in Section 9.1.
"Collateral" shall mean all property of any kind which is subject to a
Lien in favor of Seller or which, under the terms of any Security Document, is
purported to be subject to such a Lien.
"Commission" shall mean the Securities and Exchange Commission (or any
successor body thereto).
"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.
"Default" shall mean an Event of Default and any default, event or
condition which would, with the giving of any requisite notices and the passage
of any requisite periods of time, constitute an Event of Default.
"Defects" shall have the meaning assigned to such term in Section 7.1(b).
"Effective Date" shall have the meaning assigned to such term in Section
9.2(a).
"Engineering Report" shall mean the engineering report referenced in
Section 14.2(d).
"Event of Default" shall have the meaning assigned to such term in Section
16.1.
"Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended, and all rules and regulations promulgated under such Act.
"Fiscal Quarter" shall mean a three-month period ending on March 31, June
30, September 30 and December 31 of any year.
"Fiscal Year" shall mean the twelve-month period ending on December 31 of
any year.
"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).
"Indebtedness" of any person means Liabilities in any of the following
categories: (a) Liabilities for borrowed money; (b) Liabilities constituting an
obligation to pay the deferred purchase price of property or services; (c)
Liabilities evidenced by a bond, debenture, note or similar instrument; (d)
Liabilities which would under GAAP be shown on such person's balance sheet as
a liability, and is payable more than one year from the date of creation
thereof (other than reserves for taxes and reserves for contingent obligations);
(e) Liabilities arising under futures contracts, forward contracts, swap, cap or
collar contracts, option contracts, hedging contracts, other derivative
contracts, or similar agreements; (f) Liabilities constituting principal under
leases capitalized in accordance with GAAP; (g) Liabilities arising under
conditional sales or other title retention agreements; (h) Liabilities owing
under direct or indirect guaranties of Liabilities of any other person or
constituting obligations to purchase or acquire or to otherwise protect or
insure a creditor against loss in respect of Liabilities of any other person
(such as obligations under working capital maintenance agreements, agreements to
keep-well, or agreements to purchase Liabilities, assets, goods, securities or
services), but excluding endorsements in the ordinary course of business of
negotiable instruments in the course of collection; (i) Liabilities (for
example, repurchase agreements) consisting of an obligation to purchase
securities or other property, if such Liabilities arises out of or in connection
with the sale of the same or similar securities or property; (j) Liabilities
with respect to letters of credit or applications or reimbursement agreements
therefor; (k) Liabilities with respect to payments received in consideration of
oil, gas, or other minerals yet to be acquired or produced at the time of
payment (including obligations under "take-or-pay" contracts to deliver gas in
return for payments already received and the undischarged balance of any
production payment created by such person or for the creation of which such
person directly or indirectly received payment), or (l) Liabilities with respect
to other obligations to deliver goods or services in consideration of advance
payments therefor; provided, however, that the "Indebtedness" of any person
shall not include Liabilities that were incurred by such person on ordinary
trade terms to vendors, suppliers, or other persons providing goods and services
for use by such person in the ordinary course of its business, unless and until
such Liabilities are outstanding more than 90 days past the original invoice or
billing date therefor.
"Liabilities" shall mean, as to any person, all indebtedness, liabilities
and obligations of such person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or absolute, fixed or contingent, and
whether or not required to be considered pursuant to GAAP.
"Lien" shall mean, with respect to any property or assets, any right or
interest therein of a creditor to secure Liabilities owed to such creditor or
any other arrangement with such creditor which provides for the payment of such
Liabilities out of such property or assets or which allows him to have such
Liabilities satisfied out of such property or assets prior to the general
creditors of any owner thereof, including any lien, mortgage, security interest,
pledge, deposit, production payment, rights of a vendor under any title
retention or conditional sale Agreement or lease substantially equivalent
thereto, tax lien, mechanic's or materialman's lien, or any other charge or
encumbrance for security purposes, whether arising by law or Agreement or
otherwise, but excluding any right of offset which arises without Agreement in
the ordinary course of business. "Lien" shall also mean any filed financing
statement, any registration of a pledge (such as with an issuer of
uncertificated securities), or any other arrangement or action which would serve
to perfect a Lien described in the preceding sentence, regardless of whether
such financing statement is filed, such registration is made, or such
arrangement or action is undertaken before or after such Lien exists.
"Material Adverse Change" means a material and adverse change to (a)
Buyer's and its Subsidiaries' Consolidated financial condition, (b) the
operations or properties of Buyer and its Subsidiaries, considered as a whole,
(c) Buyer's ability to timely pay the Obligations, or (d) the enforceability of
the material terms of this Agreement or any other Note Document.
"Note" shall have the meaning assigned to such term in Article III.
"Note Document" shall mean this Agreement, the Note, the Security
Documents, and all other agreements, certificates, documents, commitments and
writings at any time delivered in connection herewith or therewith.
"Obligations" shall mean all Liabilities owing Seller under of pursuant to
this Agreement, the Note or any of the other Note Documents.
"Oil and Gas Properties" shall have the meaning assigned to such term in
Article II.
"Other Acquisitions" shall mean the transactions contemplated under the
following documents: (a) that certain Purchase and Sale Agreement between Buyer
and NCI Properties, Ltd., dated October 15, 1998, in respect of the Gin Unit,
Dawson County, Texas; (ii) that certain Purchase and Sale Agreement between
Buyer and NCI 1990, Ltd., et al, in respect of the Shawnee Townsite Unit,
Pottawatomie County, Oklahoma; and (iii) that certain Purchase and Sale
Agreement dated October 15, 1998, between Buyer and Pledger Partners, Ltd., in
respect of the Buna Field, Jasper County, Texas.
"Other Subordinated Indebtedness" shall mean the Indebtedness of Buyer
under that certain Note Restructuring Agreement dated August 14, 1998, by and
among Buyer, Energy Capital Investment Company PLC and EnCap Equity 1994 Limited
Partnership.
"PDP Reserves" shall mean Proved Reserves which are categorized as both
"Developed" and "Producing" in the Definitions for Oil and Gas Reserves
promulgated by the Society of Petroleum Engineers (or any generally recognized
successor) as in effect at the time in question.
"PDP Reserves to Debt Ratio" shall mean the ratio obtained by dividing (a)
the pre-income tax value of projected net revenues attributable to the PDP
Reserves of Buyer set forth in the most recent Engineering Report utilizing a
10% discount rate, by (b) Buyer's total outstanding Indebtedness.
"Permitted Investment" shall mean any investment, loan, advance, guaranty
or capital contribution by Buyer or any Subsidiary in any of the following: (a)
properties or assets to be used in the ordinary course of business of Buyer and
its Subsidiaries; (b) current assets arising from the sale of goods and services
in the ordinary course of business of Buyer and its Subsidiaries; (c)
investments in one or more of Buyer's Subsidiaries or in any person that
concurrently with such investment becomes a Subsidiary; (d) any marketable
obligation maturing not later than one year after the date of acquisition
therefor, issued or guaranteed by the United States of America or by any agency
of the United States of America which has the full faith and credit of the
United States of America; (e) commercial paper which is given the highest
rating by a credit rating agency of recognized national standing and maturing
not more than 270 days from the date of creation thereof; and (f) any demand
deposit or time deposit (including certificates of deposit and money market or
sweep accounts) with a commercial bank or trust company organized and doing
business under the laws of the United States of America or any state thereof
which has capital, surplus and undivided profits of at least $250,000,000,
provided that such deposit must be either payable on demand or mature not more
than twelve months from the date of investment therein.
"Properties" shall have the meaning assigned to such term in Article II.
"Purchase Price" shall have the meaning assigned to such term in Article
III.
"Restricted Payment" shall mean any Distribution (as defined below) in
respect of Buyer or any Subsidiary thereof (other than on account of capital
stock or other equity interests of a Subsidiary owned legally or beneficially by
Buyer or another Subsidiary), including any Distribution resulting in the
acquisition by Buyer of securities that would constitute treasury stock. As
used in this definition, "Distribution" shall mean, in respect of any
corporation, partnership or other business entity (a) dividends or other
distributions or payments on capital stock or other equity interest of such
corporation, partnership or other business entity (except distributions in such
stock or other equity interest) and (b) the redemption or acquisition of such
stock or other equity interests or of warrants, rights or other options to
purchase such stock or other equity interests (except when solely in exchange
for such stock or other equity interests).
"Securities Act" shall mean the Securities Act of 1933, as amended, and
all rules and regulations under such Act.
"Seller Disclosure Schedule" shall mean a schedule delivered by Seller to
Buyer on the date hereof which sets forth additional information regarding the
representations and warranties of Seller contained herein and information called
for hereby.
"Security Documents" shall mean the documents listed in Exhibit 1.1--
Security Documents and all other security agreements, deeds of trust, mortgages,
chattel mortgages, pledges, guaranties, financing statements, continuation
statements, extension agreements and other agreements or instruments now,
heretofore or hereafter delivered by Buyer or any Subsidiary thereof to Seller
in connection with this Agreement or any transaction contemplated hereby to
secure or guarantee the payment of any part of the Obligations or the
performance of any of Buyer's or its Subsidiaries' other duties and obligations
under the Note Documents.
"Senior Credit Facility" shall mean that certain Credit Agreement between
Buyer, as borrower, and Bank of America National Trust and Savings Association,
as lender, dated as of August 14, 1998.
"Senior Lender" shall mean the lender under the Senior Credit Facility.
"Subsidiary" shall mean, with respect to any person, any corporation,
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned fifty percent or more by such person
Section 1.2. References, Titles 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) All references herein to "$" or "dollars" shall refer to U.S.
Dollars.
(j) Exhibits 1.1--Security Documents, II, III, and 9.2(a) 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
Property to be Sold and Purchased
Seller agrees to sell and Buyer agrees to purchase, for the consideration
hereinafter set forth, and subject to the terms and provisions herein contained,
the following described properties, rights and interests:
(a) All of Seller's right, title and interest in and to those
properties described in Exhibit II attached hereto and made a part hereof
for all purposes;
(b) Without limitation of the foregoing, all other right, title
and interest (of whatever kind or character, whether legal or equitable,
and whether vested or contingent) of Seller in and to the oil, gas and
other minerals in and under or that may be produced from the lands
described in Exhibit II hereto (including, without limitation, interests
in oil, gas and/or mineral leases covering such lands, overriding
royalties, production payments and net profits interests in such lands or
such leases, and fee mineral interests, fee royalty interests and other
interests in such oil, gas and other minerals);
(c) All rights, titles and interests of Seller in and to, or
otherwise derived from, all presently existing and valid oil, gas and/or
mineral unitization, pooling, and/or communitization agreements,
declarations and/or orders and in and to the properties covered and the
units created thereby (including, without limitation, all units formed
under orders, rules, regulations, or other official acts of any federal,
state, or other authority having jurisdiction, voluntary unitization
agreements, designations and/or declarations) relating to the Properties
described in paragraphs (a) and (b) above;
(d) All rights, titles and interests of Seller in and to all
presently existing and valid production sales (and sales related)
contracts, operating agreements, and other agreements and contracts which
relate to any of the Properties described in paragraphs (a), (b) and (c)
above, or which relate to the exploration, development, operation, or
maintenance thereof or the treatment, storage, transportation or marketing
of production therefrom (or allocated thereto);
(e) All rights, titles and interests of Seller in and to all
machinery, equipment, improvements and fixtures (including, but not by way
of limitation, all wells, wellhead equipment, pumping units, flowlines,
tanks, buildings, injection facilities, saltwater disposal facilities,
compression facilities, gathering systems, and other equipment), and all
easements, rights-of-way, surface leases and other surface rights, all
permits and licenses, and all other appurtenances being used or held for
use in connection with, or otherwise related to, the exploration,
development, operation or maintenance of any of the Properties described
in paragraphs (a), (b) and (c) above, or the treatment, storage,
transportation or marketing of production therefrom (or allocated
thereto); and
(f) All of Seller's lease files, abstracts and title opinions,
production records, well files, accounting records (but not including
general financial accounting records), seismic records and surveys,
gravity maps, electric logs, geological or geophysical data and records,
and other files, documents and records of every kind and description which
relate to the Properties described above and which are not subject to
privilege or prohibition on disclosure.
The properties and interests specified in the foregoing paragraphs (a), (b)
and (c) are herein sometimes collectively called the "Oil and Gas Properties,"
and the properties and interests specified in the foregoing paragraphs (a), (b),
(c), (d), (e) and (f) are herein sometimes collectively called the "Properties".
Notwithstanding anything in this Agreement or the Assignment to the
contrary, the following items are not included among the Properties and are not
to be conveyed to Buyer; however, omission of an item from this list shall not
be construed to suggest that the item is among the Properties:
(a) Seller's accounts, rights to payment, trade credits, rights
of reimbursement, liens, security interests, claims and causes of action, of any
character or description, arising out of or related to the Properties and
attributable to acts, omissions or events which occurred before the Effective
Date;
(b) Seller's general office and field equipment and supplies,
including, without limitation, computers and peripheral equipment; copies;
communication equipment; tools; vehicles; and those items listed on Section 1 of
the Sellers' Disclosure Schedule;
(c) Seller's proprietary computer software, trade secrets and
other intellectual property; and
(d) Seller's interests under insurance policies, bonds and
indemnity agreements.
ARTICLE III
Purchase Price
In consideration of the sale of the Properties by Seller to Buyer, Buyer
shall pay to Seller at Closing an aggregate purchase price (the "Base Purchase
Price") consisting of the following:
(a) $3,000,000 cash (the "Base Cash Portion"), subject to
adjustments contemplated by Section 7.2, below (the Base Cash Portion of
the Purchase Price shall be payable to TJG Investments, Inc. in the amount
of $451,800 and to Bargo Energy Company in the amount of $2,548,200);
(b) a promissory note in the original principal amount of
$602,400, in the form of the instrument attached hereto as Exhibit III(b);
and
(c) a promissory note in the original principal amount of
$3,397,600, in the form of the instrument attached hereto as Exhibit
III(c) (the notes described in Section 3(b) and in this Section 3(c) are
herein collectively called the "Note").
(The Base Purchase Price, as so adjusted, and as the same may be otherwise
adjusted by the mutual agreement of the parties, being called the "Purchase
Price").
ARTICLE IV
Representations and Warranties of Seller
Section 4.1. Organization and Existence. Seller is a general
partnership duly formed and validly existing under the laws of the State of
Texas.
Section 4.2. Power and Authority. Seller has full partnership power
and partnership authority to execute, deliver, and perform this Agreement and
each other agreement, instrument, or document executed or to be executed by
Seller 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 Seller of this Agreement and each
other agreement, instrument, or document executed or to be executed by Seller
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 of
Seller.
Section 4.3. Valid and Binding Agreement. This Agreement has been duly
executed and delivered by Seller and constitutes, and each other agreement,
instrument, or document executed or to be executed by Seller 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 Seller and constitutes,
or when executed and delivered will constitute, a valid and legally binding
obligation of 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 4.4. Non-Contravention. Other than requirements (if any) that
there be obtained consents to assignment (or waivers of preferential rights to
purchase) from third parties, and except for approvals required to be obtained
from governmental entities who are lessors under leases forming a part of the
Oil and Gas Properties (or who administer such leases on behalf of such
lessors) which are customarily obtained post-closing, neither the execution,
delivery, and performance by Seller of this Agreement and each other
agreement, instrument, or document executed or to be executed by Seller 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 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 Seller is a party or by which 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 Seller, or
(d) violate any applicable law, rule or regulation binding upon Seller.
Section 4.5. Approvals. Other than requirements (if any) that there be
obtained consents to assignment (or waivers of preferential rights to
purchase) from third parties, and except for approvals required to be obtained
from governmental entities who are lessors under leases forming a part of the
Oil and Gas Properties (or who administer such leases on behalf of such
lessors) which are customarily obtained post-closing, 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 Seller in connection with the execution, delivery, or performance
by Seller of this Agreement each other agreement, instrument, or document
executed or to be executed by Seller in connection with the transactions
contemplated hereby to which it is a party or the consummation by it of the
transactions contemplated hereby and thereby.
Section 4.6. Pending Litigation. There are no pending suits,
actions, or other proceedings in which Seller is a party which materially
adversely affect the Properties or affect the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
Section 4.7. Basic Documents. All material contracts and agreements,
licenses, permits and easements, rights-of-way and other rights-of-surface use
comprising any part of or otherwise relating to the Properties (such material
contracts, agreements, licenses, permits, easements, rights-of-way and other
rights-of-surface use being herein called the "Basic Documents"), are in full
force and effect and constitute valid and binding obligations of the parties
thereto. Seller is not in breach or default (and no situation exists which
with the passing of time or giving of notice would create a breach or default)
of its obligations under the Basic Documents, and (to the best of Seller's
knowledge) no breach or default by any third party (or situation which with
the passage of time or giving of notice would create a breach or default)
exists, to the extent such breach or default (whether by Seller or such a
third party) could materially adversely affect the operation, value or use of
any Oil and Gas Property or the Buyer after the Effective Date. All payments
owing by Seller under Basic Documents have been and are being made (timely,
and before the same became delinquent) by Seller in all material respects
(and, where the non-payment of same by a third party could materially
adversely affect the operation, value or use of an Oil and Gas Property after
the Effective Date, have been and are being made, to Seller's knowledge, by
such third parties). For the purposes of the representations contained in
this Section (and without limitation of such representations), the non-payment
of an amount, or non-performance of an obligation, where such non-payment, or
non-performance, could result in the forfeiture or termination of rights of
Seller under a Basic Document, shall be considered material.
Section 4.8. Commitments, Abandonments or Proposals. Except as set
forth in Section 4.8 of the Seller Disclosure Schedule: (a) Seller has made no
commitments to make expenditures (including, without limitation, Seller has
not entered into any agreements that would obligate Seller to make
expenditures), in connection with the ownership or operation of the Properties
after the Effective Date, other than routine expenses incurred in the normal
operation of existing wells on the Oil and Gas Properties under the terms of
the Basic Documents; (b) Seller has not abandoned any wells (or removed any
material items of equipment, except those replaced by items of equal
suitability and value) on the Oil and Gas Properties since the Effective Date;
and (c) no proposals are currently outstanding (whether made by Seller or by
any other party) to drill additional wells, or to deepen, plug back, or rework
existing wells, or to conduct other operations for which consent is required
under the applicable operating agreement, or to conduct any other operations
other than normal operation of existing wells on the Oil and Gas Properties
under the terms of the Basic Documents, or to abandon any wells, on the Oil
and Gas Properties.
Section 4.9. Production Sales Contracts. Seller is presently receiving
a price for all production from (or attributable to) each Oil and Gas Property
covered by a Basic Document as computed in accordance with the terms of such
contract, and is not having deliveries of gas from any Oil and Gas Property
subject to a Basic Document curtailed substantially below such property's
delivery capacity.
Section 4.10. Plugging and Abandonment. Except for wells listed in
Section 4.10 of the Seller Disclosure Schedule, to the best of Seller's
information and belief there are no shut in wells located on the Oil and Gas
Properties or on lands pooled or unitized therewith (including, without
limitation, any wells which would, if located in Texas, require compliance
with Railroad Commission Rule 14(b)(2)), except for wells that have been
properly plugged and abandoned, and except for wells drilled to depths not
included within the Oil and Gas Properties or within units in which the Oil
and Gas Properties participate which have never been completed in such depths.
Section 4.11. Licenses and Permits. To Seller's knowledge, Seller has
all governmental licenses and permits necessary or appropriate to own and
operate the Properties as presently being owned and operated, and such
licenses, permits and filings are in full force and effect, and Seller has not
received written notice of any violations in respect of any such licenses or
permits.
Section 4.12. Tax Partnerships. No Oil and Gas Property is subject to
(or has related to it) any tax partnership.
Section 4.13. Payment of Expenses. All expenses (including, without
limitation, all bills for labor, materials and supplies used or furnished for
use in connection with the Properties, and all severance, production, ad
valorem, windfall profit and other similar taxes) and liabilities relating to
the ownership or operation of the Properties, have been, and are being, paid
(timely, and before the same become delinquent) by Seller.
Section 4.14. Compliance with Laws. The ownership and operation of
Properties, to the extent that non-conformance could adversely affect the
operation, value or use thereof after the Effective Date (or otherwise affect
Buyer), has been in conformity, in all material respects, with all applicable
laws, and all applicable rules, regulations and orders of all governmental
agencies having jurisdiction, relating to the Properties. Without in any way
limiting the foregoing representations, the Properties are not in violation of
(or subject to any existing, pending or, threatened investigation or inquiry
by any governmental authority, or to any remedial obligations under) any
applicable laws, rules, regulations or orders pertaining to health or the
environment, including those relating to waste materials or hazardous
substances (hereinafter sometimes collectively called "applicable
environmental laws"). Also without limitation of the foregoing, all oil and
gas wells comprising a part of the Properties have been drilled and completed
within the boundaries of the applicable leases or within limits otherwise
permitted by a valid and enforceable pooling, unit, or other agreement or
contract or by applicable law, and no well comprising a part of the Properties
is or was subject to any penalty on allowables after the Effective Date
because of any over-production (or any other judgments, orders or decrees of
any court or governmental authority or agency) which would (or did) prevent
such well from being entitled to its full legal and regular allowable (as
prescribed by any court or governmental body or agency) from and after the
Effective Date.
Section 4.15. Operated Properties. Seller has listed in Section 4.15 of
the Seller Disclosure Schedule all of the Oil and Gas Properties (in this
Section, the "Operated Properties") where Seller or an Affiliate thereof
serves as operator, for itself and such other parties (in this Section,
"non-operators"). Seller holds no funds advanced by a non-operator as
pre-payment of estimated future costs). All proceeds of production which
Seller disburses (except proceeds attributable to interests being held in
suspense in accordance with prudent industry practice) have been, and are
being, accounted for under appropriate division orders, transfer orders or
similar documents signed by, or otherwise clearly binding on, the parties
receiving such proceeds. To the best of Seller's knowledge, Seller has been
correctly accounting to such third parties for such proceeds of production.
Section 4.16. Disclaimer of Warranties and Waiver of Consumer Rights.
(a) Buyer has had the opportunity to conduct all investigations
concerning the Properties that it deems appropriate and has exclusively relied
for all purposes on its own investigations and the advice of its employees,
attorneys and other consultants. Seller disclaims any representation or
warranty that reserve estimates, decline rates, recompletion or development
possibilities, projected prices, costs, taxes and any other characteristic of
the Properties as reflected in materials made available to Buyer by Seller, or
in any materials from any other source, are complete, accurate or free from
contrary interpretation. EXCEPT AS STATED IN ARTICLE IV OF THIS AGREEMENT OR
THE ASSIGNMENT, THERE ARE NO REPRESENTATIONS OR WARRANTIES, EXPRESS, IMPLIED
OR STATUTORY, CONCERNING THE PROPERTIES, INCLUDING, WITHOUT LIMITATION, NO
REPRESENTATIONS OR WARRANTIES OF (i) MERCHANTABILITY, (ii) FITNESS FOR A
PARTICULAR PURPOSE, (iii) CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, (iv)
CONDITION, OR (v) TITLE. ALL PROPERTIES WILL BE CONVEYED AS IS, WHERE IS,
WITH ALL FAULTS AND IN THEIR PRESENT CONDITION, LOCATION AND STATE OF REPAIR.
(b) Buyer acknowledges that the properties have been used for
the exploration, development and production of oil, gas, associated
hydrocarbons and other minerals. Buyer acknowledges that there may have been
spills of crude oil, produced water or other materials in the past. Buyer
also acknowledges that some wells and equipment may contain asbestos or
naturally occurring radioactive materials ("NORM"). Buyer understands that
NORM may attach itself to the inside of wells, materials and equipment as
scale or in other forms, that wells, materials and equipment among the
properties may contain NORM and that the NORM-containing materials may be
buried or otherwise disposed of on the Properties. Buyer acknowledges that
special procedures may be required to remove and dispose of asbestos and NORM.
(c) BUYER WAIVES ITS RIGHTS UNDER THE DECEPTIVE TRADE
PRACTICES-CONSUMER PROTECTION ACT, SECTION 17.41 ET SEQ., TEXAS BUSINESS &
COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS.
AFTER CONSULTATION WITH AN ATTORNEY OF ITS OWN SELECTION, BUYER VOLUNTARILY
CONSENTS TO THIS WAIVER.
ARTICLE V
Representations and Warranties of Buyer
Section 5.1. Organization and Existence. Buyer is a corporation duly
organized, legally existing and in good standing under the laws of its state
of incorporation, and is qualified to do business in the State of Utah.
Section 5.2. 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 Buyer
in connection with the transactions contemplated hereby to which it is a party
and to consummate the transactions contemplated hereby and thereby. The
execution, delivery, and performance by Buyer of this Agreement and each other
agreement, instrument, or document executed or to be executed by Buyer in
connection with the transactions contemplated hereby to which it is a party,
and the consummation by it of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary corporate action of Buyer.
Section 5.3. 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 5.4. 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) 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 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 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.
Section 5.6. Pending Litigation. There are no pending suits,
actions, or other proceedings in which Buyer is a party which affect the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
Section 5.7. 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 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 (and the rules and
regulations pertaining thereto) or a distribution thereof in violation of any
other applicable securities laws.
Section 5.8. SEC Filings. Except as otherwise disclosed to Seller,
Buyer is current in its obligations to file all periodic reports 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,
Buyer's Form 8-K/A filed on February 27, 1998, Buyer's Quarterly Reports on
Form-10QSB for the quarters ending March 31, 1998 and June 30, 1998,
respectively, Buyer's Form 8-K/A filed on August __, 1998 and Buyer's Proxy
Statement relating to the 1995, 1996, 1997, and 1998 Annual Meeting of
Shareholders (collectively, the "SEC Documents") are all of the documents the
Buyer 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 Buyer 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 Buyer as of the dates thereof and its Consolidated results of
operations and changes in financial position for the periods then ended
(subject to normal year-end 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 Buyer and its subsidiaries. There are no
material liabilities of Buyer (contingent or otherwise), other than as
disclosed in the SEC Documents and the financial statements included therein
and except as contemplated by the Senior Credit Facility.
ARTICLE VI
Closing of Transaction
Section 6.1. 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 October 15, 1998, or at such
other date and time as the Buyer and Seller may mutually agree upon (such
date and time being herein called the "Closing Date").
Section 6.2. Seller's Closing Obligations. At the Closing, Seller
shall:
(a) execute, acknowledge and deliver to Buyer an assignment
of the Properties (the "Assignment"), in the form attached hereto as
Exhibit 9.2(a), effective as to runs of oil and deliveries of gas as of
7:00 o'clock a.m. local time at the location of the respective
Properties on September 1, 1998 (the "Effective Date");
(b) deliver to Buyer a copy of the resolutions or consent
adopted or otherwise executed by the partners of Seller authorizing
Seller to execute and deliver this Agreement and all related documents
and instruments and to perform its obligations hereunder and thereunder;
(c) to the extent requested by Buyer, execute and deliver to
Buyer (i) letters in lieu of transfer orders (or similar documentation),
in form acceptable to both parties, and, (ii) an affidavit or other
certification (as permitted by such code) that Seller is not a "foreign
person" within the meaning of Section 1445 (or similar provisions) of
the Internal Revenue Code of 1986 as amended (i.e., Seller is not a
non-resident alien, foreign corporation, foreign partnership, foreign
trust or foreign estate as those terms are defined in such code and
regulations promulgated thereunder); and
(d) execute a closing statement reflecting all adjustments to
the Purchase Price made as of Closing.
Section 6.3. Buyer's Closing Obligations. At the Closing, Buyer shall:
(a) deliver to Seller, by wire transfer to an account
designated by Seller in a bank located in the United States, an amount
equal to the Cash Portion of the Purchase Price;
(b) execute and deliver to Seller the Note and the Security
Documents;
(c) deliver a copy of the resolutions adopted by the board of
directors of Buyer authorizing Buyer to execute and deliver this
Agreement and all related documents and instruments and to perform its
obligations hereunder and thereunder, which copy shall be certified by
the secretary or assistant secretary of Buyer; and
(d) execute a closing statement reflecting all adjustments to
the Purchase Price made as of Closing.
Section 6.4. Delivery of Files. No later than 15 days after the
Closing, Seller shall deliver to Buyer such of Seller's contract files, lease
and other title files, production files, well files and other files pertaining
to the ownership and/or operation of the Properties as Buyer may request.
Section 6.5 Filings and Compliance. At Closing, Seller and Buyer
shall execute Form P-4's, and any other forms required by the Railroad
Commission or other governmental authority which relate to the transfer of
operations, specifically identifying all wells among the Properties for which
Buyer assumes sole responsibility for operations, including plugging.
Immediately after Closing, Buyer shall file with the Railroad Commission of
Texas all forms signed at closing and shall take all steps required to obtain
Railroad Commission approval of Buyer as operator of those Properties for
which it assumes operations, including, without limitation, obtaining a
Commission-approved bond or other form of financial security required under
Sections 91.103 - 91.107 of the Texas Natural Resources Code covering the
wells included among the Properties. Buyer shall immediately furnish Seller
with copies of all such filings made with the Railroad Commission and shall
immediately notify Buyer if issues arise concerning Railroad Commission
approval of Buyer as operator. After Closing, Buyer shall place and maintain
all wells among the Properties in compliance with Railroad Commission rules,
shall own, operate and use the Properties in a good and workmanlike manner and
shall comply with all federal, state and local laws, rules, regulations,
order, permits and decrees.
ARTICLE VII
Certain Accounting Adjustments.
Section 7.1. Adjustments. Appropriate adjustments shall be made
between Buyer and Seller 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 Buyer, and all proceeds
(net of applicable production, severance, and similar taxes) from the sale of
oil, gas and/or other minerals produced from the Oil and Gas Properties after
the Effective Date will be received by Buyer, and (b) all expenses which are
incurred in the operation of the Properties before the Effective Date will be
borne by Seller 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 Seller. 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 7.2 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 7.1. If the amount of adjustments so
determined which would result in a credit to Buyer exceed the amount of
adjustments so determined which would result in a credit to Seller, Buyer
shall receive a credit, for the amount of such excess, against the Cash
Portion of the Purchase Price to be paid at Closing, and, if the converse is
true, Buyer shall pay to Seller, at Closing (in addition to amounts otherwise
then owed), the amount of such excess.
(b) On or before 90 days after Closing, Buyer and Seller shall
review any additional information which may then be available pertaining to
the adjustments provided for in Sections 7.1, 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 by appropriate payments from
Seller to Buyer or from Buyer to Seller. Following such additional
adjustments, no further adjustments shall be made under this Article VII.
ARTICLE VIII
Section 8.1 Assumptions. Upon Closing, Buyer assumes and agrees to
discharge:
(a) all obligations and liabilities to plug, abandon, remove
and dispose of all wells, pipelines, equipment and improvements located on the
Properties at or after the Effective Date, and all obligations and liabilities
to restore the surface and subsurface;
(b) all obligations and liabilities arising before or after
the Effective Date under applicable environmental laws, including, without
limitation, all obligations and liabilities to dispose of or properly handle
NORM, hazardous materials and wastes located on the Properties at or after the
Effective Date;
(c) all obligations and liabilities related to any production,
pipeline, storage, processing or other production-related imbalance existing
at or after the Effective Date;
(d) all obligations and liabilities related to the custody,
administration and disbursement of suspended funds attributable to the
Properties which are transferred to Buyer at Closing;
(e) all obligations and liabilities arising under consents,
preferential rights to purchase, rights of first refusal or similar rights
which were not exercised before Closing; and
(f) all other obligations and liabilities related to the
Properties of which Buyer has actual or constructive notice before or after
the Closing Date and which arise out of acts, omissions or conditions related
to ownership, operation or use of the Properties after the Effective Date,
including, without limitation, all obligations and liabilities contained in
any instrument or agreement described in this Agreement, and those arising
under any law, rule, regulation, order, permit or decree of any governmental
authority.
Section 8.2 Indemnities.
(a) To the extent permitted by law, Buyer shall indemnify and
hold Seller, its affiliated companies, directors, officers, stockholders
partners, employees, agents, successors and assigns, harmless from and against
all claims, demands, losses, damages, costs (including reasonable attorney's
fees and all other costs of litigation), liabilities and causes of action
("Damages") caused by or arising out of (i) any act, omission or condition
related to ownership, operation or use of the Properties after the Effective
Date, (ii) Buyer's breach of any of its representation or obligations in this
agreement, (iii) matters assumed by Buyer under section 8.1, and (iv) any
third party's use or reliance for any purpose on information or materials made
available to Buyer in connection with the Properties or this Agreement,
including, without limitation, reserve reports and related materials.
(b) To the extent permitted by law, an except with respect to
(i) matters of which Buyer had actual or constructive notice at or before
Closing, (ii) matters assumed by Buyer under Section 8.1, and (iii) matters
within the scope of Section 8.2(a), Seller shall indemnify and hold Buyer, its
affiliated companies, directors, officers, stockholders, partners, employees,
agents, successors and assigns, harmless from and against all Damages asserted
by third parties and governmental agencies, caused by or arising out of (i)
Seller's operation, ownership or use of the Properties before the Effective
Date, and (ii) Seller's breach of any of its representations or obligations in
this Agreement.
Section 8.3 Limitations of Liability.
(a) Following Closing, all of Seller's liabilities to Buyer
under this Agreement and under the Assignment, other than accounting
adjustments contemplated by Section 10.1, shall be remedied only by payment of
actual money damages and shall be limited as provided in this Section 8.3.
Buyer waives all legal and equitable remedies after Closing, and releases
Seller from all Damages, other than those described in Section 8.2(b) and this
Section 8.3.
(b) Seller shall have no obligation or liability to Buyer
arising out of this Agreement or the Assignment unless Buyer gives Seller
written notice of potential obligation or liability on or before April 15,
1999. To be effective, the notice must include an adequate explanation of the
basis for obligation or liability. If the preceding condition is satisfied,
Seller shall have liability to Buyer only for the amount by which the value of
all obligations or liabilities to Buyer exceed $350,000 but are less than
$1,500,000. Seller shall have no obligation or liability to Buyer if the
value of all obligations or liabilities asserted is less than $350,000, nor
shall Seller have any obligation or liability for any amount by which the
asserted obligations or liabilities exceed $1,500,000.
(c) Notwithstanding anything contained herein to the contrary,
the liabilities and obligations of the parties comprising Seller under this
Agreement shall be several and not joint or joint and several.
ARTICLE IX
Casualty Loss
In the event of damage by fire or other casualty to the Properties after
the Effective Date and prior to the Closing, of which Buyer had no actual or
constructive notice before Closing, then (unless Buyer and Seller shall
otherwise agree) in such event Seller shall, at Seller's election, either
collect (and when collected pay over to Buyer), or assign to Buyer, any and
all insurance claims relating to such loss, and Buyer shall take title to the
Property affected by such loss without reduction of the Purchase Price.
ARTICLE X
Prepayments of the Note
Section 10.1. Optional Prepayments. Buyer may, upon five business
days' notice to the holder of the Note, from time to time and without premium
or penalty prepay the Note, in whole or in part, so long as the aggregate
amount of each partial prepayment of principal on the Note equals at least
$100,000 or any higher integral multiple of $100,000. Each prepayment of
principal under this Section shall be accompanied by all interest then accrued
and unpaid on the principal so prepaid. All principal and interest prepaid
pursuant to this Section shall be in addition to, but not in lieu of, all
payments otherwise required to be paid under the Note Documents at the time of
such prepayment.
Section 10.2. Prepayments on the Sale of Assets. In the event that
Buyer or any Subsidiary thereof sells, transfers or otherwise assigns any oil,
gas or other mineral property to a third party for cash (in this Section, a
"Subject Property"), Buyer shall, no later than two business days after such
sale, transfer or assignment is consummated, make a prepayment of the Note in
an amount equal to the Designated Amount. As used in this Section, the
following terms shall have the respective meanings assigned to them below:
"Borrowing Base" shall have the meaning assigned to such term in
Senior Credit Facility.
"Designated Amount" shall be equal to A plus B, where "A" is equal
to the PV-10 Value of the Subject Property minus the attendant reduction
in the Borrowing Base under the Senior Credit Facility as a result of
the sale or disposition of the Subject Property, and where "B" is equal
to 20% of the Excess Proceeds.
"Excess Proceeds" shall mean, when used with respect to a Subject
Property, the cash proceeds received by Buyer in connection with the
sale, transfer or other disposition of such Subject Property minus the
PV-10 Value of such Subject Property.
"PV-10 Value" shall mean, when used with respect to a Subject
Property, the pre-federal income tax present value of projected net
revenues attributable to the PDP Reserves assigned to the Subject
Property in the most recent Engineering Report utilizing a 10% discount
rate.
Any amounts so received by the holder of the Note shall be applied first
against any accrued but unpaid interest on such note and second against the
outstanding principal amount of such note.
Section 10.3. Prepayments Upon the Occurrence of a Liquidity Event.
Upon receipt by Buyer of cash as a result of a Liquidity Event (as defined
below), Buyer shall, no later than two business days thereafter, make a
prepayment of the Note in an aggregate amount equal to 50% of the Net
Proceeds. As used in this Section the following terms shall have the
respective meanings assigned to them below:
"Liquidity Event" shall mean a public or private offering by
Buyer of equity or debt securities for cash (exclusive, however, of any
offering of securities by Buyer in connection with any merger or
consolidation of Buyer with another entity).
"Net Proceeds" shall mean the aggregate cash proceeds received by
Buyer as a result of the Liquidity Event minus (a) the transaction costs
incurred by Buyer in connection with such Liquidity Event and (b) that
portion of the cash proceeds paid by Buyer to the Senior Lender under
the terms of the Senior Credit Facility.
Any amount so received by the holder of the Note shall be applied first
against any accrued but unpaid interest on such note and second against the
outstanding principal amount of such note.
Section 10.4. Mandatory Prepayments Allocable among Subordinate
Creditors. The mandatory prepayments provided for in Sections 10.2 and 10.3,
above, shall be allocable among all Subordinate Creditors as defined and in
the manner set forth in that certain Intercreditor and Collateral Agency
Agreement (the "Intercreditor Agreement") of even date herewith by and between
Energy Capital Investment Company PLC, et al., as Subordinate Creditors, and
EnCap Equity 1994 Limited Partnership, as Collateral Agent, such that
prepayments required under Section 10.2 and similar provisions with other
Subordinate Creditors shall not exceed 20% of Excess Proceeds in the aggregate
and prepayments required under Section 10.3 and similar provisions with other
Subordinate Creditors shall not exceed 50% of Net Proceeds in the aggregate
ARTICLE XI
Affirmative Covenants of Buyer
To induce Seller to enter into this Agreement, Buyer warrants, covenants
and agrees that until the full and final payment of the Obligations, unless
Seller has previously otherwise agreed:
Section 11.1. Payment and Performance. Buyer will pay all amounts
due under the Note in accordance with the terms thereof and will observe,
perform and comply with every covenant, term and condition expressed or
implied in this Agreement. Buyer will cause each of its Subsidiaries to
observe, perform and comply with every such term, covenant and condition.
Section 11.2. Books, Financial Statements and Reports. Buyer and each
of its Subsidiaries will at all times maintain full and accurate books of
account and records. Buyer will maintain and will cause its Subsidiaries to
maintain a standard system of accounting, will maintain its Fiscal Year, and
will furnish the following statements and reports to Seller at Buyer's
expense:
(a) As soon as available, and in any event within ninety-five (95)
days after the end of each Fiscal Year, complete Consolidated financial
statements of Buyer together with all notes thereto, prepared in reasonable
detail in accordance with GAAP, together with an unqualified opinion, based on
an audit using generally accepted auditing standards, by independent certified
public accountants selected by Buyer and acceptable to Seller, stating that
such Consolidated financial statements have been so prepared. These financial
statements shall contain a Consolidated balance sheet as of the end of such
Fiscal Year and Consolidated statements of earnings, of cash flows, and of
changes in owners' equity for such Fiscal Year, each setting forth in
comparative form the corresponding figures for the preceding Fiscal Year.
(b) As soon as available, and in any event within sixty (60) days
after the end of each Fiscal Quarter, Buyer's Consolidated balance sheet as
of the end of such Fiscal Quarter and Consolidated statements of Buyer's
earnings and cash flows for the period from the beginning of the then current
Fiscal Year to the end of such Fiscal Quarter, all in reasonable detail and
prepared in accordance with GAAP, subject to changes resulting from normal
year-end adjustments. In addition Buyer will, together with each such set of
financial statements and each set of financial statements furnished under
subsection (a) of this section, furnish a certificate in a form reasonably
acceptable to Seller signed by the chief financial officer of Buyer stating
that such financial statements are accurate and complete (subject to normal
year-end adjustments) and stating that no Default exists at the end of such
Fiscal Quarter or at the time of such certificate or specifying the nature and
period of existence of any such Default.
(c) Promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent by Buyer to its
stockholders and all registration statements, periodic reports and other
statements and schedules filed by Buyer with any securities exchange, the
Commission or any similar governmental authority.
(d) Annually within 115 days after the end of each Fiscal Year
beginning with the Fiscal Year ending December 31, 1998, a report containing
(i) an estimation of the oil and gas reserves, classified by appropriate
categories, as of the end of the preceding Fiscal Year attributable to the
interest of the Buyer therein, (ii) a projection of the rate of production of
and net income from such reserves with respect to such interest, (iii) a
calculation of the present worth of such net income discounted at a rate of
10%, and (iv) a schedule or complete description of all assumptions, estimates
and projections made or used in the preparation of such report. Each such
report shall be prepared by an independent petroleum engineer acceptable to
Seller in accordance with customary and generally accepted standards and
practices for petroleum engineers, and shall be based on (1) prices used by
Houston Energy Banks, as reported by Madison Energy Advisors, Inc., escalated
at a rate not to exceed 3% per annum, (2) lease operating expenses and
production taxes derived from and consistent with those actually incurred by
Buyer, escalated at the same rate, if any, being applied to prices, and (3)
such other assumptions as shall be reasonably acceptable to Seller.
(e) Promptly, such other information with respect to the business
and operations of Buyer and its Subsidiaries, as Seller may reasonably
request.
Section 11.3. Notice of Material Events and Change of Address.
Buyer will promptly notify Seller in writing, stating that such notice is
being given pursuant to this Agreement, of:
(a) the occurrence of any Material Adverse Change,
(b) the occurrence of any Default,
(c) the acceleration of the maturity of any indebtedness owed by
Buyer or any Subsidiary thereof or of any default by any Buyer or any
such Subsidiary under any indenture, mortgage, agreement, contract or
other instrument to which any of them is a party or by which any of them
or any of their properties is bound, if such acceleration or default
could cause a Material Adverse Change,
(d) any claim of $100,000 or more, any notice of potential
liability under any environmental laws which might exceed such amount,
or any other material adverse claim asserted against Buyer or any
Subsidiary thereof or with respect to Buyer or any of such Subsidiary's
properties, and
(e) the filing of any suit or proceeding against Buyer or any
Subsidiary thereof in which an adverse decision could cause a Material
Adverse Change.
Upon the occurrence of any of the foregoing Buyer and any Subsidiary
thereof will take all necessary or appropriate steps to remedy promptly any
such Material Adverse Change, Default, acceleration or default, to protect
against any such adverse claim, to defend any such suit or proceeding, and to
resolve all controversies on account of any of the foregoing. Buyer will also
notify Seller in writing at least twenty business days prior to the date that
Buyer or any Subsidiary thereof changes its name or the location of its chief
executive office or principal place of business or the place where it keeps
its books and records concerning the Collateral, furnishing with such notice
any necessary financing statement amendments or requesting Seller to prepare
the same.
Section 11.4. Maintenance of Properties. Buyer and each of its
Subsidiaries will maintain, preserve, protect, and keep all Collateral and all
other property used or useful in the conduct of its business in good condition
and in compliance with all applicable laws, and will from time to time make
all repairs, renewals and replacements needed to enable the business and
operations carried on in connection therewith to be promptly and
advantageously conducted at all times.
Section 11.5. Maintenance of Existence and Qualifications. Buyer
and each of its Subsidiaries will maintain and preserve its existence and its
rights and franchises in full force and effect and will qualify to do business
in all states or jurisdictions where required by applicable law, except where
the failure so to qualify will not cause a Material Adverse Change.
Section 11.6. Payment of Trade Liabilities, Taxes, etc. Buyer and
each of its Subsidiaries will (a) timely file all required tax returns; (b)
timely pay all taxes, assessments, and other governmental charges or levies
imposed upon it or upon its income, profits or property; (c) pay when due all
Liabilities owed by it on ordinary trade terms to vendors, suppliers and other
persons providing goods and services used by it in the ordinary course of its
business; (d) pay and discharge when due all other Liabilities now or
hereafter owed by it; and (e) maintain appropriate accruals and reserves for
all of the foregoing in accordance with GAAP. Buyer and each of its
Subsidiaries may, however, delay paying or discharging any of the foregoing
so long as it is in good faith contesting the validity thereof by appropriate
proceedings and has set aside on its books adequate reserves therefor.
Section 11.7. Insurance. Buyer and each of its Subsidiaries will
keep or cause to be kept insured by financially sound and reputable insurers
its properties in such forms and amounts and against such risks as are
customary for persons engaged in the same or similar business of owning and
operating similar properties. Upon demand by Seller any insurance policies
covering Collateral shall be endorsed (a) to provide for payment of losses to
Seller as its interests may appear and (b) to provide that such policies may
not be canceled or reduced or affected in any material manner for any reason
without fifteen days prior notice to Seller.
Section 11.8. Compliance with Agreements and Law. Buyer and each of
its Subsidiaries will perform all material obligations it is required to
perform under the terms of each indenture, mortgage, deed of trust, security
agreement, lease, franchise, agreement, contract or other instrument or
obligation to which it is a party or by which it or any of its properties is
bound. Buyer and each of its Subsidiaries will conduct its business and
affairs in compliance with all laws applicable thereto.
Section 11.9. Agreement to Deliver Security Documents. Buyer agrees
to deliver and to cause each of its Subsidiaries to deliver, to further secure
the Note whenever requested by Seller in its sole and absolute discretion,
deeds of trust, mortgages, chattel mortgages, security agreements, financing
statements and other Security Documents in form and substance satisfactory to
it for the purpose of granting, confirming, and perfecting liens or security
interests in any real or personal property now owned or hereafter acquired by
Buyer and any such Subsidiary.
Section 11.10. Perfection and Protection of Security Interests and
Liens. Buyer will from time to time deliver, and will cause each of its
Subsidiaries from time to time to deliver, to Seller any financing statements,
continuation statements, extension agreements and other documents, properly
completed and executed (and acknowledged when required) by Buyer or any such
Subsidiary in form and substance satisfactory to Seller, which they request
for the purpose of perfecting, confirming, or protecting any Liens or other
rights in Collateral securing any Obligations.
Section 11.11. Designation of Agent for Sale. If either (a) the Note
has not been paid in full within the two-year period commencing at Closing, or
(b) the PDP Reserves to Debt Ratio is less than 1.0 to 1.0 at any time after
Closing for a period of 180 consecutive days, Buyer agrees (i) that upon the
written request of the Collateral Agent for the Subordinate Creditors under
the Intercreditor Agreement, it will retain a person designated by such
Collateral Agent for the express purpose of locating a buyer for all or
substantially all of the assets of Buyer (which person shall be retained on
terms generally customary in the industry for transactions of this type), (ii)
that if a person is so designated, Buyer will cooperate and otherwise act in
good faith in connection with the efforts of such person in locating a buyer
and (iii) that if a prospective buyer or buyers are located, Buyer will
consider in good faith any offer(s) tendered by them and, if a determination
is made to accept any offer, to use its reasonable best efforts to obtain any
necessary consent(s) of the Senior Lender or other third parties to any such
sale.
ARTICLE XII
Negative Covenants of Buyer
To induce Seller to enter into this Agreement, Buyer warrants, covenants
and agrees that until the full and final payment of the Obligations, unless
Seller has previously otherwise agreed:
Section 12.1. Indebtedness. Neither Buyer nor any Subsidiary thereof
will in any manner owe or be liable for Indebtedness except:
(a) the Obligations;
(b) the Senior Credit Facility;
(c) the Other Subordinated Indebtedness;
(d) obligations under operating leases entered into in the ordinary
course of Buyer's or its Subsidiaries' business in arm's length transactions
at competitive market rates under competitive terms and conditions in all
respects;
(e) Indebtedness owed by Buyer or any Subsidiary thereof which is
subordinated to the Obligations upon terms and conditions satisfactory to
Seller in its sole and absolute discretion;
(f) purchase money Indebtedness in an aggregate principal amount not
to exceed $200,000 at any time, provided that the original principal amount of
any such Indebtedness shall not be in excess of the purchase price of the
asset acquired thereby and such Indebtedness shall be secured only by the
acquired asset;
(g) Indebtedness in the principal amount of approximately $20,000
owed Bank One Texas on a workover rig; and
(h) Indebtedness in the principal amount of approximately $20,000
owed Sam Henderson.
Section 12.2. Limitation on Liens. Neither Buyer nor any Subsidiary
thereof will create, assume or permit to exist any Lien upon any of the
properties or assets which it now owns or hereafter acquires, except, to the
extent not otherwise forbidden by the Security Documents the following:
(a) Liens which secure Obligations only;
(b) Liens which secure the Senior Credit Facility;
(c) Liens which secure the Other Subordinated Indebtedness;
(d) Statutory Liens for taxes, statutory mechanics' and
materialmen's Liens incurred in the ordinary course of business, and other
similar Liens incurred in the ordinary course of business, provided such Liens
do not secure Indebtedness and secure only Indebtedness which is not
delinquent or for which adequate reserves have been set aside.
(e) Liens securing Indebtedness described in Section 15.1(f).
(f) Existing Lien in favor of Sam Henderson covering properties
located in Wichita County, Texas.
(g) Existing Lien in favor of Bank One Texas on the Indebtedness
described in Section 15.1 (g).
Section 12.3. Limitation on Mergers. Except with the approval of its
Board of Directors, and except as expressly provided in this Section, neither
Buyer nor any Subsidiary thereof will merge or consolidate with or into any
other business entity. Any Subsidiary of Buyer may, however, be merged into or
consolidated with either Buyer or another Subsidiary which is wholly-owned by
Buyer, so long as Buyer or the Subsidiary wholly-owned by Buyer is the
surviving business entity. Buyer will not issue any securities other than
shares of its common stock or any options or warrants giving the holders
thereof only the right to acquire such shares. No Subsidiary of Buyer will
issue any additional shares of its capital stock or other securities or any
options, warrants or other rights to acquire such additional shares or other
securities except to Buyer. No Subsidiary of Buyer which is a partnership
will allow any diminution of Buyer's interest (direct or indirect) therein.
Section 12.4. Limitation on Sales of Property. Except with the
approval of its Board of Directors, neither Buyer nor any Subsidiary thereof
will sell, transfer, lease, exchange, alienate or dispose of any Collateral
except, to the extent not otherwise forbidden under the Security Documents:
(a) equipment which is worthless or obsolete or which is replaced by
equipment of equal suitability and value;
(b) inventory (including oil and gas sold as produced and seismic data)
which is sold in the ordinary course of business on ordinary trade terms; or
(c) other property which is sold for fair consideration not in the
aggregate in excess of $500,000 in any Fiscal Year (commencing with Fiscal
Year 1998).
Section 12.5. Limitation on Investments and New Businesses. Neither
Buyer nor any Subsidiary thereof will make any expenditure or commitment or
incur any obligation or enter into or engage in any transaction except in the
ordinary course of business (which ordinary course of business includes the
acquisition, directly or indirectly, of oil and gas properties), engage
directly or indirectly in any business or conduct any operations except in
connection with or incidental to its present businesses and operations, make
any acquisitions of or capital contributions to or other investments in any
person, other than Permitted Investments, or make any significant
acquisitions or investments in any properties other than oil and gas
properties.
Section 12.6. Transactions with Affiliates. Neither Buyer nor any
of its Subsidiaries will engage in any material transaction with any of its
Affiliates on terms which are less favorable to it than those which would have
been obtainable at the time in arm's-length dealing with persons other than
such Affiliates, provided that such restriction shall not apply to
transactions among Buyer and its wholly-owned Subsidiaries.
Section 12.7. Restricted Payments. Buyer will not, and will not
permit any of its Subsidiaries to, declare or make, or incur any liability to
declare or make, any Restricted Payment.
ARTICLE XIII
Events of Default and Remedies
Section 13.1. Events of Default. Each of the following constitutes
an "Event of Default" for purposes of the Note and this Agreement:
(a) a default in the payment of principal of the Note when and as
the same shall become due and payable;
(b) a default in the payment of any interest upon the Note when such
interest becomes due and payable and continuance of such default for a period
of 5 business days;
(c) a default in the performance or observation of any covenant,
Agreement or condition contained in either Article XIV or Article XV, which
default is not remedied within 30 days after the earlier of (i) the day on
which Buyer first obtains knowledge of such default or (ii) the day on which
written notice thereof is given to Buyer by the holder of the Note;
(d) the PDP Reserves to Debt Ratio is less than 1.0 to 1.0, which
default is not remedied within 30 days after the day on which written notice
thereof is given to Buyer by the holder of the Note;
(e) any "default" or "event of default" occurs under any Note
Document which defines either such term, and the same is not remedied within
the applicable period of grace (if any) provided in such Note Document;
(f) any representation or warranty previously, presently or
hereafter made in writing by or on behalf of Buyer or any Subsidiary thereof
in connection with this Agreement or any Note Document shall prove to have
been false or incorrect in any material respect on any date on or as of which
made, which default is not remedied within 30 days after the earlier of (i)
the day on which Buyer first obtains knowledge of such default or (ii) the day
on which written notice thereof is given to Buyer by the holder of the Note;
(g) Buyer or any Subsidiary fails to duly observe, perform or comply
with any agreement with any person or any term or condition of any loan
document relating to the Senior Credit Facility, the Other Subordinated
Indebtedness or any other agreement or instrument, if such agreement or
instrument is materially significant to Buyer or such Subsidiary, and such
failure is not remedied within the applicable period of grace (if any)
provided in such agreement or instrument;
(h) Buyer or any Subsidiary thereof fails to pay any portion, when
such portion is due, of any of its Indebtedness in excess of $100,000, or
breaches or defaults in the performance of any agreement or instrument by
which any such Indebtedness is issued, evidenced, governed, or secured, and
any such failure, breach or default continues beyond any applicable period of
grace provided therefor;
(i) Buyer or any Subsidiary thereof:
(i) suffers the entry against it of a judgment, decree or
order for relief by a tribunal of competent jurisdiction in an
involuntary proceeding commenced under any applicable bankruptcy,
insolvency or other similar Law of any jurisdiction now or hereafter in
effect, including the federal Bankruptcy Code, as from time to time
amended, or has any such proceeding commenced against it which remains
undismissed for a period of thirty days; or
(ii) commences a voluntary case under any applicable
bankruptcy, insolvency or similar Law now or hereafter in effect,
including the federal Bankruptcy Code, as from time to time amended; or
applies for or consents to the entry of an order for relief in an
involuntary case under any such Law; or makes a general assignment for
the benefit of creditors; or fails generally to pay (or admits in
writing its inability to pay) its debts as such debts become due; or
takes corporate or other action to authorize any of the foregoing; or
(iii) suffers the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of all or a substantial part of its assets or of any
part of the Collateral in a proceeding brought against or initiated by
it, and such appointment or taking possession is neither made
ineffective nor discharged within thirty days after the making thereof,
or such appointment or taking possession is at any time consented to,
requested by, or acquiesced to by it; or
(iv) suffers the entry against it of a final judgment for the
payment of money in excess of $100,000 (not covered by insurance
satisfactory to Sellers in their discretion), unless the same is
discharged within thirty days after the date of entry thereof or an
appeal or appropriate proceeding for review thereof is taken within such
period and a stay of execution pending such appeal is obtained; or
(v) suffers a writ or warrant of attachment or any similar
process to be issued by any tribunal against all or any substantial part
of its assets or any part of the Collateral, and such writ or warrant of
attachment or any similar process is not stayed or released within
thirty days after the entry or levy thereof or after any stay is vacated
or set aside;
(j) Any Change in Control occurs; and
(k) Any Material Adverse Change occurs.
Upon the occurrence of an Event of Default described in subsection (i)(i),
(i)(ii) or (i)(iii) of this section with respect to Buyer or a Subsidiary
thereof, all of the Obligations shall thereupon be immediately due and
payable, without demand, presentment, notice of demand or of dishonor and
nonpayment, protest, notice of protest, notice of intention to accelerate,
declaration or notice of acceleration, or any other notice or declaration of
any kind, all of which are hereby expressly waived by Buyer and each such
Subsidiary. Upon the occurrence of any other Event of Default, the holder of
the Note may during its continuance, by written notice to Buyer declare the
Note held by it to be due and payable, whereupon such Note shall forthwith
mature and become due and payable.
Section 13.2. Remedies. If any Default shall occur and be
continuing, the holder of the Note may protect and enforce its rights under
the Note Documents by any appropriate proceedings, including proceedings for
specific performance of any covenant or Agreement contained in any Note
Document, and each holder of the Note may enforce the payment of any
Obligations due it or enforce any other legal or equitable right which it may
have. All rights, remedies and powers conferred upon the holder of the Note
under the Note Documents shall be deemed cumulative and not exclusive of any
other rights, remedies or powers available under the Note Documents or at law
or in equity.
ARTICLE XIV
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 Seller: Bargo Energy Company
700 Louisiana
Suite 3700
Houston, Texas 77002
Attention: Mike Gibson
Fax No.: 713-236-9799
If to Buyer: 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 Buyer or
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 XV
Commissions
(a) Seller agrees to indemnify and hold harmless Buyer from and
against any and all Damages 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, Seller with any broker or finder in connection
with this Agreement or the transaction contemplated hereby.
(b) Buyer agrees to indemnify and hold harmless Seller from and
against all Damages 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 transaction contemplated hereby.
ARTICLE XVI
Option to Repurchase
As a part of the consideration for the purchase of the Properties, Buyer
hereby grants to Seller an exclusive option to repurchase the Properties,
exercisable at any time prior to the expiration of 90 days following Closing.
Such option shall be exercisable by delivery by Seller of written notice of
exercise to Buyer on or before the expiration of said 90 day period. The terms
of purchase if the option is exercised shall be the same price, with the same
Effective Date and on all of the same other terms and conditions as are
provided in this Agreement, except that Seller shall have no obligation or
liability for any torts or breaches of contract committed by Buyer during the
period of its ownership of the Properties.
ARTICLE XVII
Miscellaneous Matters
Section 16.1. Survival of Provisions. All representations and
warranties made herein by Buyer and Seller 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 Section 9.3, all of
such representations and warranties shall survive the Closing and the delivery
of the Assignment. The provisions of, and the obligations of the parties
under, Article VI (to the extent the same are, by mutual agreement, not
performed at Closing), and Articles VII through XVI inclusive shall survive
the Closing and the delivery of the Assignment.
Section 17.2. Further Assurances. After the Closing, Seller shall
execute and deliver, and shall otherwise cause to be executed and delivered,
from time to time, such further instruments, notices, division orders,
transfer orders and other documents, and do such other and further acts and
things, as may be reasonably necessary to more fully and effectively grant,
convey and assign the Properties to Buyer.
Section 17.3. Binding Effect; Successors and Assigns. The Agreement
shall be binding on the parties hereto and their respective successors and
permitted assigns. Neither party shall have the right to assign its rights
under this Agreement, without the prior written consent of the other party
first having been obtained, except that Buyer shall have the right to
designate a wholly-owned subsidiary of Buyer to whom title to the Properties
shall be conveyed by Seller.
Section 17.4. Imbalances. On the date of Closing (and, upon the
delivery to Buyer of the Assignments), Buyer shall succeed to the position of
Seller with respect to all gas imbalances. As a result of such succession
Buyer shall be entitled to receive the benefits of production and shall be
obligated to suffer any detriments (whether the same be in the form of
obligations to deliver production which would have otherwise been attributable
to its ownership of the Oil and Gas Properties without receiving full payment
therefor, or be in the form of the obligation to make payment in cash) which
Seller would have been obligated to suffer by virtue of such positions.
Section 17.5. Expenses. Each party shall bear and pay all expenses
incurred by it in connection with the negotiation, execution and preparation
of this Agreement and all related instruments. Buyer will promptly pay all
reasonable costs and expenses incurred by or on behalf of the holder of the
Note (including attorneys' fees, consultants' fees and engineering fees,
travel costs and miscellaneous expenses) in connection with (a) monitoring or
confirming (or preparation or negotiation of any document related to) Buyer's
compliance with any covenants or conditions contained in Article IV or Article
XV of this Agreement or in any Note Document, and (b) the defense or
enforcement of any of the Note Documents (including this section) or the
defense of such holder's exercise of its rights thereunder.
Section 17.6. 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 17.7. Public Statements. Seller 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 party shall
issue any publicity or other release without the prior consent of the other
party.
Section 17.8. 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 17.9. 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 party against whom enforcement
of the amendment, modification, supplement, restatement or discharge (or
waiver) is sought.
Section 17.10. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without giving
effect to rules of law which might require application of the law of another
jurisdiction. Buyer hereby irrevocably submits itself to the non-exclusive
jurisdiction of the state and federal courts sitting in the State of Texas and
agrees and consents that service of process may be made upon it in any legal
proceeding relating to the Note Documents or the Obligations by any means
allowed under Texas or federal law.
Section 17.11. Limitation on Interest. The holder of the Note, Buyer
and any other parties to the Note Documents intend to contract in strict
compliance with applicable usury law from time to time in effect. In
furtherance thereof such persons stipulate and agree that none of the terms
and provisions contained in the Note Documents shall ever be construed to
create a contract to pay, for the use, forbearance or detention of money,
interest in excess of the maximum amount of interest permitted to be charged
by applicable law from time to time in effect. Neither Buyer nor any present
or future guarantors, endorsers, or other persons hereafter becoming liable
for payment of any Obligation shall ever be liable for unearned interest
thereon or shall ever be required to pay interest thereon in excess of the
maximum amount that may be lawfully charged under applicable law from time to
time in effect, and the provisions of this section shall control over all
other provisions of the Note Documents which may be in conflict or apparent
conflict herewith. Each holder of the Note expressly disavows any intention
to charge or collect excessive unearned interest or finance charges in the
event the maturity of any Obligation is accelerated. If the maturity of any
Obligation is accelerated for any reason, any Obligation is prepaid and as a
result any amounts held to constitute interest are determined to be in excess
of the legal maximum, or any holder of any or all of the Obligations shall
otherwise collect moneys which are determined to constitute interest which
would otherwise increase the interest on any or all of the Obligations to an
amount in excess of that permitted to be charged by applicable law then in
effect, then all sums determined to constitute interest in excess of such
legal limit shall, without penalty, be promptly applied to reduce the then
outstanding principal of the related Obligations or, at such holder's option,
promptly returned to Buyer or the other payor thereof upon such determination.
In determining whether or not the interest paid or payable, under any
specific circumstance, exceeds the maximum amount permitted under applicable
law, each holder of an Obligation and Buyer (and any other payors thereof)
shall to the greatest extent permitted under applicable law, characterize any
non-principal payment as an expense, fee or premium rather than as interest,
exclude voluntary prepayments and the effects thereof, and amortize, prorate,
allocate, and spread the total amount of interest throughout the entire
contemplated term of the instruments evidencing the Obligations in accordance
with the amounts outstanding from time to time thereunder and the maximum
legal rate of interest from time to time in effect under applicable law in
order to lawfully charge the maximum amount of interest permitted under
applicable law.
Section 17.12. 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 Buyer and Seller to sign
the same counterpart.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, this Agreement is executed by the parties hereto on
the date set forth above.
SELLER:
BARGO ENERGY COMPANY
By: /s/ Tim J. Goff
Tim J. Goff, Manager
TJG INVESTMENTS, INC.
By: /s/ Tim J. Goff
Tim J. Goff, President
BUYER:
FUTURE PETROLEUM CORPORATION
By: /s/ Carl Price
Carl Price, President
EXHIBIT 10.02
PROMISSORY NOTE
$3,397,600 Houston, Texas October 15, 1998
FOR VALUE RECEIVED, the undersigned, FUTURE PETROLEUM CORPORATION, a Utah
corporation, hereby promises to pay to the order of BARGO ENERGY COMPANY, a
Texas general partnership ("Lender") the principal sum of THREE MILLION THREE
HUNDRED NINETY-SEVEN THOUSAND SIX HUNDRED AND NO/100 Dollars ($3,397,600) with
interest on the unpaid balance thereof from the date hereof until maturity at
the rate of ten percent (10%) per annum, both principal and interest payable as
hereinafter provided in lawful money of the United States of America at 1100
Louisiana, Suite 3150, Houston, Texas 77002, or at such other place within
Harris County, Texas as from time to time may be designated by the holder of
this Note.
All past due principal and/or interest or installments thereof shall bear
interest at the highest rate for which the undersigned may legally contract
under applicable law or, if no such rate is designated under applicable law, at
the rate of eighteen percent (18%) per annum.
Interest only on this Note shall be due and payable quarterly as it
accrues on the last business day of each quarter, beginning December 31, 1998
and continuing regularly thereafter until and including December 31, 2003, on
which date all unpaid principal of and accrued interest on this Note shall be
due and payable. Notwithstanding the foregoing, the undersigned shall have the
option, exercisable with respect to each of the first seven quarterly
installments of interest due hereunder, 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 Bargo Purchase Agreement, (ii) any such unpaid installment of interest shall
not bear interest at the default rate set forth above and (iii) the amount of
any unpaid installment of interest shall automatically be added to the principal
amount hereof, effective as of the date such unpaid installment of interest was
due hereunder, and shall bear interest at the rate of interest set forth herein.
This Note (a) is executed and delivered in connection with and pursuant to
that certain Purchase and Sale Agreement of even date herewith (the "Bargo
Purchase Agreement") between the undersigned, Bargo Energy Company and TJG
Investments Inc., and is one of the "Notes" as defined therein, (b) is subject
to the terms and provisions thereof, which contains provisions for acceleration
of maturity hereof upon the happening of certain stated events, and (c) is
secured by and entitled to the benefits of certain security documents (as
identified therein). Reference is hereby made to (i) the Bargo Purchase
Agreement for a description of certain rights, limitations of rights,
obligations and duties of the parties hereto and for the meanings assigned to
terms used and not defined herein, and (ii) the security documents referenced
above for a description of the nature and extent of the security thereby
provided and the rights of the parties thereto.
The undersigned shall have the right to prepay, without penalty, at any
time and from time to time prior to maturity, all or any part of the unpaid
principal balance of this Note and/or all or any part of the unpaid interest
accrued to the date of such prepayment, provided that any such principal thus
paid is accompanied by accrued interest on such principal. Any partial
prepayments of principal shall be applied to installments thereof in the inverse
order of maturity.
It is the intent of the payee of this Note and the undersigned in the
execution of this Note and all other instruments now or hereafter securing this
Note to contract in strict compliance with applicable usury law. In furtherance
thereof, the said payee and the undersigned stipulate and agree that none of the
terms and provisions contained in this Note, or in any other instrument executed
in connection herewith, shall ever be construed to create a contract to pay for
the use, forbearance or detention of money, interest at a rate in excess of the
maximum interest rate permitted to be charged by applicable law; that neither
the undersigned nor any guarantors, endorsers or other parties now or hereafter
becoming liable for payment of this Note shall ever be obligated or required to
pay interest on this Note at a rate in excess of the maximum interest that may
be lawfully charged under applicable law; and that the provisions of this
paragraph shall control over all other provisions of this Note and any other
instruments now or hereafter executed in connection herewith which may be in
apparent conflict herewith. The holder of this Note expressly disavows any
intention to charge or collect excessive unearned interest or finance charges in
the event the maturity of this Note is accelerated. If the maturity of this
Note shall be accelerated for any reason or if the principal of this Note is
paid prior to the end of the term of this Note, and as a result thereof the
interest received for the actual period of existence of the loan evidenced by
this Note exceeds the applicable maximum lawful rate, the holder of this Note
shall, at its option, either refund to the undersigned the amount of such excess
or credit the amount of such excess against the principal balance of this Note
then outstanding and thereby shall render inapplicable any and all penalties of
any kind provided by applicable law as a result of such excess interest. In the
event that the said payee or any other holder of this Note shall contract for,
charge or receive any amount or amounts and/or any other thing of value which
are determined to constitute interest which would increase the effective
interest rate on this Note to a rate in excess of that permitted to be charged
by applicable law, an amount equal to interest in excess of the lawful rate
shall, upon such determination, at the option of the holder of this Note, be
either immediately returned to the undersigned or credited against the principal
balance of this Note then outstanding, in which event any and all penalties of
any kind under applicable law as a result of such excess interest shall be
inapplicable. By execution of this Note the undersigned acknowledges that it
believes the loan evidenced by this Note to be non-usurious and agrees that if,
at any time, the undersigned should have reason to believe that such loan is in
fact usurious, it will give the holder of this Note notice of such condition and
the undersigned agrees that said holder shall have ninety (90) days in which to
make appropriate refund or other adjustment in order to correct such condition
if in fact such exists. The term "applicable law" as used in this Note shall
mean the laws of the State of Texas or the laws of the United States, whichever
laws allow the greater rate of interest, as such laws now exist or may be
changed or amended or come into effect in the future.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity or through any bankruptcy, receivership, probate
or other court proceedings or if this Note is placed in the hands of attorneys
for collection after default, the undersigned and all endorsers, guarantors and
sureties of this Note jointly and severally agree to pay to the holder of this
Note in addition to the principal and interest due and payable hereon all the
costs and expenses of said holder in enforcing this Note including, without
limitation, reasonable attorneys' fees and legal expenses.
The undersigned and all endorsers, guarantors and sureties of this Note
and all other persons liable or to become liable on this Note severally waive
presentment for payment, demand, notice of demand and of dishonor and nonpayment
of this Note, notice of intention to accelerate the maturity of this Note,
protest and notice of protest, diligence in collecting, and the bringing of suit
against any other party, and agree to all renewals, extensions, modifications,
partial payments, releases or substitutions of security, in whole or in part,
with or without notice, before or after maturity.
THIS NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER SHALL BE
GOVERNED FOR ALL PURPOSES BY THE LAW OF THE STATE OF TEXAS AND THE LAW OF THE
UNITED STATES APPLICABLE TO TRANSACTIONS WITHIN SUCH STATE.
FUTURE PETROLEUM CORPORATION,
a Utah corporation
By: /s/ Carl Price
B. Carl Price, President
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.
EXHIBIT 10.03
PROMISSORY NOTE
$602,400 Houston, Texas October 15, 1998
FOR VALUE RECEIVED, the undersigned, FUTURE PETROLEUM CORPORATION, a Utah
corporation, hereby promises to pay to the order of TJG INVESTMENTS INC., a
Texas corporation ("Lender") the principal sum of SIX HUNDRED TWO THOUSAND FOUR
HUNDRED AND NO/100 Dollars ($602,400) with interest on the unpaid balance
thereof from the date hereof until maturity at the rate of ten percent (10%) per
annum, both principal and interest payable as hereinafter provided in lawful
money of the United States of America at 1100 Louisiana, Suite 3150, Houston,
Texas 77002, or at such other place within Harris County, Texas as from time to
time may be designated by the holder of this Note.
All past due principal and/or interest or installments thereof shall bear
interest at the highest rate for which the undersigned may legally contract
under applicable law or, if no such rate is designated under applicable law, at
the rate of eighteen percent (18%) per annum.
Interest only on this Note shall be due and payable quarterly as it
accrues on the last business day of each quarter, beginning December 31, 1998
and continuing regularly thereafter until and including December 31, 2003, on
which date all unpaid principal of and accrued interest on this Note shall be
due and payable. Notwithstanding the foregoing, the undersigned shall have the
option, exercisable with respect to each of the first seven quarterly
installments of interest due hereunder, 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 Bargo Purchase Agreement, (ii) any such unpaid installment of interest shall
not bear interest at the default rate set forth above and (iii) the amount of
any unpaid installment of interest shall automatically be added to the principal
amount hereof, effective as of the date such unpaid installment of interest was
due hereunder, and shall bear interest at the rate of interest set forth herein.
This Note (a) is executed and delivered in connection with and pursuant to
that certain Purchase and Sale Agreement of even date herewith (the "Bargo
Purchase Agreement") between the undersigned, Bargo Energy Company and TJG
Investments Inc., and is one of the "Notes" as defined therein, (b) is subject
to the terms and provisions thereof, which contains provisions for acceleration
of maturity hereof upon the happening of certain stated events, and (c) is
secured by and entitled to the benefits of certain security documents (as
identified therein). Reference is hereby made to (i) the Bargo Purchase
Agreement for a description of certain rights, limitations of rights,
obligations and duties of the parties hereto and for the meanings assigned to
terms used and not defined herein, and (ii) the security documents referenced
above for a description of the nature and extent of the security thereby
provided and the rights of the parties thereto.
The undersigned shall have the right to prepay, without penalty, at any
time and from time to time prior to maturity, all or any part of the unpaid
principal balance of this Note and/or all or any part of the unpaid interest
accrued to the date of such prepayment, provided that any such principal thus
paid is accompanied by accrued interest on such principal. Any partial
prepayments of principal shall be applied to installments thereof in the inverse
order of maturity.
It is the intent of the payee of this Note and the undersigned in the
execution of this Note and all other instruments now or hereafter securing this
Note to contract in strict compliance with applicable usury law. In furtherance
thereof, the said payee and the undersigned stipulate and agree that none of the
terms and provisions contained in this Note, or in any other instrument executed
in connection herewith, shall ever be construed to create a contract to pay for
the use, forbearance or detention of money, interest at a rate in excess of the
maximum interest rate permitted to be charged by applicable law; that neither
the undersigned nor any guarantors, endorsers or other parties now or hereafter
becoming liable for payment of this Note shall ever be obligated or required to
pay interest on this Note at a rate in excess of the maximum interest that may
be lawfully charged under applicable law; and that the provisions of this
paragraph shall control over all other provisions of this Note and any other
instruments now or hereafter executed in connection herewith which may be in
apparent conflict herewith. The holder of this Note expressly disavows any
intention to charge or collect excessive unearned interest or finance charges in
the event the maturity of this Note is accelerated. If the maturity of this
Note shall be accelerated for any reason or if the principal of this Note is
paid prior to the end of the term of this Note, and as a result thereof the
interest received for the actual period of existence of the loan evidenced by
this Note exceeds the applicable maximum lawful rate, the holder of this Note
shall, at its option, either refund to the undersigned the amount of such excess
or credit the amount of such excess against the principal balance of this Note
then outstanding and thereby shall render inapplicable any and all penalties of
any kind provided by applicable law as a result of such excess interest. In the
event that the said payee or any other holder of this Note shall contract for,
charge or receive any amount or amounts and/or any other thing of value which
are determined to constitute interest which would increase the effective
interest rate on this Note to a rate in excess of that permitted to be charged
by applicable law, an amount equal to interest in excess of the lawful rate
shall, upon such determination, at the option of the holder of this Note, be
either immediately returned to the undersigned or credited against the principal
balance of this Note then outstanding, in which event any and all penalties of
any kind under applicable law as a result of such excess interest shall be
inapplicable. By execution of this Note the undersigned acknowledges that it
believes the loan evidenced by this Note to be non-usurious and agrees that if,
at any time, the undersigned should have reason to believe that such loan is in
fact usurious, it will give the holder of this Note notice of such condition and
the undersigned agrees that said holder shall have ninety (90) days in which to
make appropriate refund or other adjustment in order to correct such condition
if in fact such exists. The term "applicable law" as used in this Note shall
mean the laws of the State of Texas or the laws of the United States, whichever
laws allow the greater rate of interest, as such laws now exist or may be
changed or amended or come into effect in the future.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity or through any bankruptcy, receivership, probate
or other court proceedings or if this Note is placed in the hands of attorneys
for collection after default, the undersigned and all endorsers, guarantors and
sureties of this Note jointly and severally agree to pay to the holder of this
Note in addition to the principal and interest due and payable hereon all the
costs and expenses of said holder in enforcing this Note including, without
limitation, reasonable attorneys' fees and legal expenses.
The undersigned and all endorsers, guarantors and sureties of this Note
and all other persons liable or to become liable on this Note severally waive
presentment for payment, demand, notice of demand and of dishonor and nonpayment
of this Note, notice of intention to accelerate the maturity of this Note,
protest and notice of protest, diligence in collecting, and the bringing of suit
against any other party, and agree to all renewals, extensions, modifications,
partial payments, releases or substitutions of security, in whole or in part,
with or without notice, before or after maturity.
THIS NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER SHALL BE
GOVERNED FOR ALL PURPOSES BY THE LAW OF THE STATE OF TEXAS AND THE LAW OF THE
UNITED STATES APPLICABLE TO TRANSACTIONS WITHIN SUCH STATE.
FUTURE PETROLEUM CORPORATION,
a Utah corporation
By: /s/ Carl Price
B. Carl Price, President
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.
EXHIBIT 10.04
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT dated October 15, 1998, is made by and
between PLEDGER PARTNERS, LTD., a Texas limited partnership ("Seller"), and
FUTURE PETROLEUM CORPORATION, a Utah corporation ("Buyer");
W I T N E S E T H:
WHEREAS, Seller desires to sell, assign and convey to Buyer, and Buyer
desires to purchase and accept certain oil and gas properties and related
assets;
and
WHEREAS, Seller and Buyer deem it in their mutual best interests to
execute and deliver this Agreement;
NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual
covenants and agreements contained herein, Seller and Buyer do hereby agree as
follows:
ARTICLE I
Definitions and References
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:
"Adjusted Purchase Price" shall have the meaning assigned to such term in
Article III.
"Agreement" shall mean this Agreement, as hereafter changed, amended or
modified in accordance with the terms hereof.
"Asserted Defects" shall have the meaning assigned to such term in Section
7.1(a).
"Assignment" shall have the meaning assigned to such term in Section
9.2(a).
"Basic Documents" shall have the meaning assigned to such term in Section
4.7.
"Borrowing Base" shall have the meaning assigned to such term in the
Credit Agreement.
"Closing" and "Closing Date" shall have the meanings assigned to such
terms in Section 9.1.
"Credit Agreement" shall mean that certain Credit Agreement between Buyer,
as borrower, and Bank of America National Trust and Savings Association, as
lender, dated as of August 14, 1998.
"Defects" shall have the meaning assigned to such term in Section 7.1(b).
"Effective Date" shall have the meaning assigned to such term in Section
9.2(a).
"Oil and Gas Properties" shall have the meaning assigned to such term in
Article II.
"Other Acquisitions" shall mean the transactions contemplated under the
following documents: (a) that certain Purchase and Sale Agreement between Buyer
and NCI Properties, Ltd., dated October 15, 1998, in respect of the Gin Unit,
Dawson County, Texas; (ii) that certain Purchase and Sale Agreement between
Buyer and NCI 1990, Ltd., et al, in respect of the Shawnee Townsite Unit,
Pottawatomie County, Oklahoma and; (iii) that certain Purchase and Sale
Agreement dated October 15, 1998, between Buyer and Bargo Energy Company, in
respect of the NE Limes Field, the Candy Field, the Sand Hills Field, the Bluitt
Field, the Bruce Roy Field, and the Yellow Creek Field, located in New Mexico
(Bluitt Field), Mississippi (Yellow Creek Field) and in Texas (all others).
"Properties" shall have the meaning assigned to such term in Article II.
"Purchase Price" shall have the meaning assigned to such term in Article
III.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
all rules and regulations under such Act.
"Seller Disclosure Schedule" shall mean a schedule delivered by Seller to
Buyer on the date hereof which sets forth additional information regarding the
representations and warranties of Seller contained herein and information called
for hereby.
Section 1.2. References, Titles 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) All references herein to "$" or "dollars" shall refer to U.S.
Dollars.
(j) Exhibits II and 9.2(a) 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
Property to be Sold and Purchased
Seller agrees to sell and Buyer agrees to purchase, for the consideration
hereinafter set forth, and subject to the terms and provisions herein contained,
the following described properties, rights and interests:
(a) All of Seller's right, title and interest in and to those
properties described in Exhibit II attached hereto and made a part hereof
for all purposes;
(b) Without limitation of the foregoing, all other right, title
and interest (of whatever kind or character, whether legal or equitable,
and whether vested or contingent) of Seller in and to the oil, gas and
other minerals in and under or that may be produced from the lands
described in Exhibit II hereto (including, without limitation, interests
in oil, gas and/or mineral leases covering such lands, overriding
royalties, production payments and net profits interests in such lands or
such leases, and fee mineral interests, fee royalty interests and other
interests in such oil, gas and other minerals);
(c) All rights, titles and interests of Seller in and to, or
otherwise derived from, all presently existing and valid oil, gas and/or
mineral unitization, pooling, and/or communitization agreements,
declarations and/or orders and in and to the properties covered and the
units created thereby (including, without limitation, all units formed
under orders, rules, regulations, or other official acts of any federal,
state, or other authority having jurisdiction, voluntary unitization
agreements, designations and/or declarations) relating to the Properties
described in paragraphs (a) and (b) above;
(d) All rights, titles and interests of Seller in and to all
presently existing and valid production sales (and sales related)
contracts, operating agreements, and other agreements and contracts which
relate to any of the Properties described in paragraphs (a), (b) and (c)
above, or which relate to the exploration, development, operation, or
maintenance thereof or the treatment, storage, transportation or marketing
of production therefrom (or allocated thereto);
(e) All rights, titles and interests of Seller in and to all
machinery, equipment, improvements and fixtures (including, but not by way
of limitation, all wells, wellhead equipment, pumping units, flowlines,
tanks, buildings, injection facilities, saltwater disposal facilities,
compression facilities, gathering systems, and other equipment), and all
easements, rights-of-way, surface leases and other surface rights, all
permits and licenses, and all other appurtenances being used or held for
use in connection with, or otherwise related to, the exploration,
development, operation or maintenance of any of the Properties described
in paragraphs (a), (b) and (c) above, or the treatment, storage,
transportation or marketing of production therefrom (or allocated
thereto); and
(f) All of Seller's lease files, abstracts and title opinions,
production records, well files, accounting records (but not including
general financial accounting records), seismic records and surveys,
gravity maps, electric logs, geological or geophysical data and records,
and other files, documents and records of every kind and description which
relate to the properties described above and which are not subject to
privilege or prohibition on disclosure.
The properties and interests specified in the foregoing paragraphs (a), (b)
and (c) are herein sometimes collectively called the "Oil and Gas Properties,"
and the properties and interests specified in the foregoing paragraphs (a), (b),
(c), (d), (e) and (f) are herein sometimes collectively called the "Properties".
Notwithstanding anything in this Agreement or the Assignment to the
contrary, the following items are not included among the Properties and are not
to be conveyed to Buyer; however, omission of an item from this list shall not
be construed to suggest that the item is among the Properties:
(a) Seller's accounts, rights to payment, trade credits, rights
of reimbursement, liens, security interests, claims and causes of action,
of any character or description, arising out of or related to the Properties
and attributable to acts, omissions or events which occurred before the
Effective Date;
(b) Seller's general office and field equipment and supplies,
including, without limitation, computers and peripheral equipment; copies;
communication equipment; tools; vehicles; and those items listed on Section
1 of the Sellers' Disclosure Schedule;
(c) Seller's proprietary computer software, trade secrets and
other intellectual property; and
(d) Seller's interests under insurance policies, bonds and
indemnity agreements.
ARTICLE III
Purchase Price
In consideration of the sale of the Properties by Seller to Buyer, Buyer
shall pay to Seller at Closing cash in the amount of $1,000,000, subject to
adjustments contemplated by Section 7.2, below. (The Purchase Price, as so
adjusted, and as the same may be otherwise adjusted by the mutual agreement of
the parties, being called the "Adjusted Purchase Price").
ARTICLE IV
Representations and Warranties of Seller
Section 4.1. Organization and Existence. Seller is a limited
partnership duly formed and validly existing under the laws of the State of
Texas.
Section 4.2. Power and Authority. Seller has full partnership power
and partnership authority to execute, deliver, and perform this Agreement and
each other agreement, instrument, or document executed or to be executed by
Seller 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 Seller of this Agreement and each
other agreement, instrument, or document executed or to be executed by Seller
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 of
Seller.
Section 4.3. Valid and Binding Agreement. This Agreement has been duly
executed and delivered by Seller and constitutes, and each other agreement,
instrument, or document executed or to be executed by Seller 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 Seller and constitutes,
or when executed and delivered will constitute, a valid and legally binding
obligation of 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 4.4. Non-Contravention. Other than requirements (if any) that
there be obtained consents to assignment (or waivers of preferential rights to
purchase) from third parties, and except for approvals required to be obtained
from governmental entities who are lessors under leases forming a part of the
Oil and Gas Properties (or who administer such leases on behalf of such
lessors) which are customarily obtained post-closing, neither the execution,
delivery, and performance by Seller of this Agreement and each other
agreement, instrument, or document executed or to be executed by Seller 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 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 Seller is a party or by which 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 Seller, or
(d) violate any applicable law, rule or regulation binding upon Seller.
Section 4.5. Approvals. Other than requirements (if any) that there be
obtained consents to assignment (or waivers of preferential rights to
purchase) from third parties, and except for approvals required to be obtained
from governmental entities who are lessors under leases forming a part of the
Oil and Gas Properties (or who administer such leases on behalf of such
lessors) which are customarily obtained post-closing, 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 Seller in connection with the execution, delivery, or performance
by Seller of this Agreement each other agreement, instrument, or document
executed or to be executed by Seller in connection with the transactions
contemplated hereby to which it is a party or the consummation by it of the
transactions contemplated hereby and thereby.
Section 4.6. Pending Litigation. There are no pending suits,
actions, or other proceedings in which Seller is a party which materially
adversely affect the Properties or affect the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
Section 4.7. Basic Documents. All material contracts and agreements,
licenses, permits and easements, rights-of-way and other rights-of-surface use
comprising any part of or otherwise relating to the Properties (such material
contracts, agreements, licenses, permits, easements, rights-of-way and other
rights-of-surface use being herein called the "Basic Documents"), are in full
force and effect and constitute valid and binding obligations of the parties
thereto. Seller is not in breach or default (and no situation exists which
with the passing of time or giving of notice would create a breach or default)
of its obligations under the Basic Documents, and (to the best of Seller's
knowledge) no breach or default by any third party (or situation which with
the passage of time or giving of notice would create a breach or default)
exists, to the extent such breach or default (whether by Seller or such a
third party) could materially adversely affect the operation, value or use of
any Oil and Gas Property or the Buyer after the Effective Date. All payments
owing by Seller under Basic Documents have been and are being made (timely,
and before the same became delinquent) by Seller in all material respects
(and, where the non-payment of same by a third party could materially
adversely affect the operation, value or use of an Oil and Gas Property after
the Effective Date, have been and are being made, to Seller's knowledge, by
such third parties). For the purposes of the representations contained in
this Section (and without limitation of such representations), the non-payment
of an amount, or non-performance of an obligation, where such non-payment, or
non-performance, could result in the forfeiture or termination of rights of
Seller under a Basic Document, shall be considered material.
Section 4.8. Commitments, Abandonments or Proposals. Except as set
forth in Section 4.8 of the Seller Disclosure Schedule: (a) Seller has made no
commitments to make expenditures (including, without limitation, Seller has
not entered into any agreements that would obligate Seller to make
expenditures), in connection with the ownership or operation of the Properties
after the Effective Date, other than routine expenses incurred in the normal
operation of existing wells on the Oil and Gas Properties under the terms of
the Basic Documents; (b) Seller has not abandoned any wells (or removed any
material items of equipment, except those replaced by items of equal
suitability and value) on the Oil and Gas Properties since the Effective Date;
and (c) no proposals are currently outstanding (whether made by Seller or by
any other party) to drill additional wells, or to deepen, plug back, or rework
existing wells, or to conduct other operations for which consent is required
under the applicable operating agreement, or to conduct any other operations
other than normal operation of existing wells on the Oil and Gas Properties
under the terms of the Basic Documents, or to abandon any wells, on the Oil
and Gas Properties.
Section 4.9. Production Sales Contracts. Seller is presently receiving
a price for all production from (or attributable to) each Oil and Gas Property
covered by a Basic Document as computed in accordance with the terms of such
contract, and is not having deliveries of gas from any Oil and Gas Property
subject to a Basic Document curtailed substantially below such property's
delivery capacity.
Section 4.10. Plugging and Abandonment. Except for wells listed in
Section 4.10 of the Seller Disclosure Schedule, to the best of Seller's
information and belief there are no shut in wells located on the Oil and Gas
Properties or on lands pooled or unitized therewith (including, without
limitation, any wells which would, if located in Texas, require compliance
with Railroad Commission Rule 14(b)(2)), except for wells that have been
properly plugged and abandoned, and except for wells drilled to depths not
included within the Oil and Gas Properties or within units in which the Oil
and Gas Properties participate which have never been completed in such depths.
Section 4.11. Licenses and Permits. To Seller's knowledge, Seller has
all governmental licenses and permits necessary or appropriate to own and
operate the Properties as presently being owned and operated, and such
licenses, permits and filings are in full force and effect, and Seller has not
received written notice of any violations in respect of any such licenses or
permits.
Section 4.12. Tax Partnerships. No Oil and Gas Property is subject to
(or has related to it) any tax partnership.
Section 4.13. Payment of Expenses. All expenses (including, without
limitation, all bills for labor, materials and supplies used or furnished for
use in connection with the Properties, and all severance, production, ad
valorem, windfall profit and other similar taxes) and liabilities relating to
the ownership or operation of the Properties, have been, and are being, paid
(timely, and before the same become delinquent) by Seller.
Section 4.14. Compliance with Laws. The ownership and operation of
Properties, to the extent that non-conformance could adversely affect the
operation, value or use thereof after the Effective Date (or otherwise affect
Buyer), has been in conformity, in all material respects, with all applicable
laws, and all applicable rules, regulations and orders of all governmental
agencies having jurisdiction, relating to the Properties. Without in any way
limiting the foregoing representations, the Properties are not in violation of
(or subject to any existing, pending or, threatened investigation or inquiry
by any governmental authority, or to any remedial obligations under) any
applicable laws, rules, regulations or orders pertaining to health or the
environment, including those relating to waste materials or hazardous
substances (hereinafter sometimes collectively called "applicable
environmental laws"). Also without limitation of the foregoing, all oil and
gas wells comprising a part of the Properties have been drilled and completed
within the boundaries of the applicable leases or within limits otherwise
permitted by a valid and enforceable pooling, unit, or other agreement or
contract or by applicable law, and no well comprising a part of the Properties
is or was subject to any penalty on allowables after the Effective Date
because of any over-production (or any other judgments, orders or decrees of
any court or governmental authority or agency) which would (or did) prevent
such well from being entitled to its full legal and regular allowable (as
prescribed by any court or governmental body or agency) from and after the
Effective Date.
Section 4.15. Operated Properties. Seller has listed in Section 4.15 of
the Seller Disclosure Schedule all of the Oil and Gas Properties (in this
Section, the "Operated Properties") where Seller or an Affiliate thereof
serves as operator, for itself and such other parties (in this Section,
"non-operators"). Seller holds no funds advanced by a non-operator as
pre-payment of estimated future costs). All proceeds of production which
Seller disburses (except proceeds attributable to interests being held in
suspense in accordance with prudent industry practice) have been, and are
being, accounted for under appropriate division orders, transfer orders or
similar documents signed by, or otherwise clearly binding on, the parties
receiving such proceeds. To the best of Seller's knowledge, Seller has been
correctly accounting to such third parties for such proceeds of production.
Section 4.16. Disclaimer of Warranties and Waiver of Consumer Rights.
(a) Buyer has had the opportunity to conduct all investigations
concerning the Properties that it deems appropriate and has exclusively relied
for all purposes on its own investigations and the advice of its employees,
attorneys and other consultants. Seller disclaims any representation or
warranty that reserve estimates, decline rates, recompletion or development
possibilities, projected prices, costs, taxes and any other characteristic of
the Properties as reflected in materials made available to Buyer by Seller, or
in any materials from any other source, are complete, accurate or free from
contrary interpretation. EXCEPT AS STATED IN ARTICLE IV OF THIS AGREEMENT OR
THE ASSIGNMENT, THERE ARE NO REPRESENTATIONS OR WARRANTIES, EXPRESS, IMPLIED
OR STATUTORY, CONCERNING THE PROPERTIES, INCLUDING, WITHOUT LIMITATION, NO
REPRESENTATIONS OR WARRANTIES OF (i) MERCHANTABILITY, (ii) FITNESS FOR A
PARTICULAR PURPOSE, (iii) CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, (iv)
CONDITION, OR (v) TITLE. ALL PROPERTIES WILL BE CONVEYED AS IS, WHERE IS,
WITH ALL FAULTS AND IN THEIR PRESENT CONDITION, LOCATION AND STATE OF REPAIR.
(b) Buyer acknowledges that the properties have been used for
the exploration, development and production of oil, gas, associated
hydrocarbons and other minerals. Buyer acknowledges that there may have been
spills of crude oil, produced water or other materials in the past. Buyer
also acknowledges that some wells and equipment may contain asbestos or
naturally occurring radioactive materials ("NORM"). Buyer understands that
NORM may attach itself to the inside of wells, materials and equipment as
scale or in other forms, that wells, materials and equipment among the
properties may contain NORM and that the NORM-containing materials may be
buried or otherwise disposed of on the Properties. Buyer acknowledges that
special procedures may be required to remove and dispose of asbestos and NORM.
(c) BUYER WAIVES ITS RIGHTS UNDER THE DECEPTIVE TRADE
PRACTICES-CONSUMER PROTECTION ACT, SECTION 17.41 ET SEQ., TEXAS BUSINESS &
COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS.
AFTER CONSULTATION WITH AN ATTORNEY OF ITS OWN SELECTION, BUYER VOLUNTARILY
CONSENTS TO THIS WAIVER.
ARTICLE V
Representations and Warranties of Buyer
Section 5.1. Organization and Existence. Buyer is a corporation duly
organized, legally existing and in good standing under the laws of its state
of incorporation, and is qualified to do business in the State of Utah.
Section 5.2. 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 Buyer
in connection with the transactions contemplated hereby to which it is a party
and to consummate the transactions contemplated hereby and thereby. The
execution, delivery, and performance by Buyer of this Agreement and each other
agreement, instrument, or document executed or to be executed by Buyer in
connection with the transactions contemplated hereby to which it is a party,
and the consummation by it of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary corporate action of Buyer.
Section 5.3. 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 5.4. 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) 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 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 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.
Section 5.6. Pending Litigation. There are no pending suits,
actions, or other proceedings in which Buyer is a party which affect the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
Section 5.7. 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 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 (and the rules and
regulations pertaining thereto) or a distribution thereof in violation of any
other applicable securities laws.
ARTICLE VI
Closing of Transaction
Section 6.1. The Closing. The closing (herein called the "Closing") of
the transaction contemplated hereby shall take place in the offices of
Thompson & Knight, at 1700 Chase Tower, 600 Travis Street, Houston, Texas, at
10:00 a.m. Central Daylight Time, on October 15, 1998, or at such other date
and time as the Buyer and Seller may mutually agree upon (such date and time
being herein called the "Closing Date").
Section 6.2. Seller's Closing Obligations. At the Closing, Seller
shall:
(a) execute, acknowledge and deliver to Buyer an assignment
of the Properties (the "Assignment"), in the form attached hereto as
Exhibit 9.2(a), effective as to runs of oil and deliveries of gas as of
7:00 o'clock a.m. local time at the location of the respective
Properties on September 1, 1998 (the "Effective Date");
(b) deliver to Buyer a copy of the resolutions or consent
adopted or otherwise executed by the partners of Seller authorizing
Seller to execute and deliver this Agreement and all related documents
and instruments and to perform its obligations hereunder and thereunder;
(c) to the extent requested by Buyer, execute and deliver to
Buyer (i) letters in lieu of transfer orders (or similar documentation),
in form acceptable to both parties, and, (ii) an affidavit or other
certification (as permitted by such code) that Seller is not a "foreign
person" within the meaning of Section 1445 (or similar provisions) of
the Internal Revenue Code of 1986 as amended (i.e., Seller is not a
non-resident alien, foreign corporation, foreign partnership, foreign
trust or foreign estate as those terms are defined in such code and
regulations promulgated thereunder); and
(d) execute a closing statement reflecting all adjustments to
the Purchase Price made as of Closing.
Section 6.3. Buyer's Closing Obligations. At the Closing, Buyer shall:
(a) deliver to Seller, by wire transfer to an account
designated by Seller in a bank located in the United States, an amount
equal to the Cash Portion of the Purchase Price;
(b) execute and deliver to Seller the Note and the Security
Documents;
(c) deliver a copy of the resolutions adopted by the board of
directors of Buyer authorizing Buyer to execute and deliver this
Agreement and all related documents and instruments and to perform its
obligations hereunder and thereunder, which copy shall be certified by
the secretary or assistant secretary of Buyer; and
(d) execute a closing statement reflecting all adjustments to
the Purchase Price made as of Closing.
ARTICLE VII
Certain Accounting Adjustments.
Section 7.1. Adjustments. Appropriate adjustments shall be made
between Buyer and Seller 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 Buyer, and all proceeds
(net of applicable production, severance, and similar taxes) from the sale of
oil, gas and/or other minerals produced from the Oil and Gas Properties after
the Effective Date will be received by Buyer, and (b) all expenses which are
incurred in the operation of the Properties before the Effective Date will be
borne by Seller 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 Seller. 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 7.2 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 7.1. If the amount of adjustments so
determined which would result in a credit to Buyer exceed the amount of
adjustments so determined which would result in a credit to Seller, Buyer
shall receive a credit, for the amount of such excess, against the Cash
Portion of the Purchase Price to be paid at Closing, and, if the converse
is true, Buyer shall pay to Seller, at Closing (in addition to amounts
otherwise then owed), the amount of such excess.
(b) On or before 90 days after Closing, Buyer and Seller shall
review any additional information which may then be available pertaining to
the adjustments provided for in Sections 7.1, 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 by appropriate payments
from Seller to Buyer or from Buyer to Seller. Following such additional
adjustments, no further adjustments shall be made under this Article VII.
ARTICLE VIII
Section 8.1 Assumptions. Upon Closing, Buyer assumes and agrees to
discharge:
(a) all obligations and liabilities to plug, abandon, remove
and dispose of all wells, pipelines, equipment and improvements located
on the Properties at or after the Effective Date, and all obligations
and liabilities to restore the surface and subsurface;
(b) all obligations and liabilities arising before or after
the Effective Date under applicable environmental laws, including, without
limitation, all obligations and liabilities to dispose of or properly
handle NORM, hazardous materials and wastes located on the Properties
at or after the Effective Date;
(c) all obligations and liabilities related to any production,
pipeline, storage, processing or other production-related imbalance
existing at or after the Effective Date;
(d) all obligations and liabilities related to the custody,
administration and disbursement of suspended funds attributable to the
Properties which are transferred to Buyer at Closing;
(e) all obligations and liabilities arising under consents,
preferential rights to purchase, rights of first refusal or similar
rights which were not exercised before Closing; and
(f) all other obligations and liabilities related to the
Properties of which Buyer has actual or constructive notice before
or after the Closing Date and which arise out of acts, omissions
or conditions related to ownership, operation or use of the Properties
after the Effective Date, including, without limitation, all obligations
and liabilities contained in any instrument or agreement described in
this Agreement, and those arising under any law, rule, regulation, order,
permit or decree of any governmental authority.
Section 8.2 Indemnities.
(a) To the extent permitted by law, Buyer shall indemnify and
hold Seller, its affiliated companies, directors, officers, stockholders
partners, employees, agents, successors and assigns, harmless from and
against all claims, demands, losses, damages, costs (including reasonable
attorney's fees and all other costs of litigation), liabilities and causes
of action ("Damages") caused by or arising out of (i) any act, omission or
condition related to ownership, operation or use of the Properties after
the Effective Date, (ii) Buyer's breach of any of its representation or
obligations in this agreement, (iii) matters assumed by Buyer under
section 8.1, and (iv) any third party's use or reliance for any purpose on
information or materials made available to Buyer in connection with the
Properties or this Agreement, including, without limitation, reserve
reports and related materials.
(b) To the extent permitted by law, an except with respect to
(i) matters of which Buyer had actual or constructive notice at or before
Closing, (ii) matters assumed by Buyer under Section 8.1, and (iii) matters
within the scope of Section 8.2(a), Seller shall indemnify and hold Buyer,
its affiliated companies, directors, officers, stockholders, partners,
employees, agents, successors and assigns, harmless from and against all
Damages asserted by third parties and governmental agencies, caused by or
arising out of (i) Seller's operation, ownership or use of the Properties
before the Effective Date, and (ii) Seller's breach of any of its
representations or obligations in this Agreement.
Section 8.3 Limitations of Liability.
(a) Following Closing, all of Seller's liabilities to Buyer
under this Agreement and under the Assignment, other than accounting
adjustments contemplated by Section 10.1, shall be remedied only by payment
of actual money damages and shall be limited as provided in this Section
8.3. Buyer waives all legal and equitable remedies after Closing, and
releases Seller from all Damages, other than those described in Section
8.2(b) and this Section 8.3.
(b) Seller shall have no obligation or liability to Buyer
arising out of this Agreement or the Assignment unless Buyer gives Seller
written notice of potential obligation or liability on or before April 15,
1999. To be effective, the notice must include an adequate explanation of
the basis for obligation or liability. If the preceding condition is
satisfied, Seller shall have liability to Buyer only for the amount by
which the value of all obligations or liabilities to Buyer exceed $100,000
but are less than $750,000. Seller shall have no obligation or liability
to Buyer if the value of all obligations or liabilities asserted is less
than $100,000, nor shall Seller have any obligation or liability for any
amount by which the asserted obligations or liabilities exceed $750,000.
(c) Notwithstanding anything contained herein to the contrary,
the liabilities and obligations of the parties comprising Seller under this
Agreement shall be several and not joint or joint and several.
ARTICLE IX
Casualty Loss
In the event of damage by fire or other casualty to the Properties after
the Effective Date and prior to the Closing, of which Buyer had no actual or
constructive notice before Closing, then (unless Buyer and Seller shall
otherwise agree) in such event Seller shall, at Seller's election, either
collect (and when collected pay over to Buyer), or assign to Buyer, any and
all insurance claims relating to such loss, and Buyer shall take title to the
Property affected by such loss without reduction of the Purchase Price.
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 Seller: Pledger Partners, Ltd.
700 Louisiana
Suite 3700
Houston, Texas 77002
Attention: Mike Gibson
Fax No.: 713-236-9799
If to Buyer: 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 Buyer or
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
(a) Seller agrees to indemnify and hold harmless Buyer from and
against any and all Damages 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, Seller with any broker or finder in connection
with this Agreement or the transaction contemplated hereby.
(b) Buyer agrees to indemnify and hold harmless Seller from and
against all Damages 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 transaction contemplated hereby.
ARTICLE XII
Option to Repurchase
As a part of the consideration for the purchase of the Properties, Buyer
hereby grants to Seller an exclusive option to repurchase the Properties,
exercisable at any time prior to the expiration of 90 days following Closing.
Such option shall be exercisable by delivery by Seller of written notice of
exercise to Buyer on or before the expiration of said 90 day period. The terms
of purchase if the option is exercised shall be the same price, with the same
Effective Date and on all of the same other terms and conditions as are
provided in this Agreement, except that Seller shall have no obligation or
liability for any torts or breaches of contract committed by Buyer during the
period of iots ownership of the Properties.
ARTICLE XII
Miscellaneous Matters
Section 13.1. Survival of Provisions. All representations and
warranties made herein by Buyer and Seller 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 below in this Section,
all of such representations and warranties shall survive the Closing and the
delivery of the Assignment.
Section 13.2. Further Assurances. After the Closing, Seller shall
execute and deliver, and shall otherwise cause to be executed and delivered,
from time to time, such further instruments, notices, division orders,
transfer orders and other documents, and do such other and further acts and
things, as may be reasonably necessary to more fully and effectively grant,
convey and assign the Properties to Buyer.
Section 13.3. Binding Effect; Successors and Assigns. The Agreement
shall be binding on the parties hereto and their respective successors and
permitted assigns. Neither party shall have the right to assign its rights
under this Agreement, without the prior written consent of the other party
first having been obtained, except that Buyer shall have the right to
designate a wholly-owned subsidiary of Buyer to whom title to the Properties
shall be conveyed by Seller.
Section 13.4. Imbalances. On the date of Closing (and, upon the
delivery to Buyer of the Assignments), Buyer shall succeed to the position of
Seller with respect to all gas imbalances. As a result of such succession
Buyer shall be entitled to receive any and all benefits which Seller would
have been entitled to receive by virtue of such positions and shall be
obligated to suffer any detriments (whether the same be in the form of
obligations to deliver production which would have otherwise been attributable
to its ownership of the Oil and Gas Properties without receiving full payment
therefor, or be in the form of the obligation to make payment in cash) which
Seller would have been obligated to suffer by virtue of such positions.
Section 13.5. Expenses. Each party shall bear and pay all expenses
incurred by it in connection with the transaction contemplated by this
Agreement.
Section 13.6. 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 13.7. Public Statements. Seller 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 party shall
issue any publicity or other release without the prior consent of the other
party.
Section 13.8. 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 13.9. 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 party against whom enforcement
of the amendment, modification, supplement, restatement or discharge (or
waiver) is sought.
Section 13.10. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without giving
effect to rules of law which might require application of the law of another
jurisdiction.
Section 13.11. 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 Buyer and Seller to sign
the same counterpart.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, this Agreement is executed by the parties hereto on
the date set forth above.
SELLER:
PLEDGER PARTNERS, LTD.
By: BARGO ENERGY COMPANY
By: /s/ Tim J. Goff
Tim J. Goff, Manager
BUYER:
FUTURE PETROLEUM CORPORATION
By: /s/ Carl Price
Carl Price, President
EXHIBIT II
EXHIBIT III(b)
EXHIBIT III(c)
EXHIBIT 6.5
EXHIBIT 7.1(b)(i)
EXHIBIT 7.1(b)(vi)
EXHIBIT 7.2
EXHIBIT 9.2(a)
(For copies of all Exhibits, please contact the company)
EXHIBIT 10.05
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT dated October 9, 1998, is made by and
between NCI 1990, LTD., a Texas limited partnership, NCI RESERVES, LTD., a Texas
limited partnership, SOUTHWEST SULFUR & OIL, INC., a Texas corporation, WAYNE
NEWKUMET and CASTELLO ENTERPRISES, INC., a Texas corporation, (herein
collectively called "Seller"), and FUTURE PETROLEUM CORPORATION, a Utah
corporation ("Buyer");
W I T N E S E T H:
WHEREAS, Seller desires to sell, assign and convey to Buyer, and Buyer
desires to purchase and accept certain oil and gas properties and related
assets; and
WHEREAS, Seller and Buyer deem it in their mutual best interests to
execute and deliver this Agreement;
NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual
covenants and agreements contained herein, Seller and Buyer do hereby agree as
follows:
ARTICLE I
Definitions and References
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.
"Asserted Defects" shall have the meaning assigned to such term in Section
7.1(a).
"Assignment" shall have the meaning assigned to such term in Section
9.2(a).
"Base Cash Portion" shall have the meaning assigned to such term in
Article III.
"Base Purchase Price" shall have the meaning assigned to such term in
Article III.
"Basic Documents" shall have the meaning assigned to such term in Section
4.7.
"Buyer 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
"Cash Portion of the Purchase Price" shall mean the Base Cash Portion, as
may be adjusted as provided in Sections 7.2 and 10.2(a), and as the same may be
otherwise adjusted by the mutual agreement of the parties.
"Closing" and "Closing Date" shall have the meanings assigned to such
terms in Section 9.1.
"Closing Shares" shall have the meaning assigned to such term in Article
III.
"Commission" shall mean the Securities and Exchange Commission (or any
successor body thereto).
"Defects" shall have the meaning assigned to such term in Section 7.1(b).
"Effective Date" shall have the meaning assigned to such term in Section
9.2(a).
"Oil and Gas Properties" shall have the meaning assigned to such term in
Article II.
"Other Acquisitions" shall mean the transactions contemplated under the
following documents: (i) that certain Purchase and Sale Agreement between Buyer
and NCI Properties, Ltd., et al, in respect of the Gin Unit, Dawson County,
Texas; (ii) that certain Purchase and Sale Agreement between Buyer and Pledger
Partners, Ltd. Buna Field, Jasper County, Texas; and (iii) that certain Purchase
and Sale Agreement dated September __, 1998, between Buyer and Bargo Energy
Company, in respect of the NE Limes Field, the Candy Field, the Sand Hills
Field, the Bluitt Field, the Bruce Roy Field, and the NorthYellow Creek Field,
located in New Mexico (Bluitt Field), Mississippi (NorthYellow Creek Field) and
in Texas (all others).
"Properties" shall have the meaning assigned to such term in Article II.
"Purchase Price" shall have the meaning assigned to such term in Article
III.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
all rules and regulations under such Act.
"Seller Disclosure Schedule" shall mean a schedule delivered by Seller to
Buyer on the date hereof which sets forth additional information regarding the
representations and warranties of Seller contained herein and information called
for hereby.
Section 1.2. References, Titles 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) All references herein to "$" or "dollars" shall refer to U.S.
Dollars.
(j) Exhibits II, 6.5, 7.1(b)(i), 7.1(b)(vi), 7.2 and 9.2(a) 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
Property to be Sold and Purchased
Seller agrees to sell and Buyer agrees to purchase, for the consideration
hereinafter set forth, and subject to the terms and provisions herein contained,
the following described properties, rights and interests:
(a) All of those properties described in Exhibit II attached
hereto and made a part hereof for all purposes;
(b) Without limitation of the foregoing, all other right, title
and interest (of whatever kind or character, whether legal or equitable,
and whether vested or contingent) of Seller in and to the oil, gas and
other minerals in and under or that may be produced from the lands
described in Exhibit II hereto (including, without limitation, interests
in oil, gas and/or mineral leases covering such lands, overriding
royalties, production payments and net profits interests in such lands or
such leases, and fee mineral interests, fee royalty interests and other
interests in such oil, gas and other minerals), whether such lands be
described in a description set forth in such Exhibit II or be described in
such Exhibit II by reference to another instrument (and without limitation
by any depth limitations that may be set forth in such Exhibit II or in
any such instrument so referred to for description), even though Seller's
interest in such oil, gas and other minerals may be incorrectly described
in, or omitted from, such Exhibit II;
(c) All rights, titles and interests of Seller in and to, or
otherwise derived from, all presently existing and valid oil, gas and/or
mineral unitization, pooling, and/or communitization agreements,
declarations and/or orders and in and to the properties covered and the
units created thereby (including, without limitation, all units formed
under orders, rules, regulations, or other official acts of any federal,
state, or other authority having jurisdiction, voluntary unitization
agreements, designations and/or declarations) relating to the properties
described in paragraphs (a) and (b) above;
(d) All rights, titles and interests of Seller in and to all
presently existing and valid production sales (and sales related)
contracts, operating agreements, and other agreements and contracts which
relate to any of the properties described in paragraphs (a), (b) and (c)
above, or which relate to the exploration, development, operation, or
maintenance thereof or the treatment, storage, transportation or marketing
of production therefrom (or allocated thereto);
(e) All rights, titles and interests of Seller in and to all
materials, supplies, machinery, equipment, improvements and other personal
property and fixtures (including, but not by way of limitation, all wells,
wellhead equipment, pumping units, flowlines, tanks, buildings, injection
facilities, saltwater disposal facilities, compression facilities,
gathering systems, and other equipment), and all easements, rights-of-way,
surface leases and other surface rights, all permits and licenses, and all
other appurtenances being used or held for use in connection with, or
otherwise related to, the exploration, development, operation or
maintenance of any of the properties described in paragraphs (a), (b) and
(c) above, or the treatment, storage, transportation or marketing of
production therefrom (or allocated thereto); and
(f) All of Seller's lease files, abstracts and title opinions,
production records, well files, accounting records (but not including
general financial accounting records), seismic records and surveys,
gravity maps, electric logs, geological or geophysical data and records,
and other files, documents and records of every kind and description which
relate to the properties described above.
The properties and interests specified in the foregoing paragraphs (a), (b)
and (c) are herein sometimes collectively called the "Oil and Gas Properties,"
and the properties and interests specified in the foregoing paragraphs (a), (b),
(c),(d), (e) and (f) are herein sometimes collectively called the "Properties".
ARTICLE III
Purchase Price
Section 3.1. Purchase Price. In consideration of the sale of the
Properties by Seller to Buyer, Buyer shall pay to Seller at Closing an aggregate
purchase price (the "Base Purchase Price") consisting of the following:
(a) $357,000 cash (the "Base Cash Portion"); and
(b) 116,676 shares of Buyer Common Stock (the "Closing Shares").
The Base Purchase Price may be adjusted as provided in Sections 6.5 and 7.2
and in Article XII (the Base Purchase Price, as so adjusted, and as the same may
be otherwise adjusted by the mutual agreement of the parties, being called the
"Purchase Price").
Section 3.2. Allocation of the Purchase Price between Sellers. The Base
Cash Portion of the Purchase Price and the Closing Shares, subject to adjustment
as provided herein, shall be allocated among the parties comprising Seller as
follows:
Seller Cash Portion Closing Shares
NCI 1990, LTD. 133,875 43,753
NCI Reserves, LTD. 70,686 23,102
Southwest Sulfur & Oil, Inc. 139,944 45,737
Wayne Newkumet 6,247.50 2,042
Castello Enterprises, Inc. 6,247.50 2,042
------------- --------------
357,000 116,676
ARTICLE IV
Representations and Warranties of Seller
Section 4.1. Organization and Existence. Each of the corporate or
partnership parties comprising Seller is duly formed and validly existing under
the laws of the state in which it was organized.
Section 4.2. Power and Authority. Each of the corporate or partnership
parties comprising Seller has full partnership or corporate power and authority
to execute, deliver, and perform this Agreement and each other agreement,
instrument, or document executed or to be executed by Seller 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 Seller of this Agreement and each other agreement, instrument, or
document executed or to be executed by Seller 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 or partnership action of such party.
Section 4.3. Valid and Binding Agreement. This Agreement has been duly
executed and delivered by Seller and constitutes, and each other agreement,
instrument, or document executed or to be executed by Seller 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 Seller and constitutes, or when
executed and delivered will constitute, a valid and legally binding obligation
of 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 4.4. Non-Contravention. Other than requirements (if any) that
there be obtained consents to assignment (or waivers of preferential rights to
purchase) from third parties, and except for approvals required to be obtained
from governmental entities who are lessors under leases forming a part of the
Oil and Gas Properties (or who administer such leases on behalf of such lessors)
which are customarily obtained post-closing, neither the execution, delivery,
and performance by Seller of this Agreement and each other agreement,
instrument, or document executed or to be executed by Seller 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 corporate or
partnership agreement or other governing instruments of 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 Seller is a party or by which 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 Seller, or (d) violate any
applicable law, rule or regulation binding upon Seller.
Section 4.5. Approvals. Other than requirements (if any) that there be
obtained consents to assignment (or waivers of preferential rights to purchase)
from third parties, and except for approvals required to be obtained from
governmental entities who are lessors under leases forming a part of the Oil and
Gas Properties (or who administer such leases on behalf of such lessors) which
are customarily obtained post-closing, 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
Seller in connection with the execution, delivery, or performance by Seller of
this Agreement each other agreement, instrument, or document executed or to be
executed by Seller in connection with the transactions contemplated hereby to
which it is a party or the consummation by it of the transactions contemplated
hereby and thereby.
Section 4.6. Pending Litigation. There are no pending suits, actions,
or other proceedings in which Seller is a party which affect the Properties
(including, without limitation, any actions challenging or pertaining to
Seller's title to any of the Properties), or affecting the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
Section 4.7. Basic Documents. The oil, gas and/or mineral leases,
interests in which comprise parts of the Oil and Gas Properties, and all other
material contracts and agreements, licenses, permits and easements, rights-of-
way and other rights-of-surface use comprising any part of or otherwise relating
to the Properties (such leases and such material contracts, agreements,
licenses, permits, easements, rights-of-way and other rights-of-surface use
being herein called the "Basic Documents"), are in full force and effect and
constitute valid and binding obligations of the parties thereto. All contracts
and agreements which are Basic Documents are disclosed on Exhibit II in
connection with the descriptions of the Oil and Gas Properties to which they
relate. Seller is not in breach or default (and no situation exists which with
the passing of time or giving of notice would create a breach or default) of its
obligations under the Basic Documents, and (to the best of Seller's knowledge)
no breach or default by any third party (or situation which with the passage of
time or giving of notice would create a breach or default) exists, to the extent
such breach or default (whether by Seller or such a third party) could
materially adversely affect the ownership, operation, value or use of any Oil
and Gas Property or the Buyer after the Effective Date. All payments
(including, without limitation, all delay rentals, royalties, shut-in royalties
and valid calls for payment or prepayment under operating agreements) owing
under Basic Documents have been and are being made (timely, and before the same
became delinquent) by Seller in all material respects (and, where the non-
payment of same by a third party could materially adversely affect the
ownership, operation, value or use of an Oil and Gas Property after the
Effective Date, have been and are being made, to Seller's knowledge, by such
third parties). For the purposes of the representations
contained in this Section (and without limitation of such representations), the
non-payment of an amount, or non-performance of an obligation, where such
non-payment, or non-performance, could result in the forfeiture or termination
of rights of Seller under a Basic Document, shall be considered material.
Section 4.8. Commitments, Abandonments or Proposals. Except as set forth
in Section 4.8 of the Seller Disclosure Schedule: (a) Seller has incurred no
expenses, and has made no commitments to make expenditures (including, without
limitation, Seller has not entered into any agreements that would obligate
Seller to make expenditures), in connection with (and no other obligations or
liabilities have been incurred which would adversely affect) the ownership or
operation of the Properties after the Effective Date, other than routine
expenses incurred in the normal operation of existing wells on the Oil and Gas
Properties; (b) Seller has not abandoned any wells (or removed any material
items of equipment, except those replaced by items of equal suitability and
value) on the Oil and Gas Properties since the Effective Date; and (c) no
proposals are currently outstanding (whether made by Seller or by any other
party) to drill additional wells, or to deepen, plug back, or rework existing
wells, or to conduct other operations for which consent is required under the
applicable operating agreement, or to conduct any other operations other than
normal operation of existing wells on the Oil and Gas Properties, or to abandon
any wells, on the Oil and Gas Properties.
Section 4.9. Production Sales Contracts. There exist no agreements or
arrangements for the sale of production from the Oil and Gas Properties
(including without limitation, calls on, or other rights to purchase,
production, whether or not the same are currently being exercised) other than
(a) production sales contracts (in this Section, the "Scheduled Production Sales
Contracts") disclosed in Section 4.9 of the Seller Disclosure Schedule or (b)
agreements or arrangements which are cancelable on 90 days notice or less
without penalty or detriment. Seller is presently receiving a price for all
production from (or attributable to) each Oil and Gas Property covered by a
Scheduled Production Sales Contract as computed in accordance with the terms of
such contract, and is not having deliveries of gas from any Oil and Gas Property
subject to a Scheduled Production Sale Contract curtailed substantially below
such property's delivery capacity.
Section 4.10. Plugging and Abandonment. Except for wells listed in
Section 4.10 of the Seller Disclosure Schedule, there are no dry holes, or shut
in or otherwise inactive wells, located on the Oil and Gas Properties or on
lands pooled or unitized therewith (including, without limitation, any wells
which would, if located in Texas, require compliance with Railroad Commission
Rule 14(b)(2)), except for wells that have been properly plugged and abandoned,
and except for wells drilled to depths not included within the Oil and Gas
Properties or within units in which the Oil and Gas Properties participate which
have never been completed in such depths.
Section 4.11. Licenses and Permits. Seller has all governmental licenses
and permits necessary or appropriate to own and operate the Properties as
presently being owned and operated, and such licenses, permits and filings are
in full force and effect (and are transferrable to Buyer or are subject to being
routinely replaced by a license or permit issued to Buyer as a successor owner
of the Properties), and Seller has not received written notice of any violations
in respect of any such licenses or permits.
Section 4.12. Area of Mutual Interest and Other Agreements; Tax
Partnerships. No Oil and Gas Property is subject to (or has related to it) any
area of mutual interest agreements. No Oil and Gas Property is subject to (or
has related to it) any farm-out or farm-in agreement under which any party
thereto is entitled to receive assignments not yet made, or could earn
additional assignments after the Effective Date. No Oil and Gas Property is
subject to (or has related to it) any tax partnership.
Section 4.13. Payment of Expenses. All expenses (including, without
limitation, all bills for labor, materials and supplies used or furnished for
use in connection with the Properties, and all severance, production, ad
valorem, windfall profit and other similar taxes) and liabilities relating to
the ownership or operation of the Properties, have been, and are being, paid
(timely, and before the same become delinquent) by Seller (and, as to properties
operated by third parties, so paid by such third parties, to the best of
Seller's knowledge) in all material respects.
Section 4.14. Compliance with Laws. The ownership and operation of
Properties, to the extent that non-conformance could adversely affect the
ownership, operation, value or use thereof after the Effective Date (or
otherwise affect Buyer), has been in conformity, in all material respects, with
all applicable laws, and all applicable rules, regulations and orders of all
governmental agencies having jurisdiction, relating to the Properties. Without
in any way limiting the foregoing representations, the Properties are not in
violation of (or subject to any existing, pending or, threatened investigation
or inquiry by any governmental authority, or to any remedial obligations under)
any applicable laws, rules, regulations or orders pertaining to health or the
environment, including those relating to waste materials or hazardous substances
(hereinafter sometimes collectively called "applicable environmental laws").
Seller undertook, at the times of its respective acquisitions of the Properties,
all appropriate inquiry into the previous ownership and uses of the Properties
consistent with good commercial or customary practice, and Seller has taken all
steps necessary to determine and has determined that no hazardous substances or
solid wastes (as defined in the applicable environmental laws) have been
disposed of or otherwise released on or to the Properties. Also without
limitation of the foregoing, all oil and gas wells comprising a part of the
Properties have been drilled and completed within the boundaries of the
applicable leases or within limits otherwise permitted by a valid and
enforceable pooling, unit, or other agreement or contract or by applicable law,
and no well comprising a part of the Properties is or was subject to any penalty
on allowables after the Effective Date because of any over-production (or any
other judgments, orders or decrees of any court or governmental authority or
agency) which would (or did) prevent such well from being entitled to its full
legal and regular allowable (as prescribed by any court or governmental body or
agency) from and after the Effective Date.
Section 4.15. Operatorship of Properties. Neither Seller, nor any
affiliate of Seller, has or is currently serving as the operator with respect to
the Properties.
Section 4.16. Investment Intent. Seller is acquiring the Closing Shares
to be acquired by it hereunder for its own account for investment and not with
a view to, or for sale or other disposition in connection with, any distribution
of all or any part thereof, except (i) in an offering covered by a registration
statement filed with the Commission under the Securities Act covering the
Closing Shares, or (ii) pursuant to an applicable exemption under the Securities
Act.
Section 4.17. Investment Experience. Seller acknowledges that it is able
to fend for itself, can bear the economic risk of its investment in the Closing
Shares to be acquired by it hereunder, and has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of an investment in the Closing Shares. Seller has not been organized for
the purpose of acquiring the Closing Shares to be acquired by it hereunder.
Seller is an "accredited investor" as defined in Rule 501(a) of the Securities
Act.
Section 4.18. Restricted Securities. Seller understands that the Closing
Shares will not have been registered pursuant to the Securities Act or any
applicable state securities laws, that such Closing Shares will be characterized
as "restricted securities" under federal securities laws, and that under such
laws and applicable regulations such Closing Shares cannot be sold or otherwise
disposed of without registration under the Securities Act or an exemption
therefrom.
Section 4.19. Legend. It is agreed and understood by Seller that the
certificates representing the Closing Shares shall each conspicuously set forth
on the face or back thereof, in addition to any legends required by applicable
law or other agreement, a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. SUCH SHARES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
UNLESS THEY ARE FIRST REGISTERED PURSUANT TO THAT ACT AND APPLICABLE STATE
SECURITIES LAWS OR UNLESS THE CORPORATION RECEIVES A WRITTEN OPINION OF
COUNSEL, WHICH OPINION AND COUNSEL ARE SATISFACTORY TO THE CORPORATION, TO
THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
Section 4.20. Disclaimer of Warranties. Other than those expressly set
out in this Article IV, Seller hereby expressly disclaims any and all
representations or warranties with respect to the Properties or the transaction
contemplated hereby, and Buyer agrees that the Properties are being sold by
Seller "where is" and "as is". Specifically as a part of (but not in limitation
of) the foregoing, Buyer acknowledges that Seller has not made, and Seller
hereby expressly disclaims, any representation or warranty (express, implied,
under common law, by statute or otherwise) as to the condition of the Properties
(INCLUDING WITHOUT LIMITATION, SELLER DISCLAIMS ANY IMPLIED OR EXPRESS WARRANTY
OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR CONFORMITY TO MODELS OR
SAMPLES OF MATERIALS).
ARTICLE V
Representations and Warranties of Buyer
Section 5.1. Organization and Existence. Buyer is a corporation duly
organized, legally existing and in good standing under the laws of its state of
incorporation, and is qualified to do business in the State of Utah.
Section 5.2. 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 Buyer in
connection with the transactions contemplated hereby to which it is a party and
to consummate the transactions contemplated hereby and thereby. The execution,
delivery, and performance by Buyer of this Agreement and each other agreement,
instrument, or document executed or to be executed by Buyer in connection with
the transactions contemplated hereby to which it is a party, and the
consummation by it of the transactions contemplated hereby and thereby, have
been duly authorized by all necessary corporate action of Buyer.
Section 5.3. 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 5.4. 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) 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 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 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 5.6. Pending Litigation. There are no pending suits, actions,
or other proceedings in which Buyer is a party which affect the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
Section 5.7. 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 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 or a distribution thereof
in violation of any other applicable securities laws.
Section 5.8. Buyer Common Stock. 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.
ARTICLE VI
Certain Covenants of Seller Pending Closing
Section 6.1. Access to Files. From the date hereof until Closing, Seller
will give Buyer, and its attorneys and other representatives, access at all
reasonable times to the Properties and to any contract files, lease or other
title files, production files, well files and other files of Seller pertaining
to the ownership and/or operation of the Properties, and 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 office of Seller.
Seller shall not be obligated to provide Buyer with access to any records or
data which Seller cannot provide to Buyer without, in its opinion, breaching
confidentiality agreements with other parties.
Section 6.2. Conduct of Operations. Seller will take such steps as would
a prudent non-operator to cause the operator to of the Properties to (a)
continue the routine operation of the Properties in the ordinary course of
business and as would a prudent operator, (b) operate the Properties in
conformity (in all material respects) with all applicable laws, and all
applicable rules, regulations and orders of all governmental agencies having
jurisdiction, and in conformity with all oil, gas and/or mineral leases, and in
conformity (in all material respects) with all Basic Documents other than such
leases, and (c) fulfill all obligations (including without limitation all
obligations to make payments under leases or other Basic Documents) under such
leases, and (in all material respects) under such other Basic Documents and (in
all material respects) under such laws, rules, regulations and orders (without
limitation of the foregoing, the failure to perform an obligation, when such
failure could result in forfeiture or termination of rights of Seller under a
Basic Document, shall be considered material).
Section 6.3. Restrictions on Certain Actions. Seller will not, without
Buyer's prior consent:
(a) expend any funds, or make any commitments to expend funds
(including, without limitation, entering into new agreements which would
obligate Seller to expend funds), or otherwise incur any other obligations or
liabilities, in connection with the ownership or operation of the Properties
after the Effective Date, other than routine expenses incurred in the normal
operation of the existing wells on the Oil and Gas Properties;
(b) propose the drilling of any additional wells, or propose the
deepening, plugging back or reworking of any existing wells, or propose the
conducting of any other operations which require consent under the applicable
operating agreement, or propose the conducting of any other operations other
than the normal operation of the existing wells on the Oil and Gas Properties,
or propose the abandonment of any wells on the Oil and Gas Properties (and
Seller agrees that it will advise Buyer of any such proposals made by third
parties and will respond to each such proposal made by a third party in the
manner requested by Buyer);
(c) sell, transfer or abandon any portion of the Properties other than
items of materials, supplies, machinery, equipment, improvements or other
personal property or fixtures forming a part of the Properties (and then only if
the same is replaced with an item of equal suitability and value free of liens
and security interests, which replacement item will then, for the purposes of
this Agreement, become part of the Properties) ; or
(d) release (or permit to terminate), or modify or reduce its rights
under, any oil, gas and/or mineral lease forming a part of the Oil and Gas
Properties, or any other Basic Document, or enter into any new agreements which
would be Basic Documents, or modify any existing production sales contracts or
enter into any new production sales contracts.
Section 6.4. Payment of Expenses. Seller will cause all expenses
(including, without limitation, all bills for labor, materials and supplies used
or furnished for use in connection with the Property and all severance,
production, windfall profit and similar taxes) and liabilities relating to the
ownership or operation of the Properties prior to the date of Closing to be
promptly paid and discharged.
Section 6.5. Preferential Rights and Third Party Consents. Seller will
request, from the appropriate parties (and in accordance with the documents
creating such rights and/or requirements), waivers of the preferential rights to
purchase, or requirements that consent to assignment be obtained, which are
identified on Exhibit 6.5. Seller shall have no obligation hereunder other than
to so request such waivers (i.e., Seller shall have no obligation to assure that
such waivers are obtained), and if all such waivers (or any other waivers of
preferential rights to purchase or requirements that consent be obtained to
assignment, even if the same are not listed on such Exhibit 6.5) are not
obtained, Buyer may treat any waiver which is not obtained as a matter which
causes Seller's title to not be sufficient to meet the standards set forth in
Article VII; provided, however, that if the unobtained waiver is a waiver of a
preferential right to purchase, and if both Buyer and Seller agree to this
treatment of such matter (and agree upon an appropriate allocation of the
Purchase Price), Seller will tender (at the agreed allocated portion of the
Purchase Price) the required interest in the Property affected by such unwaived
preferential right to purchase to the holder, or holders, of such right who have
elected not to waive such preferential right to purchase, and if, and to the
extent that, such preferential right to purchase is exercised by such party or
parties, such interest in such Property will be excluded from the transaction
contemplated hereby and the Purchase Price will be reduced by the amount paid,
or to be paid, by the party exercising such preferential right to purchase (and
Seller shall collect such amount from such purchaser).
ARTICLE VII
Due Diligence Examination
Section 7.1. Inspection and Assertion of Defects.
(a) Buyer may, to the extent it deems appropriate, conduct, at its
sole cost, such title examination or investigation as it may choose to conduct
with respect to the Properties. Should, as a result of such examination and
investigation, or otherwise, matters come to Buyer's attention which would
constitute "Defects" (as below defined), and should there be one or more of such
Defects which Buyer determines it is unwilling to waive and close the
transaction contemplated hereby notwithstanding the fact that such Defects
exist, Buyer shall notify Seller in writing of such Defects as soon as they are
identified by Buyer, but in no event later than five business days prior to
Closing. Such Defects of which Buyer so provides notice are herein called
"Asserted Defects." All Defects with respect to which Buyer fails to so give
Seller notice will be deemed waived for all purposes. In the event that Buyer
notifies Seller of Asserted Defects, Seller shall have the right (but not the
obligation) to attempt to cure, prior to Closing, such Asserted Defects to the
reasonable satisfaction of Buyer.
(b) The term "Defect" as used in this Section shall mean the
following:
(i) Seller's ownership of the Properties is such that, with
respect to a well listed on Exhibit 7.1(b)(i) hereto, it (A) entitles
Seller to receive a percentage share of the oil, gas and other
hydrocarbons produced from, or allocated to, such well which is less than
the percentage share set forth on Exhibit 7.1(b)(i) in connection with
such well in the column headed "NRI" or (B) causes Seller to be obligated
to bear a percentage share of the cost of operation of such well greater
than the percentage share set forth on Exhibit 7.1(b)(i) in connection
with such well in the column headed "WI" (unless the share of production
from such well to which Seller is entitled is proportionately larger than
the "NRI" shown for such well on Exhibit 7.1(b)(i)); or
(ii) Seller's ownership of an Oil and Gas Property is subject to
a lien other than (A) a lien for taxes not yet delinquent, or (B) a
mechanic's or materialmen's lien (or other similar lien), or a lien under
an operating agreement or similar agreement, to the extent the same
relates to expenses incurred which are not yet due; or
(iii) Seller's ownership of an Oil and Gas Property is subject
to a preferential right to purchase such property or a requirement that
consent to assignment of such property be obtained, unless a waiver of
such right has been obtained with respect to the transaction contemplated
hereby or, in the case of a preferential right to purchase, an appropriate
tender of the applicable interest has been made to the party holding such
right and the period of time required for such party to exercise such
right has expired without such party exercising such right; or
(iv) Seller's ownership of an Oil and Gas Property is subject to
an imperfection in title which, if asserted, would cause a Defect, as
defined in clause (i) above, to exist, and such imperfection in title is
not such as would normally be waived by persons engaged in the oil and gas
business who are purchasing producing properties; or
(v) An Oil and Gas Property is subject to a makeup obligation to
satisfy take-or-pay payments or other prepayments for production
previously received by Seller; or
(vi) Seller is in an overproduced position with respect to an
Oil and Gas Property (e.g., Seller and/or its predecessors in title have
taken more gas than their ownership in such Oil and Gas Property would
entitle them to take), and such overproduced position is greater than that
shown on Exhibit 7.1(b)(vi).
Section 7.2. Certain Price Adjustments.
(a) In the event that, as a part of the due diligence review provided
for in Section 7.1 above, Asserted Defects are presented to Seller and Seller is
unable (or unwilling) to cure such Asserted Defects prior to Closing, or in the
event that Buyer has elected to treat an Oil and Gas Property affected by a
casualty loss as if it was an Oil and Gas Property affected by an Asserted
Defect (as provided in Article XII), then:
(i) Buyer and Seller shall, with respect to each Oil and Gas
Property affected by one or more Asserted Defects, attempt to agree upon
an appropriate adjustment to the Base Purchase Price to account for such
Asserted Defects; and
(ii) with respect to each Oil and Gas Property as to which Buyer
and Seller are unable to agree upon an appropriate adjustment with respect
to all Asserted Defects affecting such Oil and Gas Property, such Oil and
Gas Property will be excluded from the transaction contemplated hereby,
and the Base Purchase Price will be reduced by the amount attributed on
Exhibit 7.2 to such Oil and Gas Property.
Notwithstanding anything herein to the contrary, Buyer may elect to specify as
an appropriate adjustment to the Base Purchase Price (A) for an Asserted Defect
of the type which is specified in Section 7.1(b)(i) or Section 7.1(b)(iv), and
which relates to the NRI specified on Exhibit 7.1(b)(i), an amount equal to X
multiplied by Y, where "X" is the amount specified on Exhibit 7.2 for the Oil
and Gas Property to which such Defect relates, and where "Y" is the
proportionate reduction in such NRI (e.g., the amount by which the share of
production to which Seller is actually entitled is less than the NRI specified
for such Oil and Gas Property on Exhibit 7.1(b)(i), divided by such NRI
specified on Exhibit 7.1(b)(i)), or (B) for a Defect of the type specified in
Section 7.1(b)(ii), Section 7.1(b)(v), or Section 7.1(b)(vi), the amount
required to discharge such lien, or the amount represented by the loss of
volumes required to discharge such make up obligation or overproduced position,
which amounts shall, in the case of a make up obligation or overproduced
position, be the discounted present value of the volumes required to discharge
such obligation, determined by using a 10% discount rate and assuming the same
would be discharged as promptly as possible (under the terms of applicable
agreements) after the Closing Date assuming production occurs at the same rate
as projected in projections of production furnished by Buyer as (and represented
by Buyer to be) its projections used in making its decision to purchase (and
valuing such production using prices for production utilized in such
projections).
(b) Should Seller determine (or should Buyer, in the course of its due
diligence review contemplated by Section 7.1, determine) that the ownership of
the Properties by Seller entitles Seller to a share of the production from a
well listed on Exhibit 7.1(b)(i) greater than the share shown for such well
under the column headed "NRI" on Exhibit 7.1(b)(i), or that Seller is in an
under produced position with respect to an Oil and Gas Property (e.g., Seller
and/or its predecessors in title have taken less gas than their ownership in
such Oil and Gas Property would entitle them to take), or is in an overproduced
position less than that shown on Exhibit 7.1(b)(vi), then Seller may propose an
upward adjustment to the Base Purchase Price to account for such fact, in which
case such adjustment shall be handled in a similar manner as provided above with
respect to adjustments for Asserted Defects; provided that the party making such
determination shall notify the other party no later than ten business days prior
to the Closing.
(c) Any reduction to the Base Purchase Price under subsection (a)
above shall be effected by a dollar-for-dollar decrease in the Base Cash
Portion.
(d) Any increase in the Base Purchase Price under subsection (b) above
shall be effected by a dollar-for-dollar increase in the Base Cash Portion.
Section 7.3. Waiver. Without limiting Section 7.1 and notwithstanding
anything else herein to the contrary, all Defects not raised by Buyer within the
time period specified in Section 7.1 shall be waived by Buyer for all purposes,
and Buyer shall have no right to seek an adjustment to the Purchase Price, make
a claim against Seller or seek indemnification from Seller with respect thereto;
provided, however, that this Section 7.3 shall not affect or otherwise limit or
modify the rights of Buyer to make a claim and obtain recourse against Seller
arising from a breach of Seller's representation and warranty contained in the
Assignment.
ARTICLE VIII
Conditions Precedent to the Obligations of the Parties
Section 8.1. 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 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) 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 Seller prior to or at the Closing.
(c) No suit, action or other proceedings shall, on the date of
Closing, be pending or threatened before any court or governmental agency
seeking to restrain, prohibit, or obtain damages or other relief in connection
with the consummation of the transactions contemplated by this Agreement.
(d) The total of the net Purchase Price reductions (if any) which
result from the application of Section 7.2 do not exceed 5% of the Base Cash
Portion.
(e) Prior to or contemporaneously with the transactions contemplated
hereby, Buyer shall have consummated the Other Acquisitions.
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, 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 Article XIV and Section 15.5
which will survive such termination).
Section 8.2. Conditions Precedent to the Obligations of Seller. The
obligations of Seller under this Agreement are subject to each of the following
conditions being met:
(a) Each and every representation of Buyer under this Agreement shall
be true and accurate in all material respects as of the date when made and shall
be deemed to have been made again at and as of the time of Closing and shall at
and as of such time of Closing be true and accurate in all respects except as to
changes specifically contemplated by this Agreement or consented to by Seller.
(b) Buyer shall have performed and complied in all material respects
with (or compliance therewith shall have been waived by Seller) 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) The total of the net Purchase Price reductions (if any) which
result from the application of Section 7.2 do not exceed 5% of the Base Cash
Portion.
If any such condition on the obligations of Seller 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) 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 Seller, be
terminated, in which case the parties shall have no further obligations to one
another hereunder (other than the obligations under Article XIV and Section 15.5
which will survive such termination).
ARTICLE IX
Closing of Transaction
Section 9.1. The Closing. The closing (herein called the "Closing") of
the transaction contemplated hereby shall take place in the offices of
Thompson & Knight, at 1700 Chase Tower, 600 Travis Street, Houston, Texas, at
10:00 a.m. Central Daylight Time, on October 9, 1998, or at such other date
and time as the Buyer and Seller may mutually agree upon (such date and time
being herein called the "Closing Date").
Section 9.2. Seller's Closing Obligations. At the Closing, Seller
shall:
(a) execute, acknowledge and deliver to Buyer an assignment
of the Properties (the "Assignment"), in the form attached hereto as
Exhibit 9.2(a), effective as to runs of oil and deliveries of gas as of
7:00 o'clock a.m., Central Daylight Time on August 1, 1998 (the
"Effective Date");
(b) deliver a copy of the resolutions or consent adopted or
otherwise executed by the partners of Seller authorizing Seller to
execute and deliver this Agreement and all related documents and
instruments and to perform its obligations hereunder and thereunder,
which copy shall be certified by the general partner of Seller;
(c) deliver to Buyer a certificate of existence issued by the
Secretary of State of Texas and dated no earlier than five business days
prior to the Closing Date; and
(d) to the extent requested by Buyer, execute and deliver to
Buyer (i) letters in lieu of transfer orders (or similar documentation),
in form acceptable to both parties, and, (ii) an affidavit or other
certification (as permitted by such code) that Seller is not a "foreign
person" within the meaning of Section 1445 (or similar provisions) of
the Internal Revenue Code of 1986 as amended (i.e., Seller is not a
non-resident alien, foreign corporation, foreign partnership, foreign
trust or foreign estate as those terms are defined in such code and
regulations promulgated thereunder).
Section 9.3. Buyer's Closing Obligations. At the Closing, Buyer shall:
(a) deliver to the Seller, by wire transfer to an account
designated by Seller in a bank located in the United States, an amount
equal to the Cash Portion of the Purchase Price;
(b) issue and deliver to Seller a certificate or certificates
representing the Closing Shares registered in the name of Seller; and
(c) deliver a copy of the resolutions adopted by the board of
directors of Buyer authorizing Buyer to execute and deliver this
Agreement and all related documents and instruments and to perform its
obligations hereunder and thereunder, which copy shall be certified by
the secretary or assistant secretary of Buyer.
Section 9.4. Delivery of Files. No later than 30 days after the
Closing, Seller shall deliver to Buyer such of Seller's contract files, lease
and other title files, production files, well files and other files pertaining
to the ownership and/or operation of the Properties as Buyer may request.
ARTICLE X
Certain Accounting Adjustments.
Section 10.1. Adjustments. Appropriate adjustments shall be made
between Buyer and Seller 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 Buyer, and all proceeds
(net of applicable production, severance, and similar taxes) from the sale of
oil, gas and/or other minerals produced from the Oil and Gas Properties after
the Effective Date will be received by Buyer, and (b) all expenses which are
incurred in the operation of the Properties before the Effective Date will be
borne by Seller 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 Seller. 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 10.2 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 10.1. If the amount of adjustments so
determined which would result in a credit to Buyer exceed the amount of
adjustments so determined which would result in a credit to Seller, Buyer
shall receive a credit, for the amount of such excess, against the Cash
Portion of the Purchase Price to be paid at Closing, and, if the converse is
true, Buyer shall pay to Seller, at Closing (in addition to amounts otherwise
then owed), the amount of such excess.
(b) On or before 90 days after Closing, Buyer and Seller shall
review any additional information which may then be available pertaining to
the adjustments provided for in Sections 10.1, 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 by appropriate payments from
Seller to Buyer or from Buyer to Seller. Following such additional
adjustments, no further adjustments shall be made under this Article X.
ARTICLE XI
Assumption and Indemnification
Seller shall, on the date of Closing, agree (and, upon the delivery to
Buyer of the Assignment, shall be deemed to have agreed) to indemnify and hold
Buyer harmless from and against any and all claims, obligations, actions,
liabilities, damages, or expenses arising out of the ownership and/or
operation of the Properties before the date of Closing. Buyer shall, on the
date of Closing, agree (and, upon the delivery to Buyer of the Assignment,
shall be deemed to have agreed) to indemnify and hold Seller harmless from and
against any and all claims, obligations, actions, liabilities, damages, or
expenses arising out of the ownership and/or operation of the Properties after
the date of Closing. In the event of a conflict between this Section and the
adjustment procedure provided for in Article X, this Section shall control,
except that nothing in this Section shall be construed as overriding the
adjustment procedure provided for in Article X as to expenses arising between
the Effective Date and Closing which are properly charged to Buyer pursuant to
such procedure. The liability of the parties comprising Seller under this
Article XI shall be proportionate and several and not joint or joint and
several.
ARTICLE XII
Casualty Loss
In the event of damage by fire or other casualty to the Properties after
the Effective Date and prior to the Closing, then this Agreement shall remain
in full force and effect, and (unless Buyer and Seller shall otherwise agree)
in such event
(a) as to each such Property so damaged which is an Oil and Gas
Property, then, at Buyer's election, either (i) such Property shall be treated
as if it had an Asserted Defect associated with it and the procedure provided
for in Article 7 shall be applicable thereto, or (B) the Purchase Price will
not be adjusted, and if Seller should be entitled to make any claims under any
insurance policy with respect to such damage, Seller shall, at Seller's
election, either collect (and when collected pay over to Buyer), or assign to
Buyer, such claims, and
(b) as to each such Property which is other than an Oil and Gas
Property, Seller shall, at Seller's election, either collect (and when
collected pay over to Buyer), or assign to Buyer, any and all insurance claims
relating to such loss, and Buyer shall take title to the Property affected by
such loss without reduction of the Purchase Price.
ARTICLE XIII
Notices
All notices and other communications required under this Agreement shall
(unless otherwise specifically provided herein) be in writing and be delivered
personally, by recognized commercial courier or delivery service (which
provides a receipt), by telecopier (with receipt acknowledged), or by
registered or certified mail (postage prepaid), at the following addresses:
If to Seller: c/o NCI Enterprises, Inc.
550 West Texas
Suite 1145
Midland, Texas 79701
Attention: Wayne Newkumet
Fax No.: 915-687-2519
If to Buyer: 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 Buyer or
Seller may specify as its proper address any other post office address within
the continental limits of the United States by giving notice to the other
party, in the manner provided in this Article, at least ten (10) days prior to
the effective date of such change of address.
ARTICLE XIV
Commissions
(a) Seller 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, Seller with
any broker or finder in connection with this Agreement or the transaction
contemplated hereby.
(b) Buyer agrees to indemnify and hold harmless Seller 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 transaction
contemplated hereby.
ARTICLE XV
Miscellaneous Matters
Section 15.1. Survival of Provisions. All representations and
warranties made herein by Buyer and Seller 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 below in this Section,
all of such representations and warranties shall survive the Closing and the
delivery of the Assignment; provided, that the representations and warranties
of the Seller under Sections 4.7 through 4.15 shall survive only until the
first anniversary date of the Closing Date. The provisions of, and the
obligations of the parties under, Article IX (to the extent the same are, by
mutual agreement, not performed at Closing), and Articles X through XV
inclusive shall survive the Closing and the delivery of the Assignment.
Section 15.2. Further Assurances. After the Closing, Seller shall
execute and deliver, and shall otherwise cause to be executed and delivered,
from time to time, such further instruments, notices, division orders,
transfer orders and other documents, and do such other and further acts and
things, as may be reasonably necessary to more fully and effectively grant,
convey and assign the Properties to Buyer.
Section 15.3. Binding Effect; Successors and Assigns. The Agreement
shall be binding on the parties hereto and their respective successors and
permitted assigns. Neither party shall have the right to assign its rights
under this Agreement, without the prior written consent of the other party
first having been obtained, except that Buyer shall have the right to
designate a wholly-owned subsidiary of Buyer to whom title to the Properties
shall be conveyed by Seller.
Section 15.4. Imbalances. On the date of Closing (and, upon the
delivery to Buyer of the Assignments), Buyer shall succeed to the position of
Seller with respect to all gas imbalances. As a result of such succession
Buyer shall (i) be entitled to receive any and all benefits, including
payments of proceeds of production in excess of amounts which it would
otherwise be entitled to produce and receive by virtue of ownership of the Oil
and Gas Properties, which Seller would have been entitled to receive by virtue
of such positions and (ii) shall be obligated to suffer any detriments
(whether the same be in the form of obligations to deliver production which
would have otherwise been attributable to its ownership of the Oil and Gas
Properties without receiving full payment therefor, or be in the form of the
obligation to make payment in cash) which Seller would have been obligated to
suffer by virtue of such positions.
Section 15.5. Expenses. Each party shall bear and pay all expenses
incurred by it in connection with the transaction contemplated by this
Agreement.
Section 15.6. Entire Agreement. This Agreement contains the entire
understanding of the parties hereto with respect to subject matter hereof and
supersedes all prior agreements, understandings, negotiations, and discussions
among the parties with respect to such subject matter. Time is of the essence
in this Agreement.
Section 15.7. Public Statements. Seller 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 party shall
issue any publicity or other release without the prior consent of the other
party.
Section 15.8. 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 15.9. Amendments. This Agreement may be amended, modified,
supplemented, restated or discharged (and provisions hereof may be waived)
only by an instrument in writing signed by the party against whom enforcement
of the amendment, modification, supplement, restatement or discharge (or
waiver) is sought.
Section 15.10. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
Section 15.11. 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 Buyer and Seller to sign
the same counterpart.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, this Agreement is executed by the parties hereto on
the date set forth above.
SELLER:
NCI 1990, LTD.
By: NCI Enterprises, Inc.
General Partner
By: /s/ Wayne Newkumet
Wayne Newkumet
Vice President
NCI RESERVES, LTD.
NCI 1990, LTD.
By: NCI Enterprises, Inc.
General Partner
By: /s/ Wayne Newkumet
Wayne Newkumet
Vice President
SOUTHWEST SULFUR & OIL, INC.
By: /s/ Wayne Newkumet
Wayne Newkumet
President
/s/ Wayne Newkumet
WAYNE NEWKUMET
CASTELLO ENTERPRISES, INC.
By: /s/ Wayne Newkumet
Wayne Newkumet
Attorney-in-Fact
BUYER:
FUTURE PETROLEUM CORPORATION
By: /s/ Carl Price
Carl Price
President
EXHIBIT II
TO
PURCHASE AND SALE AGREEMENT
DATED OCTOBER 9, 1998
BY AND BETWEEN
NCI 1990, LTD., ET AL.
AND
FUTURE PETROLEUM CORPORATION
EXHIBIT 6.5
NONE.
EXHIBIT 7.1(b)(i)
Working Interest:
Net Revenue Interest:
EXHIBIT 7.1(b)(vi)
NONE.
EXHIBIT 7.2
EXHIBIT 9.2(a)
SELLER'S DISCLOSURE SCHEDULE
Section 4.8. None.
Section 4.9. None.
Section 4.10. None.
EXHIBIT 10.06
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT dated October 9, 1998, is made by and
between NCI PROPERTIES, LTD., a Texas limited partnership ("Seller"), and FUTURE
PETROLEUM CORPORATION, a Utah corporation ("Buyer");
W I T N E S E T H:
WHEREAS, Seller desires to sell, assign and convey to Buyer, and Buyer
desires to purchase and accept certain oil and gas properties and related
assets; and
WHEREAS, Seller and Buyer deem it in their mutual best interests to
execute and deliver this Agreement;
NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual
covenants and agreements contained herein, Seller and Buyer do hereby agree as
follows:
ARTICLE I
Definitions and References
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.
"Asserted Defects" shall have the meaning assigned to such term in Section
7.1(a).
"Assignment" shall have the meaning assigned to such term in Section
9.2(a).
"Base Cash Portion" shall have the meaning assigned to such term in
Article III.
"Base Purchase Price" shall have the meaning assigned to such term in
Article III.
"Basic Documents" shall have the meaning assigned to such term in Section
4.7.
"Buyer 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.
"Cash Portion of the Purchase Price" shall mean the Base Cash Portion, as
may be adjusted as provided in Sections 7.2 and 10.2(a), and as the same may be
otherwise adjusted by the mutual agreement of the parties.
"Closing" and "Closing Date" shall have the meanings assigned to such
terms in Section 9.1.
"Closing Shares" shall have the meaning assigned to such term in Article
III.
"Commission" shall mean the Securities and Exchange Commission (or any
successor body thereto).
"Defects" shall have the meaning assigned to such term in Section 7.1(b).
"Effective Date" shall have the meaning assigned to such term in Section
9.2(a).
"Oil and Gas Properties" shall have the meaning assigned to such term in
Article II.
"Other Acquisitions" shall mean the transactions contemplated under the
following documents: (i) that certain Purchase and Sale Agreement between Buyer
and NCI Enterprises, Inc., et al, in respect of the Shawnee Townsite Unit,
Pottawatomie County, Oklahoma; (ii) that certain Purchase and Sale Agreement
between Buyer and Pledger Partners, Ltd. Buna Field, Jasper County, Texas; and
(iii) that certain Purchase and Sale Agreement dated September __, 1998, between
Buyer and Bargo Energy Company, in respect of the NE Limes Field, the Candy
Field, the Sand Hills Field, the Bluitt Field, the Bruce Roy Field, and the
NorthYellow Creek Field, located in New Mexico (Bluitt Field), Mississippi
(NorthYellow Creek Field) and in Texas (all others).
"Properties" shall have the meaning assigned to such term in Article II.
"Purchase Price" shall have the meaning assigned to such term in Article
III.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
all rules and regulations under such Act.
"Seller Disclosure Schedule" shall mean a schedule delivered by Seller to
Buyer on the date hereof which sets forth additional information regarding the
representations and warranties of Seller contained herein and information called
for hereby.
Section 1.2. References, Titles 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) All references herein to "$" or "dollars" shall refer to U.S.
Dollars.
(j) Exhibits II, 6.5, 7.1(b)(i), 7.1(b)(vi), 7.2 and 9.2(a) 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
Property to be Sold and Purchased
Seller agrees to sell and Buyer agrees to purchase, for the consideration
hereinafter set forth, and subject to the terms and provisions herein contained,
the following described properties, rights and interests:
(a) All of those properties described in Exhibit II attached
hereto and made a part hereof for all purposes;
(b) Without limitation of the foregoing, all other right, title
and interest (of whatever kind or character, whether legal or equitable,
and whether vested or contingent) of Seller in and to the oil, gas and
other minerals in and under or that may be produced from the lands
described in Exhibit II hereto (including, without limitation, interests
in oil, gas and/or mineral leases covering such lands, overriding
royalties, production payments and net profits interests in such lands or
such leases, and fee mineral interests, fee royalty interests and other
interests in such oil, gas and other minerals), whether such lands be
described in a description set forth in such Exhibit II or be described in
such Exhibit II by reference to another instrument (and without limitation
by any depth limitations that may be set forth in such Exhibit II or in
any such instrument so referred to for description), even though Seller's
interest in such oil, gas and other minerals may be incorrectly described
in, or omitted from, such Exhibit II;
(c) All rights, titles and interests of Seller in and to, or
otherwise derived from, all presently existing and valid oil, gas and/or
mineral unitization, pooling, and/or communitization agreements,
declarations and/or orders and in and to the properties covered and the
units created thereby (including, without limitation, all units formed
under orders, rules, regulations, or other official acts of any federal,
state, or other authority having jurisdiction, voluntary unitization
agreements, designations and/or declarations) relating to the properties
described in paragraphs (a) and (b) above;
(d) All rights, titles and interests of Seller in and to all
presently existing and valid production sales (and sales related)
contracts, operating agreements, and other agreements and contracts which
relate to any of the properties described in paragraphs (a), (b) and (c)
above, or which relate to the exploration, development, operation, or
maintenance thereof or the treatment, storage, transportation or marketing
of production therefrom (or allocated thereto);
(e) All rights, titles and interests of Seller in and to all
materials, supplies, machinery, equipment, improvements and other personal
property and fixtures (including, but not by way of limitation, all wells,
wellhead equipment, pumping units, flowlines, tanks, buildings, injection
facilities, saltwater disposal facilities, compression facilities,
gathering systems, and other equipment), and all easements, rights-of-way,
surface leases and other surface rights, all permits and licenses, and all
other appurtenances being used or held for use in connection with, or
otherwise related to, the exploration, development, operation or
maintenance of any of the properties described in paragraphs (a), (b) and
(c) above, or the treatment, storage, transportation or marketing of
production therefrom (or allocated thereto); and
(f) All of Seller's lease files, abstracts and title opinions,
production records, well files, accounting records (but not including
general financial accounting records), seismic records and surveys,
gravity maps, electric logs, geological or geophysical data and records,
and other files, documents and records of every kind and description which
relate to the properties described above.
The properties and interests specified in the foregoing paragraphs (a), (b)
and (c) are herein sometimes collectively called the "Oil and Gas Properties,"
and the properties and interests specified in the foregoing paragraphs (a), (b),
(c), (d), (e) and (f) are herein sometimes collectively called the "Properties".
ARTICLE III
Purchase Price
In consideration of the sale of the Properties by Seller to Buyer, Buyer
shall pay to Seller at Closing an aggregate purchase price (the "Base Purchase
Price") consisting of the following:
(a) $493,000 cash (the "Base Cash Portion"); and
(b) 163,324 shares of Buyer Common Stock (the "Closing Shares").
The Base Purchase Price may be adjusted as provided in Sections 6.5 and 7.2 and
in Article XII (the Base Purchase Price, as so adjusted, and as the same may be
otherwise adjusted by the mutual agreement of the parties, being called the
"Purchase Price").
ARTICLE IV
Representations and Warranties of Seller
Section 4.1. Organization and Existence. Seller is a limited partnership
duly formed and validly existing under the laws of the State of Texas.
Section 4.2. Power and Authority. Seller has full partnership power and
partnership authority to execute, deliver, and perform this Agreement and each
other agreement, instrument, or document executed or to be executed by Seller 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 Seller of this Agreement and each other agreement,
instrument, or document executed or to be executed by Seller 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 of Seller.
Section 4.3. Valid and Binding Agreement. This Agreement has been duly
executed and delivered by Seller and constitutes, and each other agreement,
instrument, or document executed or to be executed by Seller 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 Seller and constitutes, or when
executed and delivered will constitute, a valid and legally binding obligation
of 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 4.4. Non-Contravention. Other than requirements (if any) that
there be obtained consents to assignment (or waivers of preferential rights to
purchase) from third parties, and except for approvals required to be obtained
from governmental entities who are lessors under leases forming a part of the
Oil and Gas Properties (or who administer such leases on behalf of such lessors)
which are customarily obtained post-closing, neither the execution, delivery,
and performance by Seller of this Agreement and each other agreement,
instrument, or document executed or to be executed by Seller 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 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 Seller is a party or by which 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 Seller, or (d) violate any applicable
law, rule or regulation binding upon Seller.
Section 4.5. Approvals. Other than requirements (if any) that there be
obtained consents to assignment (or waivers of preferential rights to purchase)
from third parties, and except for approvals required to be obtained from
governmental entities who are lessors under leases forming a part of the Oil and
Gas Properties (or who administer such leases on behalf of such lessors) which
are customarily obtained post-closing, 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
Seller in connection with the execution, delivery, or performance by Seller of
this Agreement each other agreement, instrument, or document executed or to be
executed by Seller in connection with the transactions contemplated hereby to
which it is a party or the consummation by it of the transactions contemplated
hereby and thereby.
Section 4.6. Pending Litigation. There are no pending suits, actions,
or other proceedings in which Seller is a party which affect the Properties
(including, without limitation, any actions challenging or pertaining to
Seller's title to any of the Properties), or affecting the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
Section 4.7. Basic Documents. The oil, gas and/or mineral leases,
interests in which comprise parts of the Oil and Gas Properties, and all other
material contracts and agreements, licenses, permits and easements, rights-of-
way and other rights-of-surface use comprising any part of or otherwise relating
to the Properties (such leases and such material contracts, agreements,
licenses, permits, easements, rights-of-way and other rights-of-surface use
being herein called the "Basic Documents"), are in full force and effect and
constitute valid and binding obligations of the parties thereto. All contracts
and agreements which are Basic Documents are disclosed on Exhibit II in
connection with the descriptions of the Oil and Gas Properties to which they
relate. Seller is not in breach or default (and no situation exists which with
the passing of time or giving of notice would create a breach or default) of its
obligations under the Basic Documents, and (to the best of Seller's knowledge)
no breach or default by any third party (or situation which with the passage of
time or giving of notice would create a breach or default) exists, to the extent
such breach or default (whether by Seller or such a third party) could
materially adversely affect the ownership, operation, value or use of any Oil
and Gas Property or the Buyer after the Effective Date. All payments
(including, without limitation, all delay rentals, royalties, shut-in royalties
and valid calls for payment or prepayment under operating agreements) owing
under Basic Documents have been and are being made (timely, and before the same
became delinquent) by Seller in all material respects (and, where the non-
payment of same by a third party could materially adversely affect the
ownership, operation, value or use of an Oil and Gas Property after the
Effective Date, have been and are being made, to Seller's knowledge, by such
third parties). For the purposes of the representations contained in this
Section (and without limitation of such representations), the non-payment of an
amount, or non-performance of an obligation, where such non-payment, or non-
performance, could result in the forfeiture or termination of rights of Seller
under a Basic Document, shall be considered material.
Section 4.8. Commitments, Abandonments or Proposals. Except as set forth
in Section 4.8 of the Seller Disclosure Schedule: (a) Seller has incurred no
expenses, and has made no commitments to make expenditures (including, without
limitation, Seller has not entered into any agreements that would obligate
Seller to make expenditures), in connection with (and no other obligations or
liabilities have been incurred which would adversely affect) the ownership or
operation of the Properties after the Effective Date, other than routine
expenses incurred in the normal operation of existing wells on the Oil and Gas
Properties; (b) Seller has not abandoned any wells (or removed any material
items of equipment, except those replaced by items of equal suitability and
value) on the Oil and Gas Properties since the Effective Date; and (c) no
proposals are currently outstanding (whether made by Seller or by any other
party) to drill additional wells, or to deepen, plug back, or rework existing
wells, or to conduct other operations for which consent is required under the
applicable operating agreement, or to conduct any other operations other than
normal operation of existing wells on the Oil and Gas Properties, or to abandon
any wells, on the Oil and Gas Properties.
Section 4.9. Production Sales Contracts. There exist no agreements or
arrangements for the sale of production from the Oil and Gas Properties
(including without limitation, calls on, or other rights to purchase,
production, whether or not the same are currently being exercised) other than
(a) production sales contracts (in this Section, the "Scheduled Production Sales
Contracts") disclosed in Section 4.9 of the Seller Disclosure Schedule or (b)
agreements or arrangements which are cancelable on 90 days notice or less
without penalty or detriment. Seller is presently receiving a price for all
production from (or attributable to) each Oil and Gas Property covered by a
Scheduled Production Sales Contract as computed in accordance with the terms of
such contract, and is not having deliveries of gas from any Oil and Gas Property
subject to a Scheduled Production Sale Contract curtailed substantially below
such property's delivery capacity.
Section 4.10. Plugging and Abandonment. Except for wells listed in
Section 4.10 of the Seller Disclosure Schedule, there are no dry holes, or shut
in or otherwise inactive wells, located on the Oil and Gas Properties or on
lands pooled or unitized therewith (including, without limitation, any wells
which would, if located in Texas, require compliance with Railroad Commission
Rule 14(b)(2)), except for wells that have been properly plugged and abandoned,
and except for wells drilled to depths not included within the Oil and Gas
Properties or within units in which the Oil and Gas Properties participate which
have never been completed in such depths.
Section 4.11. Licenses and Permits. Seller has all governmental licenses
and permits necessary or appropriate to own and operate the Properties as
presently being owned and operated, and such licenses, permits and filings are
in full force and effect (and are transferrable to Buyer or are subject to being
routinely replaced by a license or permit issued to Buyer as a successor owner
of the Properties), and Seller has not received written notice of any violations
in respect of any such licenses or permits.
Section 4.12. Area of Mutual Interest and Other Agreements; Tax
Partnerships. No Oil and Gas Property is subject to (or has related to it) any
area of mutual interest agreements. No Oil and Gas Property is subject to (or
has related to it) any farm-out or farm-in agreement under which any party
thereto is entitled to receive assignments not yet made, or could earn
additional assignments after the Effective Date. No Oil and Gas Property is
subject to (or has related to it) any tax partnership.
Section 4.13. Payment of Expenses. All expenses (including, without
limitation, all bills for labor, materials and supplies used or furnished for
use in connection with the Properties, and all severance, production, ad
valorem, windfall profit and other similar taxes) and liabilities relating to
the ownership or operation of the Properties, have been, and are being, paid
(timely, and before the same become delinquent) by Seller (and, as to properties
operated by third parties, so paid by such third parties, to the best of
Seller's knowledge) in all material respects.
Section 4.14. Compliance with Laws. The ownership and operation of
Properties, to the extent that non-conformance could adversely affect the
ownership, operation, value or use thereof after the Effective Date (or
otherwise affect Buyer), has been in conformity, in all material respects, with
all applicable laws, and all applicable rules, regulations and orders of all
governmental agencies having jurisdiction, relating to the Properties. Without
in any way limiting the foregoing representations, the Properties are not in
violation of (or subject to any existing, pending or, threatened investigation
or inquiry by any governmental authority, or to any remedial obligations under)
any applicable laws, rules, regulations or orders pertaining to health or the
environment, including those relating to waste materials or hazardous substances
(hereinafter sometimes collectively called "applicable environmental laws").
Seller undertook, at the times of its respective acquisitions of the Properties,
all appropriate inquiry into the previous ownership and uses of the Properties
consistent with good commercial or customary practice, and Seller has taken all
steps necessary to determine and has determined that no hazardous substances or
solid wastes (as defined in the applicable environmental laws) have been
disposed of or otherwise released on or to the Properties. Also without
limitation of the foregoing, all oil and gas wells comprising a part of the
Properties have been drilled and completed within the boundaries of the
applicable leases or within limits otherwise permitted by a valid and
enforceable pooling, unit, or other agreement or contract or by applicable law,
and no well comprising a part of the Properties is or was subject to any penalty
on allowables after the Effective Date because of any over-production (or any
other judgments, orders or decrees of any court or governmental authority or
agency) which would (or did) prevent such well from being entitled to its full
legal and regular allowable (as prescribed by any court or governmental body or
agency) from and after the Effective Date.
Section 4.15. Operatorship of Properties. Neither Seller, nor any
affiliate of Seller, has or is currently serving as the operator with respect to
the Properties.
Section 4.16. Investment Intent. Seller is acquiring the Closing Shares
to be acquired by it hereunder for its own account for investment and not with
a view to, or for sale or other disposition in connection with, any distribution
of all or any part thereof, except (i) in an offering covered by a registration
statement filed with the Commission under the Securities Act covering the
Closing Shares, or (ii) pursuant to an applicable exemption under the Securities
Act.
Section 4.17. Investment Experience. Seller acknowledges that it is able
to fend for itself, can bear the economic risk of its investment in the Closing
Shares to be acquired by it hereunder, and has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of an investment in the Closing Shares. Seller has not been organized for
the purpose of acquiring the Closing Shares to be acquired by it hereunder.
Seller is an "accredited investor" as defined in Rule 501(a) of the Securities
Act.
Section 4.18. Restricted Securities. Seller understands that the Closing
Shares will not have been registered pursuant to the Securities Act or any
applicable state securities laws, that such Closing Shares will be characterized
as "restricted securities" under federal securities laws, and that under such
laws and applicable regulations such Closing Shares cannot be sold or otherwise
disposed of without registration under the Securities Act or an exemption
therefrom.
Section 4.19. Legend. It is agreed and understood by Seller that the
certificates representing the Closing Shares shall each conspicuously set forth
on the face or back thereof, in addition to any legends required by applicable
law or other agreement, a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. SUCH SHARES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
UNLESS THEY ARE FIRST REGISTERED PURSUANT TO THAT ACT AND APPLICABLE STATE
SECURITIES LAWS OR UNLESS THE CORPORATION RECEIVES A WRITTEN OPINION OF
COUNSEL, WHICH OPINION AND COUNSEL ARE SATISFACTORY TO THE CORPORATION, TO
THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
Section 4.20. Disclaimer of Warranties. Other than those expressly set
out in this Article IV, Seller hereby expressly disclaims any and all
representations or warranties with respect to the Properties or the transaction
contemplated hereby, and Buyer agrees that the Properties are being sold by
Seller "where is" and "as is". Specifically as a part of (but not in limitation
of) the foregoing, Buyer acknowledges that Seller has not made, and Seller
hereby expressly disclaims, any representation or warranty (express, implied,
under common law, by statute or otherwise) as to the condition of the Properties
(INCLUDING WITHOUT LIMITATION, SELLER DISCLAIMS ANY IMPLIED OR EXPRESS WARRANTY
OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR CONFORMITY TO MODELS OR
SAMPLES OF MATERIALS).
ARTICLE V
Representations and Warranties of Buyer
Section 5.1. Organization and Existence. Buyer is a corporation duly
organized, legally existing and in good standing under the laws of its state of
incorporation, and is qualified to do business in the State of Utah.
Section 5.2. 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 Buyer in
connection with the transactions contemplated hereby to which it is a party and
to consummate the transactions contemplated hereby and thereby. The execution,
delivery, and performance by Buyer of this Agreement and each other agreement,
instrument, or document executed or to be executed by Buyer in connection with
the transactions contemplated hereby to which it is a party, and the
consummation by it of the transactions contemplated hereby and thereby, have
been duly authorized by all necessary corporate action of Buyer.
Section 5.3. 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 5.4. 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) 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 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 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 5.6. Pending Litigation. There are no pending suits, actions,
or other proceedings in which Buyer is a party which affect the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
Section 5.7. 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 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 or a distribution thereof
in violation of any other applicable securities laws.
Section 5.8. Buyer Common Stock. 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.
ARTICLE VI
Certain Covenants of Seller Pending Closing
Section 6.1. Access to Files. From the date hereof until Closing, Seller
will give Buyer, and its attorneys and other representatives, access at all
reasonable times to the Properties and to any contract files, lease or other
title files, production files, well files and other files of Seller pertaining
to the ownership and/or operation of the Properties, and 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 office of Seller.
Seller shall not be obligated to provide Buyer with access to any records or
data which Seller cannot provide to Buyer without, in its opinion, breaching
confidentiality agreements with other parties.
Section 6.2. Conduct of Operations. Seller will take such steps as would
a prudent non-operator to cause the operator to of the Properties to (a)
continue the routine operation of the Properties in the ordinary course of
business and as would a prudent operator, (b) operate the Properties in
conformity (in all material respects) with all applicable laws, and all
applicable rules, regulations and orders of all governmental agencies having
jurisdiction, and in conformity with all oil, gas and/or mineral leases, and in
conformity (in all material respects) with all Basic Documents other than such
leases, and (c) fulfill all obligations (including without limitation all
obligations to make payments under leases or other Basic Documents) under such
leases, and (in all material respects) under such other Basic Documents and (in
all material respects) under such laws, rules, regulations and orders (without
limitation of the foregoing, the failure to perform an obligation, when such
failure could result in forfeiture or termination of rights of Seller under a
Basic Document, shall be considered material).
Section 6.3. Restrictions on Certain Actions. Seller will not, without
Buyer's prior consent:
(a) expend any funds, or make any commitments to expend funds
(including, without limitation, entering into new agreements which would
obligate Seller to expend funds), or otherwise incur any other obligations or
liabilities, in connection with the ownership or operation of the Properties
after the Effective Date, other than routine expenses incurred in the normal
operation of the existing wells on the Oil and Gas Properties;
(b) propose the drilling of any additional wells, or propose the
deepening, plugging back or reworking of any existing wells, or propose the
conducting of any other operations which require consent under the applicable
operating agreement, or propose the conducting of any other operations other
than the normal operation of the existing wells on the Oil and Gas Properties,
or propose the abandonment of any wells on the Oil and Gas Properties (and
Seller agrees that it will advise Buyer of any such proposals made by third
parties and will respond to each such proposal made by a third party in the
manner requested by Buyer);
(c) sell, transfer or abandon any portion of the Properties other than
items of materials, supplies, machinery, equipment, improvements or other
personal property or fixtures forming a part of the Properties (and then only if
the same is replaced with an item of equal suitability and value free of liens
and security interests, which replacement item will then, for the purposes of
this Agreement, become part of the Properties) ; or
(d) release (or permit to terminate), or modify or reduce its rights
under, any oil, gas and/or mineral lease forming a part of the Oil and Gas
Properties, or any other Basic Document, or enter into any new agreements which
would be Basic Documents, or modify any existing production sales contracts or
enter into any new production sales contracts.
Section 6.4. Payment of Expenses. Seller will cause all expenses
(including, without limitation, all bills for labor, materials and supplies used
or furnished for use in connection with the Property and all severance,
production, windfall profit and similar taxes) and liabilities relating to the
ownership or operation of the Properties prior to the date of Closing to be
promptly paid and discharged.
Section 6.5. Preferential Rights and Third Party Consents. Seller will
request, from the appropriate parties (and in accordance with the documents
creating such rights and/or requirements), waivers of the preferential rights to
purchase, or requirements that consent to assignment be obtained, which are
identified on Exhibit 6.5. Seller shall have no obligation hereunder other than
to so request such waivers (i.e., Seller shall have no obligation to assure that
such waivers are obtained), and if all such waivers (or any other waivers of
preferential rights to purchase or requirements that consent be obtained to
assignment, even if the same are not listed on such Exhibit 6.5) are not
obtained, Buyer may treat any waiver which is not obtained as a matter which
causes Seller's title to not be sufficient to meet the standards set forth in
Article VII; provided, however, that if the unobtained waiver is a waiver of a
preferential right to purchase, and if both Buyer and Seller agree to this
treatment of such matter (and agree upon an appropriate allocation of the
Purchase Price), Seller will tender (at the agreed allocated portion of the
Purchase Price) the required interest in the Property affected by such unwaived
preferential right to purchase to the holder, or holders, of such right who have
elected not to waive such preferential right to purchase, and if, and to the
extent that, such preferential right to purchase is exercised by such party or
parties, such interest in such Property will be excluded from the transaction
contemplated hereby and the Purchase Price will be reduced by the amount paid,
or to be paid, by the party exercising such preferential right to purchase (and
Seller shall collect such amount from such purchaser).
ARTICLE VII
Due Diligence Examination
Section 7.1. Inspection and Assertion of Defects.
(a) Buyer may, to the extent it deems appropriate, conduct, at its
sole cost, such title examination or investigation as it may choose to conduct
with respect to the Properties. Should, as a result of such examination and
investigation, or otherwise, matters come to Buyer's attention which would
constitute "Defects" (as below defined), and should there be one or more of such
Defects which Buyer determines it is unwilling to waive and close the
transaction contemplated hereby notwithstanding the fact that such Defects
exist, Buyer shall notify Seller in writing of such Defects as soon as they are
identified by Buyer, but in no event later than five business days prior to
Closing. Such Defects of which Buyer so provides notice are herein called
"Asserted Defects." All Defects with respect to which Buyer fails to so give
Seller notice will be deemed waived for all purposes. In the event that Buyer
notifies Seller of Asserted Defects, Seller shall have the right (but not the
obligation) to attempt to cure, prior to Closing, such Asserted Defects to the
reasonable satisfaction of Buyer.
(b) The term "Defect" as used in this Section shall mean the
following:
(i) Seller's ownership of the Properties is such that, with
respect to a well listed on Exhibit 7.1(b)(i) hereto, it (A) entitles
Seller to receive a percentage share of the oil, gas and other
hydrocarbons produced from, or allocated to, such well which is less than
the percentage share set forth on Exhibit 7.1(b)(i) in connection with
such well in the column headed "NRI" or (B) causes Seller to be obligated
to bear a percentage share of the cost of operation of such well greater
than the percentage share set forth on Exhibit 7.1(b)(i) in connection
with such well in the column headed "WI" (unless the share of production
from such well to which Seller is entitled is proportionately larger than
the "NRI" shown for such well on Exhibit 7.1(b)(i)); or
(ii) Seller's ownership of an Oil and Gas Property is subject to
a lien other than (A) a lien for taxes not yet delinquent, or (B) a
mechanic's or materialmen's lien (or other similar lien), or a lien under
an operating agreement or similar agreement, to the extent the same
relates to expenses incurred which are not yet due; or
(iii) Seller's ownership of an Oil and Gas Property is subject
to a preferential right to purchase such property or a requirement that
consent to assignment of such property be obtained, unless a waiver of
such right has been obtained with respect to the transaction contemplated
hereby or, in the case of a preferential right to purchase, an appropriate
tender of the applicable interest has been made to the party holding such
right and the period of time required for such party to exercise such
right has expired without such party exercising such right; or
(iv) Seller's ownership of an Oil and Gas Property is subject to
an imperfection in title which, if asserted, would cause a Defect, as
defined in clause (i) above, to exist, and such imperfection in title is
not such as would normally be waived by persons engaged in the oil and gas
business who are purchasing producing properties; or
(v) An Oil and Gas Property is subject to a makeup obligation to
satisfy take-or-pay payments or other prepayments for production
previously received by Seller; or
(vi) Seller is in an overproduced position with respect to an
Oil and Gas Property (e.g., Seller and/or its predecessors in title have
taken more gas than their ownership in such Oil and Gas Property would
entitle them to take), and such overproduced position is greater than that
shown on Exhibit 7.1(b)(vi).
Section 7.2. Certain Price Adjustments.
(a) In the event that, as a part of the due diligence review provided
for in Section 7.1 above, Asserted Defects are presented to Seller and Seller is
unable (or unwilling) to cure such Asserted Defects prior to Closing, or in the
event that Buyer has elected to treat an Oil and Gas Property affected by a
casualty loss as if it was an Oil and Gas Property affected by an Asserted
Defect (as provided in Article XII), then:
(i) Buyer and Seller shall, with respect to each Oil and Gas
Property affected by one or more Asserted Defects, attempt to agree upon
an appropriate adjustment to the Base Purchase Price to account for such
Asserted Defects; and
(ii) with respect to each Oil and Gas Property as to which Buyer
and Seller are unable to agree upon an appropriate adjustment with respect
to all Asserted Defects affecting such Oil and Gas Property, such Oil and
Gas Property will be excluded from the transaction contemplated hereby,
and the Base Purchase Price will be reduced by the amount attributed on
Exhibit 7.2 to such Oil and Gas Property.
Notwithstanding anything herein to the contrary, Buyer may elect to specify as
an appropriate adjustment to the Base Purchase Price (A) for an Asserted Defect
of the type which is specified in Section 7.1(b)(i) or Section 7.1(b)(iv), and
which relates to the NRI specified on Exhibit 7.1(b)(i), an amount equal to X
multiplied by Y, where "X" is the amount specified on Exhibit 7.2 for the Oil
and Gas Property to which such Defect relates, and where "Y" is the
proportionate reduction in such NRI (e.g., the amount by which the share of
production to which Seller is actually entitled is less than the NRI specified
for such Oil and Gas Property on Exhibit 7.1(b)(i), divided by such NRI
specified on Exhibit 7.1(b)(i)), or (B) for a Defect of the type specified in
Section 7.1(b)(ii), Section 7.1(b)(v), or Section 7.1(b)(vi), the amount
required to discharge such lien, or the amount represented by the loss of
volumes required to discharge such make up obligation or overproduced position,
which amounts shall, in the case of a make up obligation or overproduced
position, be the discounted present value of the volumes required to discharge
such obligation, determined by using a 10% discount rate and assuming the same
would be discharged as promptly as possible (under the terms of applicable
agreements) after the Closing Date assuming production occurs at the same rate
as projected in projections of production furnished by Buyer as (and represented
by Buyer to be) its projections used in making its decision to purchase (and
valuing such production using prices for production utilized in such
projections).
(b) Should Seller determine (or should Buyer, in the course of its due
diligence review contemplated by Section 7.1, determine) that the ownership of
the Properties by Seller entitles Seller to a share of the production from a
well listed on Exhibit 7.1(b)(i) greater than the share shown for such well
under the column headed "NRI" on Exhibit 7.1(b)(i), or that Seller is in an
under produced position with respect to an Oil and Gas Property (e.g., Seller
and/or its predecessors in title have taken less gas than their ownership in
such Oil and Gas Property would entitle them to take), or is in an overproduced
position less than that shown on Exhibit 7.1(b)(vi), then Seller may propose an
upward adjustment to the Base Purchase Price to account for such fact, in which
case such adjustment shall be handled in a similar manner as provided above with
respect to adjustments for Asserted Defects; provided that the party making such
determination shall notify the other party no later than ten business days prior
to the Closing.
(c) Any reduction to the Base Purchase Price under subsection (a)
above shall be effected by a dollar-for-dollar decrease in the Base Cash
Portion.
(d) Any increase in the Base Purchase Price under subsection (b) above
shall be effected by a dollar-for-dollar increase in the Base Cash Portion.
Section 7.3. Waiver. Without limiting Section 7.1 and notwithstanding
anything else herein to the contrary, all Defects not raised by Buyer within the
time period specified in Section 7.1 shall be waived by Buyer for all purposes,
and Buyer shall have no right to seek an adjustment to the Purchase Price, make
a claim against Seller or seek indemnification from Seller with respect thereto;
provided, however, that this Section 7.3 shall not affect or otherwise limit or
modify the rights of Buyer to make a claim and obtain recourse against Seller
arising from a breach of Seller's representation and warranty contained in the
Assignment.
ARTICLE VIII
Conditions Precedent to the Obligations of the Parties
Section 8.1. 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 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) 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 Seller prior to or at the Closing.
(c) No suit, action or other proceedings shall, on the date of
Closing, be pending or threatened before any court or governmental agency
seeking to restrain, prohibit, or obtain damages or other relief in connection
with the consummation of the transactions contemplated by this Agreement.
(d) The total of the net Purchase Price reductions (if any) which
result from the application of Section 7.2 do not exceed 5% of the Base Cash
Portion.
(e) Prior to or contemporaneously with the transactions contemplated
hereby, Buyer shall have consummated the Other Acquisitions.
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, 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 Article XIV and Section 15.5
which will survive such termination).
Section 8.2. Conditions Precedent to the Obligations of Seller. The
obligations of Seller under this Agreement are subject to each of the following
conditions being met:
(a) Each and every representation of Buyer under this Agreement shall
be true and accurate in all material respects as of the date when made and shall
be deemed to have been made again at and as of the time of Closing and shall at
and as of such time of Closing be true and accurate in all respects except as to
changes specifically contemplated by this Agreement or consented to by Seller.
(b) Buyer shall have performed and complied in all material respects
with (or compliance therewith shall have been waived by Seller) 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) The total of the net Purchase Price reductions (if any) which
result from the application of Section 7.2 do not exceed 5% of the Base Cash
Portion.
If any such condition on the obligations of Seller 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) 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 Seller, be
terminated, in which case the parties shall have no further obligations to one
another hereunder (other than the obligations under Article XIV and Section 15.5
which will survive such termination).
ARTICLE IX
Closing of Transaction
Section 9.1. The Closing. The closing (herein called the "Closing") of
the transaction contemplated hereby shall take place in the offices of
Thompson & Knight, at 1700 Chase Tower, 600 Travis Street, Houston, Texas, at
10:00 a.m. Central Daylight Time, on October 9, 1998, or at such other date
and time as the Buyer and Seller may mutually agree upon (such date and time
being herein called the "Closing Date").
Section 9.2. Seller's Closing Obligations. At the Closing, Seller
shall:
(a) execute, acknowledge and deliver to Buyer an assignment
of the Properties (the "Assignment"), in the form attached hereto as
Exhibit 9.2(a), effective as to runs of oil and deliveries of gas as of
7:00 o'clock a.m., Central Daylight Time on August 1, 1998 (the
"Effective Date");
(b) deliver a copy of the resolutions or consent adopted or
otherwise executed by the partners of Seller authorizing Seller to
execute and deliver this Agreement and all related documents and
instruments and to perform its obligations hereunder and thereunder,
which copy shall be certified by the general partner of Seller;
(c) deliver to Buyer a certificate of existence issued by the
Secretary of State of Texas and dated no earlier than five business days
prior to the Closing Date; and
(d) to the extent requested by Buyer, execute and deliver to
Buyer (i) letters in lieu of transfer orders (or similar documentation),
in form acceptable to both parties, and, (ii) an affidavit or other
certification (as permitted by such code) that Seller is not a "foreign
person" within the meaning of Section 1445 (or similar provisions) of
the Internal Revenue Code of 1986 as amended (i.e., Seller is not a
non-resident alien, foreign corporation, foreign partnership, foreign
trust or foreign estate as those terms are defined in such code and
regulations promulgated thereunder).
Section 9.3. Buyer's Closing Obligations. At the Closing, Buyer shall:
(a) deliver to the Seller, by wire transfer to an account
designated by Seller in a bank located in the United States, an amount
equal to the Cash Portion of the Purchase Price;
(b) issue and deliver to Seller a certificate or certificates
representing the Closing Shares registered in the name of Seller; and
(c) deliver a copy of the resolutions adopted by the board of
directors of Buyer authorizing Buyer to execute and deliver this
Agreement and all related documents and instruments and to perform its
obligations hereunder and thereunder, which copy shall be certified by
the secretary or assistant secretary of Buyer.
Section 9.4. Delivery of Files. No later than 30 days after the
Closing, Seller shall deliver to Buyer such of Seller's contract files, lease
and other title files, production files, well files and other files pertaining
to the ownership and/or operation of the Properties as Buyer may request.
ARTICLE X
Certain Accounting Adjustments.
Section 10.1. Adjustments. Appropriate adjustments shall be made
between Buyer and Seller 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 Buyer, and all proceeds
(net of applicable production, severance, and similar taxes) from the sale of
oil, gas and/or other minerals produced from the Oil and Gas Properties after
the Effective Date will be received by Buyer, and (b) all expenses which are
incurred in the operation of the Properties before the Effective Date will be
borne by Seller 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 Seller. 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 10.2 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 10.1. If the amount of adjustments so
determined which would result in a credit to Buyer exceed the amount of
adjustments so determined which would result in a credit to Seller, Buyer
shall receive a credit, for the amount of such excess, against the Cash
Portion of the Purchase Price to be paid at Closing, and, if the converse is
true, Buyer shall pay to Seller, at Closing (in addition to amounts otherwise
then owed), the amount of such excess.
(b) On or before 90 days after Closing, Buyer and Seller shall
review any additional information which may then be available pertaining to
the adjustments provided for in Sections 10.1, 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 by appropriate payments from
Seller to Buyer or from Buyer to Seller. Following such additional
adjustments, no further adjustments shall be made under this Article X.
ARTICLE XI
Assumption and Indemnification
Seller shall, on the date of Closing, agree (and, upon the delivery to
Buyer of the Assignment, shall be deemed to have agreed) to indemnify and hold
Buyer harmless from and against any and all claims, obligations, actions,
liabilities, damages, or expenses arising out of the ownership and/or
operation of the Properties before the date of Closing. Buyer shall, on the
date of Closing, agree (and, upon the delivery to Buyer of the Assignment,
shall be deemed to have agreed) to indemnify and hold Seller harmless from and
against any and all claims, obligations, actions, liabilities, damages, or
expenses arising out of the ownership and/or operation of the Properties after
the date of Closing. In the event of a conflict between this Section and the
adjustment procedure provided for in Article X, this Section shall control,
except that nothing in this Section shall be construed as overriding the
adjustment procedure provided for in Article X as to expenses arising between
the Effective Date and Closing which are properly charged to Buyer pursuant to
such procedure.
ARTICLE XII
Casualty Loss
In the event of damage by fire or other casualty to the Properties after
the Effective Date and prior to the Closing, then this Agreement shall remain
in full force and effect, and (unless Buyer and Seller shall otherwise agree)
in such event
(a) as to each such Property so damaged which is an Oil and Gas
Property, then, at Buyer's election, either (i) such Property shall be treated
as if it had an Asserted Defect associated with it and the procedure provided
for in Article 7 shall be applicable thereto, or (B) the Purchase Price will
not be adjusted, and if Seller should be entitled to make any claims under any
insurance policy with respect to such damage, Seller shall, at Seller's
election, either collect (and when collected pay over to Buyer), or assign to
Buyer, such claims, and
(b) as to each such Property which is other than an Oil and Gas
Property, Seller shall, at Seller's election, either collect (and when
collected pay over to Buyer), or assign to Buyer, any and all insurance claims
relating to such loss, and Buyer shall take title to the Property affected by
such loss without reduction of the Purchase Price.
ARTICLE XIII
Notices
All notices and other communications required under this Agreement shall
(unless otherwise specifically provided herein) be in writing and be delivered
personally, by recognized commercial courier or delivery service (which
provides a receipt), by telecopier (with receipt acknowledged), or by
registered or certified mail (postage prepaid), at the following addresses:
If to Seller: c/o NCI Enterprises, Inc.
550 West Texas
Suite 1145
Midland, Texas 79701
Attention: Wayne Newkumet
Fax No.: 915-687-2519
If to Buyer: 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 Buyer or
Seller may specify as its proper address any other post office address within
the continental limits of the United States by giving notice to the other
party, in the manner provided in this Article, at least ten (10) days prior to
the effective date of such change of address.
ARTICLE XIV
Commissions
(a) Seller 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, Seller with
any broker or finder in connection with this Agreement or the transaction
contemplated hereby.
(b) Buyer agrees to indemnify and hold harmless Seller 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 transaction
contemplated hereby.
ARTICLE XV
Miscellaneous Matters
Section 15.1. Survival of Provisions. All representations and
warranties made herein by Buyer and Seller 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 below in this Section,
all of such representations and warranties shall survive the Closing and the
delivery of the Assignment; provided, that the representations and warranties
of the Seller under Sections 4.7 through 4.15 shall survive only until the
first anniversary date of the Closing Date. The provisions of, and the
obligations of the parties under, Article IX (to the extent the same are, by
mutual agreement, not performed at Closing), and Articles X through XV
inclusive shall survive the Closing and the delivery of the Assignment.
Section 15.2. Further Assurances. After the Closing, Seller shall
execute and deliver, and shall otherwise cause to be executed and delivered,
from time to time, such further instruments, notices, division orders,
transfer orders and other documents, and do such other and further acts and
things, as may be reasonably necessary to more fully and effectively grant,
convey and assign the Properties to Buyer.
Section 15.3. Binding Effect; Successors and Assigns. The Agreement
shall be binding on the parties hereto and their respective successors and
permitted assigns. Neither party shall have the right to assign its rights
under this Agreement, without the prior written consent of the other party
first having been obtained, except that Buyer shall have the right to
designate a wholly-owned subsidiary of Buyer to whom title to the Properties
shall be conveyed by Seller.
Section 15.4. Imbalances. On the date of Closing (and, upon the
delivery to Buyer of the Assignments), Buyer shall succeed to the position of
Seller with respect to all gas imbalances. As a result of such succession
Buyer shall (i) be entitled to receive any and all benefits, including
payments of proceeds of production in excess of amounts which it would
otherwise be entitled to produce and receive by virtue of ownership of the Oil
and Gas Properties, which Seller would have been entitled to receive by virtue
of such positions and (ii) shall be obligated to suffer any detriments
(whether the same be in the form of obligations to deliver production which
would have otherwise been attributable to its ownership of the Oil and Gas
Properties without receiving full payment therefor, or be in the form of the
obligation to make payment in cash) which Seller would have been obligated to
suffer by virtue of such positions.
Section 15.5. Expenses. Each party shall bear and pay all expenses
incurred by it in connection with the transaction contemplated by this
Agreement.
Section 15.6. Entire Agreement. This Agreement contains the entire
understanding of the parties hereto with respect to subject matter hereof and
supersedes all prior agreements, understandings, negotiations, and discussions
among the parties with respect to such subject matter. Time is of the essence
in this Agreement.
Section 15.7. Public Statements. Seller 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 party shall
issue any publicity or other release without the prior consent of the other
party.
Section 15.8. 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 15.9. Amendments. This Agreement may be amended, modified,
supplemented, restated or discharged (and provisions hereof may be waived)
only by an instrument in writing signed by the party against whom enforcement
of the amendment, modification, supplement, restatement or discharge (or
waiver) is sought.
Section 15.10. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
Section 15.11. 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 Buyer and Seller to sign
the same counterpart.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, this Agreement is executed by the parties hereto on
the date set forth above.
SELLER:
NCI PROPERTIES, LTD.
By: NCI Enterprises, Inc..
By: /s/ Wayne Newkumet
Wayne Newkumet
Vice President
BUYER:
FUTURE PETROLEUM CORPORATION
By: /s/ Carl Price
Carl Price
President
EXHIBIT A
TO
PURCHASE AND SALE AGREEMENT
DATED OCTOBER 9, 1998
BY AND BETWEEN
NCI PROPERTIES, LTD.
AND
FUTURE PETROLEUM CORPORATION
EXHIBIT 10.07
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (this "Agreement") is made and entered
into as of the 14th day of October, 1998, by and between BARGO ENERGY RESOURCES,
LTD., a Texas limited partnership, whose address is 700 Louisiana Street, Suite
3700, Houston, Texas 77002 (herein called "Bargo"), and FUTURE ACQUISITION 1995
LTD., a Texas limited partnership, whose address is 2351 W. Northwest Highway,
Suite 2130, Dallas, Texas 75220 (herein called "Future").
W I T N E S S E T H:
WHEREAS, Bargo has entered into a certain Asset Sale Agreement dated August
3, 1998 (the "Chevron Agreement") with Chevron U.S.A. Inc., a Pennsylvania
corporation ("Chevron"), a copy of which is attached hereto as Exhibit I,
whereby Bargo has agreed to purchase certain oil and gas properties, leases,
wells, equipment, related contract rights and other assets in the Cross Creek
Field, Harris and Montgomery Counties, Texas (the "Assets"), effective as of
September 1, 1998 at 7:00 a.m. local time at the location of the Assets, and
reference is here made to the Chevron Agreement for a more particular
description of the Assets and for all other pertinent purposes; and
WHEREAS, Bargo has agreed to sell the Assets to Future, and Future has
agreed to purchase the Assets from Bargo, on the terms and conditions set forth
in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Bargo and Future hereby agree as
follows:
1. Sale and Purchase of Assets. Bargo, as "Seller" (herein so defined)
shall sell, transfer and assign to Future, as "Buyer" (herein so defined), and
Future shall purchase and receive from Bargo, all of the Assets described in the
Chevron Agreement on all of the same terms and conditions as are set forth in
the Chevron Agreement except as specifically modified by this Agreement. It is
the intention of the parties that the sale from Bargo to Future shall occur
immediately following Bargo's acquisition of the Assets from Chevron, and Bargo
and Future each agree to use their best efforts to accomplish the Closing in
such manner. All defined terms in the Chevron Agreement shall have the same
meaning in this Agreement except as otherwise specifically provided herein.
2. Effective Date. The effective date of the sale of the Assets from
Bargo to Future shall be October 1, 1998, at 7:00 a.m. local time at the
location of the Assets (the "Effective Date").
3. Purchase Price. As consideration for the sale of the Assets, Future
shall pay to Bargo the sum of $6,100,000.00 (the "Purchase Price") in
immediately available funds at the Closing, subject to adjustment in the same
manner as is provided in the Chevron Agreement (with appropriate modification as
a result of the differing Effective Dates in this Agreement and the Chevron
Agreement). Future acknowledges that Bargo has deposited with Chevron the sum
of $610,000.00 as a Deposit in accordance with Section 2.1 of the Chevron
Agreement. At Closing, Future shall pay $610,000.00 of the Purchase Price
directly to Bargo in immediately available funds, and the balance (adjusted as
herein provided) shall be paid either directly to Bargo or to such party or
parties as Bargo may specifically direct by written instructions to Future.
4. Title, Environmental and Other Due Diligence Review. Future
acknowledges that it has received copies of the title, environmental and other
due diligence review conducted by Bargo with respect to the Assets and has
approved same, subject only to satisfaction of material matters, if any, for
which Bargo has the right to object and has in fact submitted objections to
Chevron as permitted under the Chevron Agreement. Certain preferential rights
to purchase exist with respect to the Assets, and waivers of such rights have
been obtained or expiration of the period for exercise of such rights will have
occurred as of the Closing of the sale from Chevron to Bargo. Time does not
allow for obtaining such waivers prior to the Closing of the sale from Bargo to
Future, but Future agrees to honor any such validly exercised preferential
rights to purchase made by third parties with respect to the sale by Bargo to
Future. Bargo agrees to send all notices of transfer and to use its best
efforts to obtain waivers of all consents or preferential rights to purchase
affecting the Assets. In the event any preferential rights to purchase are
validly exercised with respect to the transfer from Bargo to Future and Future
does not receive payment from the party exercising such rights in the amount of
the allocated value of the affected portion of the Assets, Bargo agrees to
indemnify Future from any loss as a result of (i) the failure to receive the
payment properly due as the result of the valid exercise of any such
preferential rights to purchase, or (ii) any claim made by the holder of such
rights arising out of the failure to send such notice and offer such right to
purchase prior to the Closing. Bargo and Future agree to each use their
respective best efforts to resolve and/or waive any such objectionable matters
to the reasonable satisfaction of the parties prior to or within a reasonable
time following the Closing.
5. Closing. The closing of the sale from Bargo to Future ("Closing")
shall occur on October 15, 1998 immediately following the Closing under the
Chevron Agreement. In the event the Closing under the Chevron Agreement is
extended, the Closing under this Agreement shall be automatically extended to
coincide with the extended date of Closing under the Chevron Agreement without
the requirement of further action by Bargo or Future; provided, however, in no
event shall the date of Closing be extended to a date later than October 30,
1998 without Future's written consent. Bargo shall convey the Assets to Future
by an instrument of conveyance in the form of the Assignment, Conveyance and
Bill of Sale attached hereto as Exhibit II. In the event the parties are unable
to have a License Agreement and/or a Natural Gas Purchase and Sale Agreement in
the form of Exhibit "C" and Exhibit "D," respectively, to the Chevron Agreement
executed in the name of Future as of the Closing, Bargo agrees to act as
nominee, without charge, on behalf of Future under the terms of the said
agreements between Bargo and Chevron or Dynegy Marketing and Trade ("Dynegy"),
as the case may be, until such time as Chevron's and Dynegy's consent can be
obtained for the substitution of Future and/or execution of new agreements with
Future as a named party.
6. Assumption and Indemnity. Except as provided in the immediately
succeeding paragraph in this Section 6, upon Closing, as a part of the
consideration for the purchase of the Assets, Future hereby assumes and agrees
to comply with and perform prior to default all of the duties, obligations and
liabilities of Bargo created under or by virtue of the Chevron Agreement or
otherwise with respect to the ownership and/or operation of the Assets. Future
further hereby agrees to indemnify and hold Bargo, its partners, affiliates,
officers, agents and employees harmless from and against any and all claims,
demands, losses, liabilities, liens, judgments, settlements, suits, causes of
action, fines, penalties, fees (including, without limitation, attorney's fees),
costs and expenses, whether based on any theory of tort, breach of contract,
strict liability or statutory liability, arising from, resulting from or related
to the ownership or operation of the Assets, whether arising under the Chevron
Agreement or otherwise.
Notwithstanding the immediately preceding paragraph in this Section 6,
Bargo agrees to indemnify and hold Future, its partners, affiliates, officers,
agents and employees harmless from and against any and all claims, demands,
losses, liabilities, liens, judgments, settlements, suits, causes of action,
fines, penalties, fees (including, without limitation, attorney's fees), costs
and expenses, whether based on any theory of tort, breach of contract, strict
liability or statutory liability, arising from, resulting from or related to the
ownership or operation of the Assets, whether arising under the Chevron
Agreement or otherwise, which are attributable to the period of time from
September 1, 1998, at 7:00 a.m. local time at the location of the Assets, until
October 1, 1998, at 7:00 a.m. local time at the location of the Assets.
7. Option to Repurchase. As a part of the consideration for the purchase
of the Assets, Future hereby grants to Bargo an exclusive option to repurchase
the Assets (or such portion thereof as is remaining after the exercise of
preferential rights to purchase by third parties) exercisable at any time prior
to the expiration of ninety (90) days following the Closing of the purchase of
the Assets by Future from Bargo. Such option shall be exercisable by delivery
by Bargo of written notice of exercise to Future on or before the expiration of
said 90 day period. The terms of purchase if the option is exercised shall be
at the same price, with the same Effective Date and on all of the same other
terms and conditions as are provided in this Agreement, except that Bargo shall
have no obligation or liability for any torts or breaches of contract committed
by Future during the period of its ownership of the Assets. In the event Bargo
repurchases the Assets, then upon closing of such transaction Bargo shall assume
and agree to comply with and perform prior to default all of the duties,
obligations and liabilities of Bargo created under or by virtue of the Chevron
Agreement or otherwise with respect to the ownership and/or operation of the
Assets attributable to the period from and after the effective date of the
transfer. In the event Bargo repurchases the Assets, then upon closing of such
transaction Bargo further hereby agrees to indemnify and hold Future, its
partners, affiliates, officers, agents and employees harmless from and against
any and all claims, demands, losses, liabilities, liens, judgments, settlements,
suits, causes of action, fines, penalties, fees (including, without limitation,
attorney's fees), costs and expenses, whether based on any theory of tort,
breach of contract, strict liability or statutory liability, arising from,
resulting from or related to the ownership or operation of the Assets, whether
arising under the Chevron Agreement or otherwise, attributable to the period
from and after the effective date of the transfer.
8. Representations and Warranties of Bargo. In lieu of the
representations and warranties contained in Section 6.1 of the Chevron
Agreement, Bargo represents and warrants to Future as follows:
(a) Bargo is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Texas, and has all requisite
power and authority to own and lease the properties and assets it currently owns
and leases and to carry on its business as such business is currently conducted.
(b) Bargo has all requisite power and authority to execute and
deliver this Agreement, to consummate the transactions contemplated hereby and
to perform all the terms and conditions hereof to be performed by it. The
execution and delivery of this Agreement by Bargo, the performance by Bargo of
all the terms and conditions hereof to be performed by it and the consummation
of the transactions contemplated hereby have been, or will be, duly authorized
and approved by the requisite partners of Bargo. This Agreement has been duly
executed and delivered by Bargo and constitutes the valid and binding obligation
of Bargo, enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency or other laws relating
to or affecting the enforcement of creditors' rights generally and general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(c) There is no action, suit, proceeding or governmental
investigation or inquiry pending, or to the knowledge of Bargo, threatened
against Bargo or its affiliates or subsidiaries that might delay, prevent or
hinder the consummation of the transactions contemplated hereby.
(d) The Chevron Agreement is in full force and effect as of the date
hereof, and Bargo has not transferred any of Bargo's rights or interests in and
to the Chevron Agreement or the Assets prior to the execution of this Agreement.
9. Representations and Warranties of Future. In lieu of the
representations and warranties contained in Section 6.2 of the Chevron
Agreement, Future represents and warrants to Bargo as follows:
(a) Future is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Texas, and has all requisite
power and authority to own and lease the properties and assets it currently owns
and leases and to carry on its business as such business is currently conducted.
(b) Future has all requisite power and authority to execute and
deliver this Agreement, to consummate the transactions contemplated hereby and
to perform all the terms and conditions hereof to be performed by it. The
execution and delivery of this Agreement by Future, the performance by Future of
all the terms and conditions hereof to be performed by it and the consummation
of the transactions contemplated hereby have been duly authorized and approved
by the requisite partners of Future. This Agreement has been duly executed and
delivered by Future and constitutes the valid and binding obligation of Future,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency or other laws relating
to or affecting the enforcement of creditors' rights generally and general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(c) There is no action, suit, proceeding or governmental
investigation or inquiry pending, or to the knowledge of Future, threatened
against Future or its affiliates or subsidiaries that might delay, prevent or
hinder the consummation of the transactions contemplated hereby.
10. Notices. All notices and other communications required or permitted
under this Agreement shall be in writing and shall be deemed to have been duly
made if delivered by (i) personal delivery, (ii) recognized third party
messenger or overnight delivery service, (iii) telecopy or facsimile
transmission, or (iv) deposit into the custody of the United States Postal
Service, postage prepaid, first class certified mail, return receipt requested.
Notice given in accordance herewith shall be effective upon receipt at the
address of the addressee. For purposes of notice, the addresses of the parties
shall be as follows:
All notices to Bargo shall be delivered to:
Bargo Energy Resources, Ltd.
700 Louisiana Street, Suite 3700
Houston, Texas 77002
Attention: Mr. Tim J. Goff
Phone: (713) 236-9792
Fax: (713) 236-9799
All notices to Future shall be delivered to:
Future Acquisition 1995 Ltd.
2351 W. Northwest Highway, Suite 2130
Dallas, Texas 75220
Attention: Mr. Carl Price
Phone: (214) 350-7602
Fax: (214) 350-8382
11. Amendments. This Agreement may not be amended nor any rights
hereunder waived except by an instrument in writing signed by the party to be
charged with such amendment or waiver and delivered by such party to the party
claiming the benefit of such amendment or waiver.
12. Headings. The headings of the articles and sections of this Agreement
are for guidance and convenience of reference only and shall not limit or
otherwise affect any of the terms or provisions of this Agreement.
13. Counterparts. This Agreement may be executed by in any number of
counterparts, each of which shall be deemed an original instrument, but all of
which together shall constitute but one and the same instrument.
14. References. References made in this Agreement, including use of a
pronoun, shall be deemed to include, where applicable, masculine, feminine,
neuter, singular or plural, individuals, partnerships or corporations. As used
in this Agreement, "person" shall mean any natural person, corporation,
partnership, trust, estate or other entity.
15. Governing Law. This Agreement and the transactions contemplated
hereby shall be construed in accordance with, and governed by, the laws of the
State of Texas.
16. Entire Agreement. This Agreement (including the Exhibits hereto)
constitutes the entire understanding among the parties with respect to the
subject matter hereof, superseding all negotiations, prior discussions and prior
agreements and understandings relating to such subject matter.
17. Parties in Interest. This Agreement shall be binding upon and shall
inure to the benefit of, the parties hereto and, except as otherwise prohibited,
their respective successors and assigns; and except as otherwise stated herein,
nothing contained in this Agreement, or implied herefrom, is intended to confer
upon any other person or entity any benefits, rights or remedies.
18. Assignment. Except as otherwise provided herein, the parties may
assign all or any portion of their respective rights or delegate any portion of
their duties hereunder, so long as the respective assigning parties remain
liable for the performance of their obligations hereunder.
19. Public Announcements. The parties hereto agree that prior to making
any public announcement or statement with respect to the transactions
contemplated by this Agreement, the party desiring to make such public
announcement or statement shall consult with the other party hereto and exercise
their best efforts to agree upon the text of a joint public announcement or
statement to be made solely by one party, as the case may be; provided, however,
if either party is required by law, by a listing agreement, or by the rules and
regulations of any securities exchange to make such public announcement or
statement, then the same may be made without the approval of the other party.
The opinion of counsel of either party shall be conclusive evidence of such
requirement.
20. Severability. If a court of competent jurisdiction determines that
any clause or provision of this Agreement is void, illegal or unenforceable, the
other clauses and provisions of the Agreement shall remain in full force and
effect and the clauses and provisions which are determined to be void, illegal
unenforceable shall be limited so that they shall remain in effect to the extent
permissible by law.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date set forth above.
BARGO ENERGY RESOURCES, LTD.
By: Bargo Operating Company, Inc., its
General Partner
By /s/ Tim J. Goff
Tim J. Goff, President
FUTURE ACQUISITION 1995 LTD.
By: Future Petroleum Corporation, its
General Partner
By /s/ Carl Price
Name: B. Carl Price
Title: President
EXHIBIT I
[Please contact company for copy of Chevron Agreement]
EXHIBIT II
Recording requested by and
when recorded return to:
Mr. S. Michael Gibson
Bargo Energy Resources, Ltd.
700 Louisiana Street, Suite 3700
Houston, Texas 77002
ASSIGNMENT, CONVEYANCE AND BILL OF SALE
THE STATE OF TEXAS )
ss.
COUNTIES OF HARRIS AND )
MONTGOMERY
WHEREAS, reference is made to that certain Assignment and Bill of Sale
dated October , 1998, but effective as of September 1, 1998 (a copy of
which is attached hereto as Annex I and incorporated herein for all purposes),
from Chevron U.S.A. Inc. to BARGO ENERGY RESOURCES, LTD., a Texas limited
partnership (herein called "Assignor"), wherein certain properties, rights and
interests (herein called the "Chevron Interests") were conveyed to Assignor;
NOW, THEREFORE, for Ten Dollars and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Assignor does
hereby GRANT, BARGAIN, SELL, CONVEY, ASSIGN, TRANSFER, SET OVER and DELIVER unto
FUTURE ACQUISITION 1995 LTD., a Texas limited partnership, whose mailing address
is 2351 W. Northwest Highway, Suite 2130, Dallas, Texas 75220 (herein called
"Assignee"), all of the Chevron Interests.
TO HAVE AND TO HOLD the Chevron Interests unto the Assignee, its successors
and assigns, forever.
Assignor agrees to warrant and forever defend title to the Chevron
Interests unto Assignee, its successors and assigns, from and against the claims
and demands of all persons claiming, or to claim the same, or any part thereof,
by, through or under Assignor, but not otherwise. This Assignment, Conveyance
and Bill of Sale is made with full substitution and subrogation of Assignee in
and to all representations, covenants and warranties of title heretofore given
or made by Assignor's predecessors in title with respect to the Chevron
Interests.
Assignor agrees to execute and deliver to Assignee, from time to time, all
such other and additional instruments, notices, division orders, transfer orders
and other documents, and to do all such other and further acts and things as may
be necessary to more fully and effectively grant, convey and assign to Assignee
the rights, titles, interests and estates conveyed to Assignee hereby or
intended
so to be.
This Assignment, Conveyance and Bill of Sale is being executed in multiple
counterparts, all of which are identical. All of such counterparts taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Assignment, Conveyance and Bill of Sale is dated
the 15th day of October, 1998, but is made effective as to runs of oil and
deliveries of gas, and for all other purposes, as of October 1, 1998, at 7:00
a.m. local time at the location of the Chevron Interests.
BARGO ENERGY RESOURCES, LTD.
By: Bargo Operating Company, Inc., its
General Partner
By /s/ Tim J. Goff
Tim J. Goff, President
THE STATE OF TEXAS )
ss.
COUNTY OF HARRIS )
This instrument was acknowledged before me on the _____ day of October,
1998, by TIM J. GOFF, President of BARGO OPERATING COMPANY, INC., a Texas
corporation, on behalf of said corporation in its capacity as the General
Partner of BARGO ENERGY RESOURCES, LTD., a Texas limited partnership..
Notary Public in and for
the State of Texas
Printed Name ___________________________
My Commission Expires _________
EXHIBIT 10.08
FIRST AMENDMENT TO
MASTER SUBORDINATION AGREEMENT
THIS FIRST AMENDMENT TO MASTER SUBORDINATION AGREEMENT (this "First
Amendment"), dated as of October 15, 1998, is among ENCAP EQUITY 1994 LIMITED
PARTNERSHIP, a Texas limited partnership ("EnCap 1994"), ENERGY CAPITAL
INVESTMENT COMPANY PLC, an English investment company ("EnCap PLC"), TJG
INVESTMENTS, INC., a Texas corporation ("TJG"), and BARGO ENERGY COMPANY, a
Texas general partnership ("Bargo"; together with EnCap 1994, EnCap PLC and TJG,
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 ("Cal-Tex"), 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 Cal-Tex, 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 (the "Land"), together
with the buildings, structures and other improvements located and constructed
thereon, the "Real Property".
B. Borrower is indebted to EnCap 1994 and EnCap PLC, which
indebtedness is evidenced by (i) that certain Renewal Promissory Note executed
by Borrower, on or about October 15, 1998, in favor of EnCap PLC, in the
original principal sum of $2,616,629.16, as amended; and (ii) that certain
Renewal Promissory Note executed by Borrower, on or about October 15, 1998, in
favor of EnCap 1994, in the original principal sum of $2,883,370.84, as amended;
(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. 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.
E. As a condition precedent to extension of credit under the Credit
Agreement, Company executed and delivered, and caused 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.
F. As a condition precedent to the making of the loans under the
Credit Agreement, EnCap 1994 and EnCap PLC were required to subordinate their
debt and liens from Company and the Subsidiary Guarantors, including their liens
against and security interests in the Real Property arising under the Junior
Mortgages and their security interest in the other Junior Collateral to that of
Senior Creditor and their right to payment of the Junior Obligations to the
Senior Obligations (defined below).
G. EnCap 1994, EnCap PLC and Senior Creditor are parties to that
certain Master Subordination Agreement dated as of August 14, 1998 (as amended,
modified and supplemented from time to time, the "Subordination Agreement"),
pursuant to which EnCap 1994 and EnCap PLC subordinated the Junior Obligations
and the Lien of the Junior Security Documents to the Senior Obligations and the
Lien of the Senior Security Documents. A true and correct copy of the
Subordination Agreement is attached hereto as Exhibit A.
H. Borrower is indebted to Bargo which indebtedness is evidenced by
that certain Promissory Note (the "Bargo Note") executed by Borrower, on or
about October 15, 1998, in favor of Bargo, in the original principal sum of
$3,397,600.00, as same may be amended, modified, supplemented or amended and
restated from time to time (the "Bargo Debt").
I. Borrower is indebted to TJG which indebtedness is evidenced by that
certain Promissory Note (the "TJG Note") executed by Borrower, on or about
October 15, 1998, in favor of TJG, in the original principal sum of $602,400.00,
as amended, modified, supplemented or amended and restated from time to time
(the "TJG Debt").
J. The Bargo Debt and the TJG Debt are secured by, among other things,
that certain Deed of Trust, Mortgage, Line of Credit Mortgage Assignment,
Security Agreement, Fixture Filing and Financing Statement, dated October 9,
1998, from Future 1995 and Shawnee to Gary R. Peterson, Trustee, and EnCap 1994,
EnCap PLC, Bargo and TJG (the "New Mortgage"); and are also secured by, among
other things, those certain guaranties, pledges, security agreements and other
documents and instruments described therein (such agreements and instruments,
together with the New Mortgage, herein called the "New Security Documents" the
real property and personal property collateral encumbered by the New Security
Documents herein called the "New Collateral").
K. The Company, Junior Creditor and Senior Creditor have agreed that
it is in their respective best interests to amend the Subordination Agreement to
include Bargo and TJG as Junior Creditors and to include the Bargo Debt and the
TJG Debt as Junior Obligations.
L. Junior Creditor has duly authorized the execution, delivery and
performance of this First Amendment.
M. It is in the best interests of Junior Creditor to execute this
First Amendment 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 Subordination
Agreement. As used in this First Amendment, 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.
First Amendment is defined in the preamble.
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 F.
Senior Creditor is defined in the preamble.
Senior Obligations is defined in the Subordination Agreement.
Senior Security Documents is defined in Recital F.
SECTION 2. Amendments. Effective as of the date hereof, the
Subordination Agreement is amended in accordance with the terms of this Section
2; except as so amended, the Subordination Agreement shall continue to remain in
all respects in full force and effect.
SECTION 2.1 Definition of "Junior Note". The definition of "Junior
Note" is hereby amended to include within such term the Bargo Note and the
TJG Note.
SECTION 2.2. Definition of "Junior Obligations". The definition of
"Junior Obligations" is hereby amended to include within such term the
Bargo Debt and the TJG Debt.
SECTION 2.3. Definition of "Junior Creditor". The definition of
"Junior Creditor" is hereby amended to include within such term Bargo and
TJG.
SECTION 2.4. Definition of "Junior Security Documents". The
definition of "Junior Security Documents" is hereby amended to include
within such term the New Security Documents.
SECTION 2.5. Definition of "Junior Collateral". The definition of
"Junior Collateral" is hereby amended to include within such term the New
Collateral.
SECTION 2.6. Amended and Restated Section 3. Section 3 of the
Subordination Agreement is hereby amended and restated as follows:
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;
(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 3. Adoption of Subordination Agreement. Bargo and TJG hereby
join in and agree to be bound by all of the terms and conditions of the
Subordination Agreement, as amended hereby.
SECTION 4. Miscellaneous. Neither Senior Creditor, nor any holder of the
Senior Note shall be prejudiced in its rights under this First Amendment 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 First Amendment. 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 First Amendment 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 First Amendment, 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 5. 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 5. 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 6. 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 7. Section Captions. Section captions used in this First
Amendment are for convenience of reference only, and shall not affect the
construction of this First Amendment.
SECTION 8. Severability. Wherever possible each provision of this First
Amendment shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this First Amendment 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 First Amendment.
SECTION 9. Governing Law, Entire Agreement, etc. THIS First Amendment
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 First Amendment 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 10. Execution in Counterparts. This First Amendment 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 11. Binding Effect. This First Amendment 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 12. Recorded Instruments. In order to effect the subordination
described in the 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 the Subordination Agreement
and to otherwise implement the Subordination Agreement.
SECTION 13. Intercreditor and Collateral Agency Agreement. The Junior
Creditor acknowledges and agrees that that certain Intercreditor and Collateral
Agency Agreement dated October 15, 1998 among Bargo, EnCap 1994, EnCap PLC and
TJG (the "Intercreditor Agreement"), and the rights and duties of the parties
thereunder, are subject in all respects to the Subordination Agreement as
amended by this First Amendment and in the event of any conflict or
inconsistency, the Subordination Agreement shall prevail and control over the
Intercreditor Agreement.
IN WITNESS WHEREOF, this First Amendment 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/ D. Martin Phillips
Name: D. Martin Phillips
Title: Managing Director
Address: 1100 Louisiana Street
Suite 3150
Houston, TX 77002
Attention: D. Martin Phillips
Facsimile: 713-659-6130
ENERGY CAPITAL INVESTMENT COMPANY PLC, an
English investment company
By: /s/ D. Martin Phillips
Name: D. Martin Phillips
Title: Director
Address: 1100 Louisiana Street
Suite 3150
Houston, TX 77002
Attention: D. Martin Phillips
Facsimile: 713-659-6130
BARGO ENERGY RESOURCES, LTD., a Texas
limited partnership
By: Bargo Operating Company, Inc., a
Texas corporation, its sole General
Partner
By: /s/ Tim J. Goff
Name: Tim J. Goff
Title: President
Address: 700 Louisiana Street
Suite 3700
Houston, TX 77002
Attention: Tim J. Goff
Facsimile: 713-296-9799
TJG INVESTMENTS, INC., a Texas corporation
By: /s/ Tim J. Goff
Name: Tim J. Goff
Title: President
Address: 700 Louisiana Street
Suite 3700
Houston, TX 77002
Attention: Tim J. Goff
Facsimile: 713-236-9799
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, a national banking
association, as agent
By: /s/ John H. Homier
Name: John H. Homier
Title: Vice President
Address: 333 Clay Street
Suite 4550
Houston, TX 77002
Attention: Richard A. Bernardy
Facsimile: 713-651-4888
Exhibit A
[Please contact the Company for copy of Subordination Agreement]
Schedule I
Junior Security Documents
(including Recording Information)
(Please contact the Company for copies)
Schedule II
Senior Security Documents
(Please contact the Company for copies)
ACKNOWLEDGMENT AND AGREEMENT
Borrower and Subsidiary Guarantors each hereby acknowledge receipt of a
copy of the foregoing First Amendment to 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 First Amendment to 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: October 15, 1998.
Company:
FUTURE PETROLEUM CORPORATION, a Utah
corporation
By: /s/ Carl Price
Name: B. Carl Price
Title: President
FUTURE CAL-TEX CORPORATION, a Texas
corporation
By: /s/ Carl Price
Name: B. 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: B. 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: B. 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: B. Carl Price
Title: President
FUTURE ENERGY CORPORATION, a Nevada
corporation
By: /s/ Carl Price
Name: B. Carl Price
Title: President
FUTURE PETROLEUM CORPORATION, a Texas
corporation
By: /s/ Carl Price
Name: B. Carl Price
Title: President
EXHIBIT 10.09
RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:
Mayer, Brown & Platt
350 South Grand Avenue, 25th Floor
Los Angeles, CA 90071
Attention: Kevin L. Shaw
______________________________________________________________________________
SUBORDINATION AGREEMENT
NOTICE: THIS SUBORDINATION AGREEMENT RESULTS IN YOUR SECURITY INTEREST IN THE
PROPERTY BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF SOME OTHER
OR LATER SECURITY INSTRUMENT.
THIS SUBORDINATION AGREEMENT, made effective as of the 15th day of
October, 1998 (this "Subordination Agreement") among Future Acquisition 1995,
Ltd., a Texas limited partnership, BMC Development No.1 Limited Partnership, a
Texas limited partnership and NCI-Shawnee Limited Partnership, a Texas limited
partnership, Future Petroleum Corporation ("Future"), a Utah corporation
(collectively, "Owner"), present owner of the oil and gas leases and other
interests described on Exhibit A hereto (the "Property"), EnCap Equity 1994
Limited Partnership ("EnCap 1994"), a Texas limited partnership, Energy Capital
Investment Company PLC ("EnCap PLC"), an English investment company, TJG
Investments, Inc. ("TJG"), a Texas corporation, and Bargo Energy Company
("Bargo"), a Texas general partnership (collectively, "Junior Creditor"),
present owner and holder of a deed of trust lien on the Property and Junior Note
(as defined below), and Bank of America National Trust and Savings Association
("Senior Creditor");
W I T N E S S E T H
WHEREAS, Junior Creditor is, or will be, the holder of (i) various
mortgages and deeds of trust among Owner, as mortgagor and Junior Creditor, as
mortgagee, recorded in various counties in various states, all as more
particularly set forth in Schedule 1 to this Agreement, as amended from time to
time (collectively, the "Junior Deed of Trust"); and (ii) a Renewal Promissory
Note dated as of October 15, 1998 made by Future in favor of EnCap PLC in the
original principal sum of $2,616,629.16, a Renewal Promissory Note dated as of
October 15, 1998 made by Future in favor of EnCap 1994 in the original principal
sum of $2,883,370.84, a Promissory Note dated as of October 15, 1998 made by
Future in favor of Bargo in the original principal sum of $3,397,600.00, and a
Promissory Note dated as of October 15, 1998 made by Future in favor of TJG in
the original principal sum of $602,400.00 (collectively the "Junior Note"); and
WHEREAS, Owner has executed, or is about to execute, a mortgage, deed of
trust with power of sale, assignment of production, security agreement,
financing statement and fixture filing (the "New Deed of Trust") which secures
that certain secured promissory note (the "New Note") in the sum of $20,000,000
(the "New Loan"), dated as of August 14, 1998, in favor of Senior Creditor,
payable with interest and upon the terms and conditions described therein, which
New Deed of Trust is also to be recorded concurrently herewith; and
WHEREAS, the New Deed of Trust will burden and encumber certain interests
in the lands and other interests described in Exhibit A hereto; and
WHEREAS, it is a condition precedent to obtaining additional loans from
Senior Creditor that the New Deed of Trust shall unconditionally be and remain
at all times a lien or charge upon the Property, prior and superior to the lien
or charge of the Junior Deed of Trust; and
WHEREAS, Senior Creditor is willing to make additional loans provided the
New Deed of Trust securing the same is a lien or charge upon the Property prior
and superior to the lien or charge of the Junior Deed of Trust and provided that
Junior Creditor will specifically and unconditionally subordinate the lien or
charge of the Junior Deed of Trust to the lien or charge of the New Deed of
Trust in favor of Senior Creditor; and
WHEREAS, it is to the mutual benefit of the parties hereto that Senior
Creditor make additional loans to Owner; and Junior Creditor is willing that the
New Deed of Trust securing the same shall, when recorded, constitute a lien or
charge upon the Property which is unconditionally prior and superior to the lien
or charge of the Junior Deed of Trust first above mentioned.
NOW THEREFORE, in consideration of the mutual benefits accruing to the
parties hereto and other valuable consideration the receipt and sufficiency of
which consideration is hereby acknowledged, and in order to induce Senior
Creditor to make additional loans, it is hereby declared, understood and agreed
as follows:
(1) That the New Deed of Trust securing the New Note in favor of
Senior Creditor, shall unconditionally be and remain at all times a
lien or charge on the Property, prior and superior to the lien or
charge of the Junior Deed of Trust.
(2) That Senior Creditor would not make additional loans without
this Subordination Agreement.
(3) That this Subordination Agreement, and that certain Master
Subordination Agreement dated as of August 14, 1998, by and among
the original parties thereto, as amended by the that certain First
Amendment to Master Subordination Agreement (the "First Amendment"),
dated as of October 15, 1998, to include TJG Investments, Inc. and
Bargo Energy Company as Junior Creditors, shall be the whole and
only agreements with regard to the subordination of the lien or
charge of the Junior Deed of Trust to the lien or charge of the New
Deed of Trust in favor of Senior Creditor and shall supersede and
cancel, but only insofar as would affect the priority between the
Junior Deed of Trust and the New Deed of Trust, any prior agreements
as to such subordination including, but not limited to, those
provisions, if any, contained in the Junior Deed of Trust which
provide for the subordination of the lien or charge thereof to
another deed or deeds of trust or to another mortgage or mortgages.
Junior Creditor declares, agrees and acknowledges that:
(a) It consents to (i) the provisions of the New Note and New
Deed of Trust in favor of Senior Creditor, and (ii) all agreements,
including but not limited to any agreements, between Owner and
Senior Creditor for the disbursement of the proceeds of Senior
Creditor's loan;
(b) Senior Creditor in making disbursements pursuant to any such
agreement is under no obligation or duty to, nor has Senior Creditor
represented that it will, see to the application of such proceeds by
the person or persons to whom Senior Creditor disburses such
proceeds and any application or use of such proceeds for purposes
other than those provided for in such agreement or agreements shall
not defeat the subordination herein made in whole or in part;
(c) It intentionally waives, relinquishes and subordinates the
priority of the lien or charge of the Junior Deed of Trust in favor
of the lien or charge upon the Property of the New Deed of Trust in
favor of Senior Creditor and understands that in reliance upon, and
in consideration of, this waiver, relinquishment and subordination
specific loans and advances are being and will be made and, as part
and parcel thereof, specific monetary and other obligations are
being and will be entered into which would not be made or entered
into but for said reliance upon this waiver, relinquishment and
subordination; and
(d) An endorsement has been placed upon the Junior Note secured
by the Junior Deed of Trust that such Junior Deed of Trust has by
this instrument been subordinated to the lien or charge of the New
Deed of Trust in favor of Senior Creditor.
Senior Creditor and Owner hereby agree and covenant as follows:
(x) Senior Creditor shall deliver to Junior Creditor written notice, at
the address set forth below, of any breach or default by Owner under or
relating to the New Loan, the New Deed of Trust, or the other instruments
and agreements executed in connection therewith, and shall not take any
action to enforce any remedy available to Senior Creditor with respect to
the Property or under the New Deed of Trust without first allowing Junior
Creditor thirty (30) days from and after such notice within which to cure
such breach or default.
(y) Upon payment to Senior Creditor of the amount set forth in the New
Note, Senior Creditor shall execute, acknowledge and deliver to Owner a
request for full reconveyance requesting that the trustee under the New
Deed of Trust execute, acknowledge and deliver to Owner a full
reconveyance or release of the New Deed of Trust.
NOTICE: THIS SUBORDINATION AGREEMENT CONTAINS A PROVISION WHICH ALLOWS THE
PERSON OBLIGATED ON YOUR REAL PROPERTY SECURITY TO OBTAIN A LOAN A PORTION OF
WHICH MAY BE EXPENDED FOR OTHER PURPOSES THAN IMPROVEMENT OF THE LAND.
"Owner"
Future Acquisition 1995, Ltd., a
Texas limited partnership
By: Future Petroleum Corporation,
a Texas corporation, its sole
general partner
By: /s/ Carl Price
Carl Price, President
BMC Development No.1 Limited
Partnership., a Texas limited
partnership
By: Future Petroleum Corporation,
a Texas corporation, its sole
general partner
By: /s/ Carl Price
Carl Price, President
NCI-Shawnee Limited Partnership, a
Texas limited partnership
By: Future Petroleum Corporation,
a Texas corporation, its sole
general partner
By: /s/ Carl Price
Carl Price, President
Future Petroleum Corporation, a Utah
corporation
By: /s/ Carl Price
Carl Price, President
"Junior Creditor"
EnCap Equity 1994 Limited
Partnership, a Texas limited partnership
By: EnCap Investments L.C.,
General Partner
By: /s/ D. Martin Phillips
D. Martin Phillips
Managing Director
Energy Capital Investment Company
PLC, an English investment company
By: /s/ D. Martin Phillips
D. Martin Phillips
Managing Director
TJG Investments, Inc., a Texas
corporation
By: /s/ Tim J. Goff
Name: Tim J. Goff
Title: President
Bargo Energy Company, a Texas general
partnership
By: /s/ Tim J. Goff
Name: Tim J. Goff
Title: Manager
"Senior Creditor"
Bank of America National Trust and
Savings Association
By: /s/ Richard A. Bernardy
Name: Richard A. Bernardy
Title:
Schedule 1
Recording Schedule for Junior Security Documents
Exhibit A
STATE OF TEXAS )
ss.
COUNTY OF HARRIS )
On October 15, 1998, before me, CARL PRICE, President of Future Petroleum
Corporation, general partner of Future Acquisition 1995, Ltd., a Texas limited
partnership, personally known to me (or proved to me on the basis of
satisfactory evidence) to be person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his authorized
capacity, and that by his signature on the instrument the person or the entity
upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
Signature
(Seal)
STATE OF TEXAS )
ss.
COUNTY OF HARRIS )
On October 15, 1998, before me, CARL PRICE, President of Future Petroleum
Corporation, general partner of BMC Development No. 1 Limited Partnership, a
Texas limited partnership, personally known to me (or proved to me on the basis
of satisfactory evidence) to be person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his authorized
capacity, and that by his signature on the instrument the person or the entity
upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
Signature
(Seal)
STATE OF TEXAS )
ss.
COUNTY OF HARRIS )
On October 15, 1998, before me, CARL PRICE, President of Future Petroleum
Corporation, general partner of NCI-Shawnee Limited Partnership, a Texas limited
partnership, personally known to me (or proved to me on the basis of
satisfactory evidence) to be person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his authorized
capacity, and that by his signature on the instrument the person or the entity
upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
Signature
(Seal)
STATE OF TEXAS )
ss.
COUNTY OF HARRIS )
On October 15, 1998, before me, CARL PRICE, President of Future Petroleum
Corporation, a Utah corporation, personally known to me (or proved to me on the
basis of satisfactory evidence) to be person whose name is subscribed to the
within instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the person or
the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
Signature
(Seal)
STATE OF TEXAS )
ss.
COUNTY OF HARRIS )
On October 15, 1998, before me, D. Martin Phillips, Managing Director of
EnCap Equity 1994 Limited Partnership, a Texas limited partnership, personally
known to me (or proved to me on the basis of satisfactory evidence) to be person
whose name is subscribed to the within instrument and acknowledged to me that he
executed the same in his authorized capacity, and that by his signature on the
instrument the person or the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
Signature
(Seal)
STATE OF TEXAS )
ss.
COUNTY OF HARRIS )
On October 15, 1998, before me, D. Martin Phillips, Managing Director of
Energy Capital Investment Company PLC, an English investment company, personally
known to me (or proved to me on the basis of satisfactory evidence) to be person
whose name is subscribed to the within instrument and acknowledged to me that he
executed the same in his authorized capacity, and that by his signature on the
instrument the person or the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
Signature
(Seal)
STATE OF TEXAS )
ss.
COUNTY OF HARRIS )
On October 15, 1998, before me, Tim J. Goff, Manager of TJG Investments, Inc., a
Texas corporation, personally known to me (or proved to me on the basis of
satisfactory evidence)to be person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his authorized
capacity, and that by his signature on the instrument the person or the entity
upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
Signature
(Seal)
STATE OF TEXAS )
ss.
COUNTY OF HARRIS )
On October 15, 1998, before me, Tim J. Goff, President of Bargo Energy
Company, a Texas general partnership, personally known to me (or proved to me on
the basis of satisfactory evidence) to be person whose name is subscribed to the
within instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the person or
the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
Signature
(Seal)
STATE OF TEXAS )
ss.
COUNTY OF HARRIS )
On October 15, 1998, before me, Richard A. Bernardy,
_______________________ of Bank of America National Trust and Savings
Association, personally known to me (or proved to me on the basis of
satisfactory evidence) to be person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his authorized
capacity, and that by his signature on the instrument the person or the entity
upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
Signature
(Seal)
EXHIBIT 10.10
INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT
This INTERCREDITOR AND COLLATERAL AGENCY AGREEMENT (this
"Agreement"), dated October 15, 1998, is entered into by and among ENERGY
CAPITAL INVESTMENT COMPANY PLC ("Energy PLC"), ENCAP EQUITY 1994 I LIMITED
PARTNERSHIP ("EnCap LP"), BARGO ENERGY COMPANY ("Bargo") and TJG INVESTMENTS
INC. ("TJG"; Energy PLC, EnCap LP, Bargo and TJG, collectively,
"Subordinate Creditors") and by ENCAP EQUITY 1994 I LIMITED PARTNERSHIP, as
Collateral Agent for Subordinate Creditors (in such capacity,
"Collateral Agent").
RECITALS:
A. Energy PLC and EnCap LP have heretofore extended credit to
Future Petroleum Corporation, a Utah corporation ("Future") pursuant to
that certain Note Restructuring Agreement dated August 14, 1998 among
Future, Energy PLC and EnCap LP (as from time to time amended,
supplemented or restated, the "EnCap Note Agreement"), as evidenced by
(i) that certain Renewal Promissory Note of even date herewith made by
Future and payable to the order of Energy PLC in the original principal
amount of $2,616,629.16, which renewed and extended the indebtedness
described therein (such promissory note, 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 "Energy PLC
Note") and (ii) that certain Renewal Promissory Note of even date
herewith made by Future and payable to the order of EnCap LP in the
original principal amount of $2,883,370.84, which renewed and extended
the indebtedness described therein (such promissory note, 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
"EnCap LP Note").
B. The obligations and indebtedness of Future under the EnCap
Note Agreement, the Energy PLC Note and the EnCap LP Note are secured by
the security documents described on Schedule 1 attached hereto.
C. Bargo and TJG are contemporaneously herewith extending
credit to Future pursuant to that certain Purchase and Sale Agreement of
even date herewith among Future, Bargo and TJG (as from time to time
amended, supplemented or restated, the "Bargo/TJG Purchase Agreement"),
as evidenced by (i) that certain Promissory Note of even date herewith
made by Future and payable to the order of Bargo in the original
principal amount of $3,397,600 (such promissory note, 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
"Bargo Note") and (ii) that certain Promissory Note of even date
herewith made by Future and payable to the order of TJG in the original
principal amount of $602,400 (such promissory note, 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
"TJG Note")
D. To secure the obligations and indebtedness of Future under
the Bargo/TJG Purchase Agreement, the Bargo Note and the TJG Note, the
security documents described on Schedule 1 attached hereto are
contemporaneously herewith being executed or amended as set forth
thereon (such security documents, as from time to time amended,
supplemented or restated, together with any other right or interest now
or later securing or related to Future's obligations and indebtedness
under the EnCap Note Agreement, the Energy PLC Note, the EnCap LP Note,
the Bargo/TJG Purchase Agreement, the Bargo Note or the TJG Note, the
"Shared Security Documents").
E. It is a condition precedent to Energy PLC's and EnCap LP's
consent to the incurrence by Future of the obligations and indebtedness
under the Bargo/TJG Purchase Agreement, the Bargo Note and the TJG Note
and the amendment of the Original Security Documents that the
Subordinate Creditors execute and deliver this Agreement to evidence the
agreement of the Subordinate Creditors with respect to the sharing of
liens and collateral under the Shared Security Documents to the extent
and in the manner set forth herein.
F. This Agreement, the Notes and the Shared Security Documents
are subject to that certain Master Subordination Agreement dated August
14, 1998 by Energy PLC and EnCap LP as subordinate creditors, Bank of
America National Trust & Savings Association, as senior creditor, and
Future, as amended by that certain First Amendment to Master
Subordination Agreement of even date herewith, and as from time to time
amended, supplemented or restated. In the event of any conflict or
inconsistency, the Master Subordination Agreement shall prevail and
control over this Agreement.
NOW THEREFORE, the parties hereto agree as follows:
Section 1. Definitions. As used herein the terms "Energy
PLC", "EnCap :LP", "Bargo", "TJG", "Future", "Subordinate Creditors",
"Collateral Agent", "EnCap Note Agreement", "Energy PLC Note", "EnCap LP
Note", "Bargo/TJG Purchase Agreement", "Bargo Note", "TJG Note" and
"Shared Security Documents" have the meanings given them above, and the
following additional terms have the following meanings:
"Collateral" means all property of any kind which is subject
to a Lien under any Shared Security Document or which, under the
terms of any Shared Security Document, is purported to be subject
to a Lien.
"Creditor Agreement" means each of the EnCap Note Agreement
and the Bargo/TJG Purchase Agreement.
"Default Period" means any period during which an Event of
Default has occurred and is continuing.
"Enforcement Action" means any exercise of any rights or
remedies against any Collateral, whether under any Shared Security
Documents or otherwise, in order to foreclose upon, collect, take
possession of, sell, lease, dispose of, or otherwise realize upon
Collateral or to settle or compromise claims against Collateral.
"Event of Default" means any Event of Default as such term is
defined in either the EnCap Note Agreement or the Bargo/TJG
Purchase Agreement.
"Lien" means, with respect to any property or assets, any
right or interest therein of a Subordinate Creditor to secure or
securing indebtedness or liabilities owed to him or any other
arrangement with such Subordinate Creditor which provides for the
payment of such indebtedness or liabilities out of such property
or assets or which allows him to have such indebtedness or
liabilities satisfied out of such property or assets prior to the
general creditors of any owner thereof, including without
limitation any lien, mortgage, security interest, pledge, deposit,
production payment, rights of a vendor under any title retention
or conditional sale agreement or lease substantially equivalent
thereto, or any other charge or encumbrance for security purposes,
whether arising by law or agreement or otherwise.
"Note" means each of the Energy PLC Note, the EnCap LP Note,
the Bargo Note and the TJG Note.
"Person" means an individual, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
"Pro Rata Share" means with respect to each Subordinate
Creditor, the percentage obtained by dividing Future's outstanding
Subordinated Debt for principal to such Subordinate Creditor
(including without limitation any participation owned by such
Subordinate Creditor in any other Subordinate Creditor's
Subordinated Debt purchased pursuant to Section 5 below) by
Future's aggregate outstanding Subordinated Debt for principal to
all Subordinate Creditors.
"Required Subordinate Creditors" means, at the time in
question, one or more Subordinate Creditors whose Pro Rata Shares
at such time exceeds 51%.
"Subordinated Debt" means (i) all outstanding indebtedness or
obligations of Future (whether matured or unmatured) owing to
Energy PLC or EnCap LP (or any of their successors or assigns)
under the EnCap Note Agreement, the Energy PLC Note, the EnCap LP
Note or any of the Shared Security Documents, and (ii) all
outstanding indebtedness or obligations of Future (whether matured
or unmatured) owing to Bargo or TJG (or any of their successors or
assigns) under the Bargo/TJG Purchase Agreement, the Bargo Note,
the TJG Note or any of the Shared Security Documents.
Section 2. Appointment and Authority of Agent. In order to
expedite the enforcement of the rights and remedies set forth in the
Shared Security Documents, Subordinate Creditors hereby appoint EnCap LP
to act as Collateral Agent under the Shared Security Documents on the
terms and conditions set forth herein and therein. Subordinate
Creditors hereby authorize and direct Collateral Agent to take such
action on their behalf under the terms and provisions of the Shared
Security Documents and to exercise such rights and remedies thereunder
as are specifically delegated to or required of Collateral Agent under
the terms and provisions of this Agreement. Collateral Agent is hereby
expressly authorized as agent and transfer agent on behalf of
Subordinate Creditors, and Collateral Agent hereby agrees, to do the
following in accordance with the terms and conditions of this Agreement
and the Shared Security Documents:
(a) To hold in safekeeping original counterparts of the
Shared Security Documents and the evidence of the filing or
recording thereof;
(b) To maintain physical possession of any of the
Collateral delivered to Collateral Agent as contemplated in any of
the Shared Security Documents;
(c) To receive all other documents and items to be
furnished to Collateral Agent under the Shared Security Documents;
(d) To distribute to the Subordinate Creditors
information, requests, documents, and other items received from
Future and others under the Shared Security Documents;
(e) To execute and deliver to Future and others all
requests, demands, notices, approvals, consents and other
communications which Required Subordinate Creditors request to be
so delivered in connection with the Shared Security Documents
(subject to the terms and conditions set forth herein);
(f) To receive on behalf of Subordinate Creditors any
payment of monies paid to Collateral Agent in accordance with the
Shared Security Documents, and to distribute to each Subordinate
Creditor in accordance with the terms of this Agreement such
Subordinate Creditor's Pro Rata Share of all payments so received;
(g) To act on behalf of Subordinate Creditors at the
direction of any Subordinate Creditor to maintain the perfection
and priority of the Liens under the Shared Security Documents;
(h) To the extent permitted by this Agreement and the
Shared Security Documents and as directed by Required Subordinate
Creditors, to exercise on behalf of each Subordinate Creditor all
remedies of Collateral Agent and Subordinate Creditors under the
Shared Security Documents upon the occurrence of any Event of
Default; and
(i) To release Collateral as and when directed by all
Subordinate Creditors.
Section 3. Enforcement Action. Notwithstanding anything
herein to the contrary, Collateral Agent shall not take any Enforcement
Action without the prior written consent of Required Subordinate
Creditors.
Section 4. Notices of Default, Acceleration, and Enforcement
Action. Whenever an Event of Default shall occur and be continuing and
any Subordinate Creditor shall have actual knowledge thereof, such
Subordinate Creditor shall promptly notify Collateral Agent and the
other Subordinate Creditors of such Event of Default. Whenever any
Subordinate Creditor requests or directs Collateral Agent to take any
Enforcement Action or to exercise any other right or remedy under any
Shared Security Document with respect to any Event of Default, such
Subordinate Creditor shall promptly notify the other Subordinate
Creditors of such request or direction.
Section 5. Payments, Proceeds and Additional Collateral.
(a) Should any Subordinate Creditor ever receive during a
Default Period, whether pursuant to a Shared Security Document or by
exercise of any right of offset or banker's lien, payment, prepayment,
counterclaim, cross-action or otherwise (except pursuant to this
Agreement), any amount or payment on account of its respective
Subordinated Debt owed by Future, such Subordinate Creditor shall
promptly distribute to each other Subordinate Creditor by wire transfer
(by purchasing, to the extent necessary, a participation from each other
Subordinate Creditor) such other Subordinate Creditor's Pro Rata Share
of any such amounts received. If all or any part of any funds
transferred pursuant to the preceding sentence is thereafter recovered
from the selling Subordinate Creditor which received the same, the
purchase provided for in the preceding sentence shall be deemed to have
been rescinded to the extent of such recovery, together with interest,
if any, if interest is required pursuant to court order to be paid on
account of the possession of such funds prior to such recovery. Should
Collateral Agent ever receive any amounts from an Enforcement Action
(whether or not during a Default Period), Collateral Agent shall --
notwithstanding any instructions to the contrary by Future and unless
otherwise directed by all Subordinate Creditors -- promptly distribute
to each Subordinate Creditor its respective Pro Rata Share of such
amounts; provided that if Collateral Agent is then taking action to
collect against any of the Collateral in compliance with the directions
of Required Subordinate Creditors, such amounts shall first be applied
to the reasonable costs and expenses, including attorneys' fees,
incurred by Collateral Agent in taking such action. All such
distributions to a Subordinate Creditor shall be applied by such
Subordinate Creditor pursuant to the terms of such Subordinate
Creditor's Creditor Agreement and Note.
(b) Whenever Collateral Agent in good faith determines that it
is uncertain about how to distribute to Subordinate Creditors any funds
which it has received, or whenever Collateral Agent in good faith
determines that there is any dispute among Subordinate Creditors about
how such funds should be distributed, Collateral Agent may choose to
defer distribution of the funds which are the subject of such
uncertainty or dispute. If Collateral Agent in good faith believes that
the uncertainty or dispute will not be promptly resolved, or if
Collateral Agent is otherwise required to invest funds pending
distribution to Subordinate Creditors, Collateral Agent shall pending
such distribution deposit and invest such funds in a separate money
market account with a commercial bank or trust company organized and
doing business under the laws of the United States of America or any
state thereof which has capital, surplus and undivided profits of at
least $250,000,000; all interest on any such investment shall be
distributed upon the distribution of such investment and in the same
proportion and to the same Persons as such investment. All moneys
received by Collateral Agent for distribution to Subordinate Creditors
shall be held by Collateral Agent pending such distribution solely as
Collateral Agent for such Subordinate Creditors, and Collateral Agent
shall have no equitable title to any portion thereof.
(c) No Subordinate Creditor nor Collateral Agent shall accept
any Collateral for any Subordinated Debt except by means of a Lien
granted in such Collateral to all Subordinate Creditors or to Collateral
Agent for the benefit of all Subordinate Creditors.
(d) Without the prior written consent of all Subordinate
Creditors, no Subordinate Creditor shall -- whether due to an Event of
Default or otherwise -- accelerate the maturity of any Subordinated Debt
owed to it or otherwise take any action to collect such Subordinated
Debt prior to the date on which it would normally become due, unless
such acceleration or other action is based upon (i) an Event of Default
described in Section 8.1(i)(i), (i)(ii) or (i)(iii) of the EnCap Note
Agreement or Section 13.1 (i)(i), (i)(ii) or (i)(iii) of the the
Bargo/TJG Purchase Agreement, (ii) Future's failure to pay principal or
interest or premium on Subordinated Debt and 30 days have elapsed since
such principal, interest or premium became due, or (ii) any other Event
of Default and 90 days have elapsed since such Event of Default (taking
into account any requirement for the giving of notice or the passage of
time) occurred. Subject to the foregoing, each Subordinate Creditor may
protect and enforce its rights under its Note (but not under any Shared
Security Documents, which rights shall be enforced pursuant to the terms
hereof and thereof) by any appropriate proceedings, and may enforce the
payment of any obligations or indebtedness due thereunder.
(e) If Collateral Agent or any Subordinate Creditor shall, for
purposes of making a payment, request that the Subordinate Creditors
certify to Collateral Agent the amount and type of Subordinated Debt
outstanding, each Subordinate Creditor shall do so promptly and no
payment need be made until Subordinate Creditors' Pro Rata Shares have
been calculated and confirmed.
Section 6. Limited Liability of Collateral Agent; Indemnity.
(a) Neither Collateral Agent nor any of its officers,
directors, employees, attorneys or agents shall be liable to Subordinate
Creditors for any action taken or omitted to be taken by Collateral
Agent or any of its officers, directors, employees or agents pursuant to
and within the scope of the authority granted Collateral Agent under
this Agreement, except for its or their own gross negligence or willful
misconduct. Collateral Agent shall have no duties or obligations other
than those specifically set forth herein or in the Shared Security
Documents, or as may subsequently be agreed to in writing by Collateral
Agent and all Subordinate Creditors, and no implied duties or
obligations whatsoever on Collateral Agent's part shall be read into
this Agreement or any of the Shared Security Documents.
(b) Each Subordinate Creditor hereby agrees to indemnify
Collateral Agent, its officers, directors, employees, agents and
attorneys against all loss, liability and reasonable cost and expense
(to the extent not paid by Future or other Persons and not arising out
of or as a result of negligence or willful misconduct on the part of
Collateral Agent), including reasonable attorneys' fees, resulting from
any action taken or to be taken by it as Collateral Agent on behalf of
the Subordinate Creditors within the scope of Collateral Agent's
authority under this Agreement, to the extent of such Subordinate
Creditor's Pro Rata Share of any such loss, liability, cost, and
expense. THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH
LOSS, LIABILITY, COST OR EXPENSE IS IN ANY WAY OR TO ANY EXTENT CAUSED,
IN WHOLE OR IN PART BY ANY ACT OR OMISSION ARISING OUT OF THE ORDINARY
NEGLIGENCE (BUT NOT GROSS NEGLIGENCE) OF ANY PERSON INDEMNIFIED PURSUANT
TO THIS SECTION 6(B).
(c) Collateral Agent shall promptly notify each Subordinate
Creditor of the written assertion of, or the commencement of, any claim,
suit, action or proceeding filed against Collateral Agent arising out
of, or in connection with, this Agreement or any of the Shared Security
Documents or the rights, duties or powers conferred upon Collateral
Agent hereunder or thereunder, giving with such notice information as to
the nature and basis of the lawsuit, a statement of whether Collateral
Agent believes it is entitled under this Agreement to any indemnity
therefor, and, if so, a statement of Collateral Agent's reasons for so
believing. Any Subordinate Creditor shall be entitled to participate
in, at its own expense, the defense of any such claim, suit, action or
proceeding. Neither the Subordinate Creditors nor Collateral Agent
shall be bound by any settlement entered into by any of the other
parties hereto without such party's consent.
Section 7. Collateral Agent's Employees. Collateral Agent may
perform any and all duties under the Shared Security Documents and this
Agreement by or through agents or employees and shall be entitled to
advice of counsel pertaining to all such matters.
Section 8. Collateral Agent's Reliance. Collateral Agent
shall be entitled to rely on any notice, consent, certificate, or other
document believed by it to be genuine and correct and to have been
signed or sent by the proper Person or Persons and, in respect of legal
matters, upon the opinion of counsel selected by Collateral Agent.
Collateral Agent may deem and treat the original Subordinate Creditors
hereunder as the owners of their respective promissory notes issued in
connection with the Creditor Agreements, and of their respective Pro
Rata Shares, until receipt by Collateral Agent of notice of assignment
or transfer of any interest therein by any Subordinate Creditor;
provided, that any such assignment shall be subject to all of the rights
and obligations set forth herein. Any request, authority or consent of
any Subordinate Creditor pursuant hereto shall be conclusive and binding
on any successor or assignee of such Subordinate Creditor.
Section 9. Certain Actions Requiring Consent of Required
Subordinate Creditors. Notwithstanding anything contained herein or in
the Shared Security Documents to the contrary, no Subordinate Creditor
shall (a) amend or supplement this Agreement or any of the Shared
Security Documents or grant any consents or waivers with respect
thereto, or release or substitute any Collateral, without the prior
written consent of all Subordinate Creditors. No Subordinate Creditor
will restate, amend or supplement its Creditor Agreement or Note without
the prior written consent of all Subordinate Creditors.
Section 10. Non-Reliance on Collateral Agent and Other
Subordinate Creditors. Each Subordinate Creditor agrees that it has,
independently and without reliance on Collateral Agent or any other
Subordinate Creditor, and based upon such documents and information as
it has deemed appropriate, made its own credit analysis of Future and
the Collateral, and its independent decision to enter into this
Agreement and the Shared Security Documents, and that it will,
independently and without reliance upon Collateral Agent or any other
Subordinate Creditor, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own analysis
and decisions in taking or not taking action under this Agreement and
the Shared Security Documents. Collateral Agent shall not have any
duty, responsibility or liability to provide any Subordinate Creditor
with any credit or other information concerning the affairs, financial
condition or business of Future which may come into the possession of
Collateral Agent; provided, however, Collateral Agent shall promptly
furnish to Subordinate Creditors all information and copies of all
written materials received by Collateral Agent in its capacity as
Collateral Agent under or in connection with the enforcement of this
Agreement or the enforcement of the Shared Security Documents.
Section 11. Liability Among Subordinate Creditors. No
Subordinate Creditor shall incur any implied duty to any other
Subordinate Creditor under this Agreement or any Shared Security
Document, and each Subordinate Creditor shall have absolute and complete
discretion to exercise (or refrain from exercising) its rights hereunder
as it deems appropriate in its sole discretion. It is expressly
understood and agreed that no Subordinate Creditor assumes, and each
Subordinate Creditor hereby releases and exonerates each other
Subordinate Creditor from, any and all responsibilities or liabilities
(whether express or implied) in connection with the realization of the
Collateral, or any loss or depreciation of, or failure to realize upon,
any Collateral, or the failure or delay to collect or receive payment of
any sums owing from Future, or any mistake, omission or error of
judgment in passing upon or accepting any Collateral.
Section 12. Resignation or Removal of Collateral Agent.
(a) Subject to the appointment and acceptance of a successor
Collateral Agent as provided below, Collateral Agent may resign at any
time by giving notice thereof to each Subordinate Creditor, and Required
Subordinate Creditors may remove Collateral Agent at any time by giving
notice thereof to each other Subordinate Creditor and Collateral Agent.
Upon any such resignation or removal, a successor Collateral Agent may
be appointed by Required Subordinate Creditors. If no successor
Collateral Agent shall have been appointed by Required Subordinate
Creditors and shall have accepted such appointment within thirty (30)
days after the retiring Collateral Agent's giving of notice of
resignation, then the retiring Collateral Agent may, on behalf of the
Subordinate Creditors, appoint a successor Collateral Agent.
(b) Upon the acceptance of any appointment as Collateral Agent
hereunder by a successor Collateral Agent, such successor Collateral
Agent shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Collateral Agent, and the
retiring Collateral Agent shall be discharged from its duties and
obligations hereunder, except to the extent provided above for acts or
omissions prior to the resignation or termination. After any retiring
Collateral Agent's resignation or removal hereunder as Collateral Agent,
(i) the provisions of Sections 5 and 6 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it
while it was acting as Collateral Agent, (ii) any Collateral held in
possession of the retiring Collateral Agent shall be delivered to the
successor Collateral Agent, and (iii) the retiring Collateral Agent
shall assign all of its rights as secured party, mortgagee, assignee,
deed of trust beneficiary or other similar position with respect to any
of the Collateral to the successor Collateral Agent for the pro rata
benefit of the Subordinate Creditors.
Section 13. No Partnership. The liability of Collateral Agent
and each of the Subordinate Creditors hereunder shall be several, not
joint or collective. Nothing contained in this Agreement, and no action
taken by Collateral Agent or any Subordinate Creditor pursuant hereto,
is intended to constitute or shall be deemed to constitute a
partnership, association, joint venture or other entity among Collateral
Agent, the Subordinate Creditors or any of them, or render them liable
as partners, joint venturers or principals.
Section 14. Notices. All notices and other communications
provided for in this Agreement shall be given or made by telex,
telecopy, or in writing and telexed, telecopied, mailed by certified
mail return receipt requested, or delivered to the intended recipient at
the "Address for Notices" specified below its name on the signature
pages hereof; or, as to any party at such other address as shall be
designated by such party in a notice to each other party given in
accordance with this Section. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly
given when transmitted by telex or telecopy, subject to telephone
confirmation of receipt, or when personally delivered or, in the case of
a mailed notice, four days after being duly deposited in the mails, in
each case given or addressed as aforesaid.
Section 15. Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the respective successors
and assigns of each of the Subordinate Creditors and Collateral Agent,
but does not otherwise create, and shall not be construed as creating,
any rights or defenses enforceable by Future or by any other Person not
a party to this Agreement.
SECTION 16. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,
WITHOUT GIVING EFFECT TO RULES OF LAW THAT MIGHT REQUIRE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION, AND THE APPLICABLE LAWS OF THE UNITED
STATES OF AMERICA.
Section 17. Severability. Any provision in this Agreement
held by a court of competent jurisdiction to be invalid or unenforceable
shall not impair or invalidate the remainder of this Agreement and the
effect thereof shall be confined to the provision held to be invalid or
illegal.
Section 18. Waivers and Amendments. This Agreement may be
amended, terminated or extended, and the terms and conditions hereof may
be waived, but only in a written instrument signed by each of the
Subordinate Creditors and Collateral Agent or, in the case of a waiver,
by the party waiving compliance. No failure, delay or forbearance on
the part of any party in exercising any right, power or privilege
granted hereunder shall operate as a waiver thereof.
Section 19. Survival. The provisions contained in Sections 5,
6 and 11 hereof shall survive the termination of this Agreement for all
purposes.
Section 20. Headings. The headings, captions and arrangements
used in this Agreement are for convenience only and shall not effect the
interpretation of this Agreement.
Section 21. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument and
agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
ENERGY PLC: ENERGY CAPITAL INVESTMENT COMPANY PLC
By: /s/ D. Martin Phillips
Name: D. Martin Phillips
Director
ENCAP LP AND COLLATERAL AGENT: ENCAP EQUITY 1994 LIMITED PARTNERSHIP
By: ENCAP INVESTMENTS, L.C., General
Partner
By: /s/ D. Martin Phillips
Name: D. Martin Phillips
Managing Director
Address for Notices for Energy PLC,
EnCap LP and Collateral Agent:
c/o EnCap Investments, L.C.
1100 Louisiana, Suite 3150
Houston, Texas 77002
Attn: Managing Director
Telephone: (713) 659-6100
Facsimile: (713) 659-6150
BARGO: BARGO ENERGY COMPANY
By: /s/ Tim J. Goff
Tim J. Goff, President
TJG: TJG INVESTMENTS INC.
By: /s/ Tim J. Goff
Tim J. Goff, President
Address for Notices for Bargo and TJG:
700 Louisiana, Suite 4650
Houston, Texas 77002
Attention: Tim J. Goff
Telephone: (713) 236-9792
Facsimile: (713) 236-9799
The undersigned hereby agrees to pay to the above-described Collateral
Agent, as and when the same become due, all costs and expenses against
which the above-described Subordinate Creditors have provided indemnity
in Section 6(b) of the foregoing Intercreditor and Collateral Agency
Agreement, which payment shall be made prior to the time when such
indemnity would otherwise be required to be paid. The undersigned
further acknowledges and consents to the terms of the foregoing
Intercreditor and Collateral Agency Agreement and agrees to be bound
thereby in all respects, all as of the date first written above.
FUTURE PETROLEUM CORPORATION,
a Utah corporation
By: /s/ Carl Price
B. Carl Price, President
SCHEDULE 1
Shared Security Documents
1. Pledge Agreement dated November 25, 1997 among Future, Future
Petroleum Corporation, a Texas corporation ("Future Texas"), and
Future Energy Corporation, a Nevada corporation ("Future Nevada"),
Energy PLC and EnCap LP, amended by First Amendment to Pledge
Agreement dated May 1, 1998 and Second Amendment to Pledge
Agreement of even date herewith.
2. UCC-1 Financing Statements covering Collateral described in
Pledge Agreement.
3. Amended Registrations of Pledge of even date herewith among
Future Texas and Future Nevada, and:
a) BMC Development No. 1 Limited Partnership ("BMC LP")
b) Future Acquisition 1995, Ltd. ("Future LP")
c) NCI-Shawnee Limited Partnership ("NCI-Shawnee LP")
4. Guaranty dated November 25, 1997 by Future Texas, Future Nevada,
BMC LP and Future LP in favor of Energy PLC and EnCap LP, amended
by First Amendment to Guaranty dated May 1, 1998 and Second
Amendment to Guaranty of even date herewith.
5. Deed of Trust, Mortgage, Assignment, Security Agreement and
Financing Statement dated November 25, 1997 by Future Texas, BMC
LP, and Future LP in favor of Energy PLC and EnCap LP, amended by
First Amendment to Deed of Trust dated May 1, 1998 and Second
Amendment to Deed of Trust of even date herewith.
6. UCC-1 Financing Statements covering Collateral described in
foregoing Deed of Trust.
7. Security Agreement dated November 25, 1997 by Future, Future
Texas, Future Nevada, BMC LP, and Future LP in favor of Energy PLC
and EnCap LP, as amended by First Amendment to Security Agreement
dated May 1, 1998 and Second Amendment to Security Agreement of
even date herewith.
8. UCC-1 Financing Statements covering Collateral described in
foregoing Security Agreement.
9. Guaranty dated May 1, 1998 by NCI-Shawnee Limited Partnership
("NCI-Shawnee LP") in favor of Energy PLC and EnCap LP, as
amended by First Amendment to Guaranty of even date herewith.
10. Deed of Trust, Mortgage, Assignment, Security Agreement and
Financing Statement dated May 1, 1998 by NCI-Shawnee LP in favor
of Energy PLC and EnCap LP, as amended by First Amendment to Deed
of Trust of even date herewith.
11. UCC-1 Financing Statements covering Collateral described in
foregoing Deed of Trust.
12. Security Agreement dated May 1, 1998 by NCI-Shawnee LP in favor
of Energy PLC and EnCap LP, as amended by First Amendment to
Security Agreement of even date herewith.
13. UCC-1 Financing Statements covering Collateral described in
foregoing Security Agreement.
14. Guaranty dated August 14, 1998 by Future Cal-Tex Corporation
("Future Cal-Tex") in favor of Energy PLC and EnCap LP, as amended
by First Amendment to Guaranty of even date herewith.
15. Deed of Trust, Mortgage, Assignment, Security Agreement and
Financing Statement dated May 1, 1998 by Future Cal-Tex in favor
of Energy PLC and EnCap LP, as amended by First Amendment to Deed
of Trust of even date herewith.
16. UCC-1 Financing Statements covering Collateral described in
foregoing Deed of Trust.
17. Security Agreement dated August 14, 1998 by Future Cal-Tex in
favor of Energy PLC and EnCap LP, as amended by First Amendment to
Security Agreement of even date herewith.
18. UCC-1 Financing Statements covering Collateral described in
foregoing Security Agreement.
19. Deed of Trust, Mortgage, Assignment, Security Agreement and
Financing Statement of even date herewith by Future LP in favor of
Energy PLC, EnCap LP, Bargo and TJG.
20. UCC-1 Financing Statements covering Collateral described in
foregoing Deed of Trust.
EXHIBIT 10.11
RENEWAL PROMISSORY NOTE
$2,616,629.16 Houston, Texas October 15, 1998
FOR VALUE RECEIVED, the undersigned, FUTURE PETROLEUM CORPORATION, a Utah
corporation, hereby promises to pay to the order of ENERGY CAPITAL INVESTMENT
COMPANY PLC, an English investment company ("Lender") the principal sum of TWO
MILLION SIX HUNDRED SIXTEEN THOUSAND SIX HUNDRED TWENTY-NINE AND 16 /100 Dollars
($2,616,629.16) with interest on the unpaid balance thereof from the date hereof
until maturity at the rate of ten percent (10%) per annum, both principal and
interest payable as hereinafter provided in lawful money of the United States of
America at 1100 Louisiana, Suite 3150, Houston, Texas 77002, or at such other
place within Harris County, Texas as from time to time may be designated by the
holder of this Note.
All past due principal and/or interest or installments thereof shall bear
interest at the highest rate for which the undersigned may legally contract
under applicable law or, if no such rate is designated under applicable law, at
the rate of eighteen percent (18%) per annum.
Interest only on this Note shall be due and payable quarterly as it
accrues on the last business day of each quarter, beginning December 31, 1998
and continuing regularly thereafter until and including December 31, 2003, on
which date all unpaid principal of and accrued interest on this Note shall be
due and payable. Notwithstanding the foregoing, the undersigned shall have the
option, exercisable with respect to each of the first seven quarterly
installments of interest due hereunder, 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 EnCap Note Agreement, (ii) any such unpaid installment of interest shall not
bear interest at the default rate set forth above and (iii) the amount of any
unpaid installment of interest shall automatically be added to the principal
amount hereof, effective as of the date such unpaid installment of interest was
due hereunder, and shall bear interest at the rate of interest set forth herein.
This Note (a) is executed and delivered in connection with and pursuant to
that certain Note Restructuring Agreement dated August 14, 1998 among the
undersigned, Energy Capital Investment Company PLC and EnCap Equity 1994 Limited
Partnership, as from time to time amended, supplemented or restated (the "EnCap
Note Agreement"), which restated and superseded (i) that certain Purchase and
Sale Agreement dated November 25, 1997 between the undersigned 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 the undersigned and Energy Capital
Investment Company PLC, EnCap Equity 1994 Limited Partnership and NCI
Enterprises, Inc., and is one of the "Notes" as defined therein, (b) is subject
to the terms and provisions thereof, which contains provisions for acceleration
of maturity hereof upon the happening of certain stated events, and (c) is
secured by and entitled to the benefits of certain security documents (as
identified therein). Reference is hereby made to (i) the EnCap Note Agreement
for a description of certain rights, limitations of rights, obligations and
duties of the parties hereto and for the meanings assigned to terms used and not
defined herein, and (ii) the security documents referenced above for a
description of the nature and extent of the security thereby provided and the
rights of the parties thereto.
This Note is in renewal and extension, but not in novation or
extinguishment, of that certain Promissory Note dated May 1, 1998 executed by
the undersigned and payable to the order of Lender in the original principal
amount of $3,370,694.12, which was in renewal, extension and increase, but not
in novation or extinguishment, of that certain Promissory Note dated November
25, 1997 executed by the undersigned and payable to the order of Lender in the
original principal amount of $3,123,041.
The undersigned shall have the right to prepay, without penalty, at any
time and from time to time prior to maturity, all or any part of the unpaid
principal balance of this Note and/or all or any part of the unpaid interest
accrued to the date of such prepayment, provided that any such principal thus
paid is accompanied by accrued interest on such principal. Any partial
prepayments of principal shall be applied to installments thereof in the inverse
order of maturity.
It is the intent of the payee of this Note and the undersigned in the
execution of this Note and all other instruments now or hereafter securing this
Note to contract in strict compliance with applicable usury law. In furtherance
thereof, the said payee and the undersigned stipulate and agree that none of the
terms and provisions contained in this Note, or in any other instrument executed
in connection herewith, shall ever be construed to create a contract to pay for
the use, forbearance or detention of money, interest at a rate in excess of the
maximum interest rate permitted to be charged by applicable law; that neither
the undersigned nor any guarantors, endorsers or other parties now or hereafter
becoming liable for payment of this Note shall ever be obligated or required to
pay interest on this Note at a rate in excess of the maximum interest that may
be lawfully charged under applicable law; and that the provisions of this
paragraph shall control over all other provisions of this Note and any other
instruments now or hereafter executed in connection herewith which may be in
apparent conflict herewith. The holder of this Note expressly disavows any
intention to charge or collect excessive unearned interest or finance charges in
the event the maturity of this Note is accelerated. If the maturity of this
Note shall be accelerated for any reason or if the principal of this Note is
paid prior to the end of the term of this Note, and as a result thereof the
interest received for the actual period of existence of the loan evidenced by
this Note exceeds the applicable maximum lawful rate, the holder of this Note
shall, at its option, either refund to the undersigned the amount of such excess
or credit the amount of such excess against the principal balance of this Note
then outstanding and thereby shall render inapplicable any and all penalties of
any kind provided by applicable law as a result of such excess interest. In the
event that the said payee or any other holder of this Note shall contract for,
charge or receive any amount or amounts and/or any other thing of value which
are determined to constitute interest which would increase the effective
interest rate on this Note to a rate in excess of that permitted to be charged
by applicable law, an amount equal to interest in excess of the lawful rate
shall, upon such determination, at the option of the holder of this Note, be
either immediately returned to the undersigned or credited against the principal
balance of this Note then outstanding, in which event any and all penalties of
any kind under applicable law as a result of such excess interest shall be
inapplicable. By execution of this Note the undersigned acknowledges that it
believes the loan evidenced by this Note to be non-usurious and agrees that if,
at any time, the undersigned should have reason to believe that such loan is in
fact usurious, it will give the holder of this Note notice of such condition and
the undersigned agrees that said holder shall have ninety (90) days in which to
make appropriate refund or other adjustment in order to correct such condition
if in fact such exists. The term "applicable law" as used in this Note shall
mean the laws of the State of Texas or the laws of the United States, whichever
laws allow the greater rate of interest, as such laws now exist or may be
changed or amended or come into effect in the future.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity or through any bankruptcy, receivership, probate
or other court proceedings or if this Note is placed in the hands of attorneys
for collection after default, the undersigned and all endorsers, guarantors and
sureties of this Note jointly and severally agree to pay to the holder of this
Note in addition to the principal and interest due and payable hereon all the
costs and expenses of said holder in enforcing this Note including, without
limitation, reasonable attorneys' fees and legal expenses.
The undersigned and all endorsers, guarantors and sureties of this Note
and all other persons liable or to become liable on this Note severally waive
presentment for payment, demand, notice of demand and of dishonor and nonpayment
of this Note, notice of intention to accelerate the maturity of this Note,
protest and notice of protest, diligence in collecting, and the bringing of suit
against any other party, and agree to all renewals, extensions, modifications,
partial payments, releases or substitutions of security, in whole or in part,
with or without notice, before or after maturity.
THIS NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER SHALL BE
GOVERNED FOR ALL PURPOSES BY THE LAW OF THE STATE OF TEXAS AND THE LAW OF THE
UNITED STATES APPLICABLE TO TRANSACTIONS WITHIN SUCH STATE.
FUTURE PETROLEUM CORPORATION,
a Utah corporation
By: /s/ Carl Price
B. Carl Price, President
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.
EXHIBIT 10.12
RENEWAL PROMISSORY NOTE
$2,883,370.84 Houston, Texas October 15, 1998
FOR VALUE RECEIVED, the undersigned, FUTURE PETROLEUM CORPORATION, a Utah
corporation, hereby promises to pay to the order of ENCAP EQUITY 1994 LIMITED
PARTNERSHIP, a Texas limited partnership ("Lender") the principal sum of TWO
MILLION EIGHT HUNDRED EIGHTY-THREE THOUSAND THREE HUNDRED SEVENTY AND 84/100
Dollars ($2,883,370.84) with interest on the unpaid balance thereof from the
date hereof until maturity at the rate of ten percent (10%) per annum, both
principal and interest payable as hereinafter provided in lawful money of the
United States of America at 1100 Louisiana, Suite 3150, Houston, Texas 77002, or
at such other place within Harris County, Texas as from time to time may be
designated by the holder of this Note.
All past due principal and/or interest or installments thereof shall bear
interest at the highest rate for which the undersigned may legally contract
under applicable law or, if no such rate is designated under applicable law, at
the rate of eighteen percent (18%) per annum.
Interest only on this Note shall be due and payable quarterly as it
accrues on the last business day of each quarter, beginning December 31, 1998
and continuing regularly thereafter until and including December 31, 2003, on
which date all unpaid principal of and accrued interest on this Note shall be
due and payable. Notwithstanding the foregoing, the undersigned shall have the
option, exercisable with respect to each of the first seven quarterly
installments of interest due hereunder, 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 EnCap Note Agreement, (ii) any such unpaid installment of interest shall not
bear interest at the default rate set forth above and (iii) the amount of any
unpaid installment of interest shall automatically be added to the principal
amount hereof, effective as of the date such unpaid installment of interest was
due hereunder, and shall bear interest at the rate of interest set forth herein.
This Note (a) is executed and delivered in connection with and pursuant to
that certain Note Restructuring Agreement dated August 14, 1998 among the
undersigned, Energy Capital Investment Company PLC and EnCap Equity 1994 Limited
Partnership, as from time to time amended, supplemented or restated (the "EnCap
Note Agreement"), which restated and superseded (i) that certain Purchase and
Sale Agreement dated November 25, 1997 between the undersigned 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 the undersigned and Energy Capital
Investment Company PLC, EnCap Equity 1994 Limited Partnership and NCI
Enterprises, Inc., and is one of the "Notes" as defined therein, (b)is subject
to the terms and provisions thereof, which contains provisions for acceleration
of maturity hereof upon the happening of certain stated events, and (c) is
secured by and entitled to the benefits of certain security documents (as
identified therein). Reference is hereby made to (i) the EnCap Note Agreement
for a description of certain rights, limitations of rights, obligations and
duties of the parties hereto and for the meanings assigned to terms used and not
defined herein, and (ii) the security documents referenced above for a
description of the nature and extent of the security thereby provided and the
rights of the parties thereto.
This Note is in renewal and extension, but not in novation or
extinguishment, of that certain Promissory Note dated May 1, 1998 executed by
the undersigned and payable to the order of Lender in the original principal
amount of $3,714,305.88, which was in renewal, extension and increase, but not
in novation or extinguishment, of that certain Promissory Note dated November
25, 1997 executed by the undersigned and payable to the order of Lender in the
original principal amount of $3,301,959.
The undersigned shall have the right to prepay, without penalty, at any
time and from time to time prior to maturity, all or any part of the unpaid
principal balance of this Note and/or all or any part of the unpaid interest
accrued to the date of such prepayment, provided that any such principal thus
paid is accompanied by accrued interest on such principal. Any partial
prepayments of principal shall be applied to installments thereof in the inverse
order of maturity.
It is the intent of the payee of this Note and the undersigned in the
execution of this Note and all other instruments now or hereafter securing this
Note to contract in strict compliance with applicable usury law. In furtherance
thereof, the said payee and the undersigned stipulate and agree that none of the
terms and provisions contained in this Note, or in any other instrument executed
in connection herewith, shall ever be construed to create a contract to pay for
the use, forbearance or detention of money, interest at a rate in excess of the
maximum interest rate permitted to be charged by applicable law; that neither
the undersigned nor any guarantors, endorsers or other parties now or hereafter
becoming liable for payment of this Note shall ever be obligated or required to
pay interest on this Note at a rate in excess of the maximum interest that may
be lawfully charged under applicable law; and that the provisions of this
paragraph shall control over all other provisions of this Note and any other
instruments now or hereafter executed in connection herewith which may be in
apparent conflict herewith. The holder of this Note expressly disavows any
intention to charge or collect excessive unearned interest or finance charges in
the event the maturity of this Note is accelerated. If the maturity of this
Note shall be accelerated for any reason or if the principal of this Note is
paid prior to the end of the term of this Note, and as a result thereof the
interest received for the actual period of existence of the loan evidenced by
this Note exceeds the applicable maximum lawful rate, the holder of this Note
shall, at its option, either refund to the undersigned the amount of such excess
or credit the amount of such excess against the principal balance of this Note
then outstanding and thereby shall render inapplicable any and all penalties of
any kind provided by applicable law as a result of such excess interest. In the
event that the said payee or any other holder of this Note shall contract for,
charge or receive any amount or amounts and/or any other thing of value which
are determined to constitute interest which would increase the effective
interest rate on this Note to a rate in excess of that permitted to be charged
by applicable law, an amount equal to interest in excess of the lawful rate
shall, upon such determination, at the option of the holder of this Note, be
either immediately returned to the undersigned or credited against the principal
balance of this Note then outstanding, in which event any and all penalties of
any kind under applicable law as a result of such excess interest shall be
inapplicable. By execution of this Note the undersigned acknowledges that it
believes the loan evidenced by this Note to be non-usurious and agrees that if,
at any time, the undersigned should have reason to believe that such loan is in
fact usurious, it will give the holder of this Note notice of such condition and
the undersigned agrees that said holder shall have ninety (90) days in which to
make appropriate refund or other adjustment in order to correct such condition
if in fact such exists. The term "applicable law" as used in this Note shall
mean the laws of the State of Texas or the laws of the United States, whichever
laws allow the greater rate of interest, as such laws now exist or may be
changed or amended or come into effect in the future.
Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity or through any bankruptcy, receivership, probate
or other court proceedings or if this Note is placed in the hands of attorneys
for collection after default, the undersigned and all endorsers, guarantors and
sureties of this Note jointly and severally agree to pay to the holder of this
Note in addition to the principal and interest due and payable hereon all the
costs and expenses of said holder in enforcing this Note including, without
limitation, reasonable attorneys' fees and legal expenses.
The undersigned and all endorsers, guarantors and sureties of this Note
and all other persons liable or to become liable on this Note severally waive
presentment for payment, demand, notice of demand and of dishonor and nonpayment
of this Note, notice of intention to accelerate the maturity of this Note,
protest and notice of protest, diligence in collecting, and the bringing of suit
against any other party, and agree to all renewals, extensions, modifications,
partial payments, releases or substitutions of security, in whole or in part,
with or without notice, before or after maturity.
THIS NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER SHALL BE
GOVERNED FOR ALL PURPOSES BY THE LAW OF THE STATE OF TEXAS AND THE LAW OF THE
UNITED STATES APPLICABLE TO TRANSACTIONS WITHIN SUCH STATE.
FUTURE PETROLEUM CORPORATION,
a Utah corporation
By: /s/ Carl Price
B. Carl Price, President
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.
EXHIBIT 10.13
SECOND AMENDMENT TO PLEDGE AGREEMENT
THIS SECOND AMENDMENT TO PLEDGE AGREEMENT (this "Amendment") is made as
of October 15, 1998 by each of the undersigned (each individually a "Pledgor"
and collectively, "Pledgors"), in favor of Energy Capital Investment Company
PLC, an English investment company ("Energy PLC"), EnCap Equity 1994 Limited
Partnership, a Texas limited partnership ("EnCap LP"), Bargo Energy Company, a
Texas general partnership ("Bargo") and TJG Investments Inc., a Texas
corporation ("TJG"; Energy PLC, EnCap LP, Bargo and TJG, collectively,
"Secured Party").
RECITALS:
A. Energy PLC and EnCap LP have heretofore extended credit to Future
Petroleum Corporation, a Utah corporation ("Buyer") pursuant to that certain
Note Restructuring Agreement dated August 14, 1998 among Buyer, Energy PLC and
EnCap LP (as from time to time amended, supplemented or restated, the "EnCap
Note Agreement"), as evidenced by (i) that certain Renewal Promissory Note of
even date herewith made by Buyer and payable to the order of Energy PLC in the
original principal amount of $2,616,629.16, which renewed and extended the
indebtedness described therein (such promissory note, 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 "Energy PLC Note")
and (ii) that certain Renewal Promissory Note of even date herewith made by
Buyer and payable to the order of EnCap LP in the original principal amount of
$2,883,370.84, which renewed and extended the indebtedness described therein
(such promissory note, 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 "EnCap LP Note").
B. Pledgors entered into that certain Pledge Agreement dated as of
November 25, 1997, as amended by a First Amendment to Pledge Agreement dated
May 1, 1998 (as amended, the "Original Agreement") in favor of Energy PLC and
EnCap LP, pursuant to which Pledgors granted to Energy PLC and EnCap LP a
security interest in the Collateral as defined therein to secure the
indebtedness of Buyer under the EnCap Note Agreement, the Energy PLC Note and
the EnCap Note.
C. Bargo and TJG are contemporaneously herewith extending credit to
Buyer pursuant to that certain Purchase and Sale Agreement of even date
herewith among Buyer, Bargo and TJG (as from time to time amended,
supplemented or restated, the "Bargo/TJG Purchase Agreement"), as evidenced by
(i) that certain Promissory Note of even date herewith made by Buyer and
payable to the order of Bargo in the original principal amount of $3,397,600
(such promissory note, 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 "Bargo Note") and (ii) that certain Promissory Note
of even date herewith made by Buyer and payable to the order of TJG in the
original principal amount of $602,400 (such promissory note, 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 "TJG
Note"; the Energy PLC Note, the EnCap Note, the Bargo Note and the TJG Note,
collectively, the "Notes").
D. Pledgors and Secured Party desire to amend the Original Agreement
as expressly set forth herein.
NOW, THEREFORE, in consideration of the premises, of the benefits which
will inure to Pledgors 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 Notes, Pledgors hereby
agree with Secured Party as follows:
ARTICLE I - Definitions and References
1.1 Terms Defined in the Original Agreement. Unless the context
otherwise requires or unless otherwise expressly defined herein, the terms
defined in the Original Agreement shall have the same meanings whenever used
in this Amendment.
1.2 Other Defined Terms. Unless the context otherwise requires,
the following terms when used in this Amendment shall have the meanings
assigned to them in this 1.2.
"Amendment" means this Second Amendment to Pledge Agreement.
"Pledge Agreement" means the Original Agreement, as amended by
this Second Amendment to Pledge Agreement.
ARTICLE II - Amendments
2.1 Issuers. The definition of "Issuer" in the Original Agreement
is hereby amended to include Future Cal-Tex Corporation, a Texas corporation,
as an Issuer.
2.2 Notes. The definition of "Notes" in the Original Agreement is
hereby amended to include (a) those certain Renewal Promissory Notes of even
date herewith made by Buyer and payable to the order of Energy PLC in the
original principal amount of $2,616,629.16 and EnCap LP in the original
principal amount of $2,883,370.84, given in renewal and extension, but not
novation or extinguishment, of the Notes as defined in the Original Agreement,
and (b) those certain Promissory Notes of even date herewith made by Buyer and
payable to the order of Bargo in the original principal amount of $3,397,600
and TJG in the original principal amount of $602,400, in each case as from
time to time amended, and all promissory notes given in substitution, renewal
or extension therefor or as from time to time amended, and all promissory
notes given in substitution, renewal or extension therefor or thereof, in
whole or in part.
2.3 Purchase Agreement. The definition of "Purchase Agreement" in
the Original Agreement is hereby amended to include the EnCap Note Agreement
and the Bargo/TJG Purchase Agreement, as such documents are amended,
supplemented or restated.
2.4 Exhibit A. Exhibit A to the Original Agreement is hereby
amended in its entirety to read as set forth in Exhibit A attached hereto.
2.5 Grant and Re-Grant of Security Interest. As collateral
security for all of the Secured Obligations, each Pledgor hereby pledges and
assigns, and re-pledges and re-assigns, to Secured Party and grants and re-
grants to Secured Party a continuing security interest, for the benefit of
Secured Party, in and to all right, title and interest of each Pledgor in and
to any and all of the Collateral, whether now owned or existing or hereafter
acquired or arising and regardless of where located.
ARTICLE III -- Miscellaneous
3.1. Ratification of Agreement. The Original Agreement as hereby
amended is hereby ratified and confirmed in all respects. Any reference to
the Pledge Agreement in any Note Document shall be deemed to refer to this
Amendment also, and any reference in any Note Document to any other document
or instrument amended, renewed, extended or otherwise affected by this
Amendment shall also refer to this Amendment. The execution, delivery and
effectiveness of this Amendment shall not operate as a waiver of any right,
power or remedy of Secured Party under the Pledge Agreement or any other Note
Document nor constitute a waiver of any provision of the Pledge Agreement or
any other Note Document.
3.2. Survival of Agreements. Pledgors hereby represent and
warrant that all representations and warranties contained in the Original
Agreement are true and correct as of the date hereof. All representations,
warranties, covenants and agreements of Pledgors herein shall survive the
execution and delivery of this Amendment and the performance hereof, including
without limitation the extension of credit pursuant to the EnCap Note
Agreement and the Bargo/TJG Purchase Agreement, and shall further survive
until all of the Secured Obligations are paid in full. All statements and
agreements contained in any certificate or instrument delivered by Pledgors
hereunder or under the Pledge Agreement to Secured Party shall be deemed to
constitute representations and warranties by, or agreements and covenants of,
Pledgors under this Amendment and under the Pledge Agreement.
3.3. Documents. This Amendment is a Note Document, and all
provisions in the Pledge Agreement pertaining to Note Documents apply hereto.
3.4. Counterparts. This Amendment may be separately executed in
counterparts and by the different parties hereto in separate counterparts,
each of which when so executed shall be deemed to constitute one and the same
Amendment.
IN WITNESS WHEREOF, each Pledgor has caused this Agreement to be
executed and delivered this Agreement by its officer thereunto duly
authorized, as of the date first above written.
FUTURE PETROLEUM CORPORATION
a Utah corporation
By: /s/ Carl Price
B. Carl Price, President
FUTURE ENERGY CORPORATION
a Nevada corporation
By: /s/ Carl Price
B. Carl Price, President
FUTURE PETROLEUM CORPORATION
a Texas corporation
By: /s/ Carl Price
B. Carl Price, President
Address of Pledgors:
2351 West Northwest Highway
Dallas, Texas 75220
Attention: Carl Price
Telecopy: 214-350-8382
AGREED TO AND ACKNOWLEDGED:
ENERGY CAPITAL INVESTMENT COMPANY PLC
By: /s/ D. Martin Phillips
Name: D. Martin Phillips
Director
ENCAP EQUITY 1994 LIMITED PARTNERSHIP
By: ENCAP INVESTMENTS, L.C., General Partner
By: /s/ D. Martin Phillips
Name: D. Martin Phillips
Managing Director
Address of Energy PLC and EnCap LP:
c/o EnCap Investments, L.C.
1100 Louisiana, Suite 3150
Houston, Texas 77002
Attn: Managing Director
Telephone: (713) 659-6100
Facsimile: (713) 659-6150
BARGO ENERGY COMPANY
By: /s/ Tim J. Goff
Tim J. Goff, President
TJG INVESTMENTS INC.
By: /s/ Tim J. Goff
Tim J. Goff, President
Address of Bargo and TJG:
700 Louisiana, Suite 4650
Houston, Texas 77002
Attention: Tim J. Goff
Telephone: (713) 236-9792
Facsimile: (713) 236-9799
EXHIBIT A
Description of Initial Pledged Stock
Pledgor Issuer Cert. No. No. of Shares
- ---------------- --------------------- --------- -------------
Future Petroleum Future Energy 1 1,000
Corporation, Corporation, common
a Utah corporation a Nevada corporation
Future Petroleum Future Petroleum 1 1,000
Corporation, Corporation, common
a Utah corporation a Texas corporation
Future Petroleum Future Cal-Tex 1 1,000
Corporation, Corporation, common
a Utah corporation a Texas corporation
Description of Initial Partnership Rights
Pledgor Issuer Interest
- -------------------- --------------------------- -------------------
Future Energy BMC Development No. 1 99% limited
Corporation, Limited Partnership partnership interest
a Nevada corporation a Texas limited partnership
Future Energy Future Acquisition 1995, Ltd. 99% limited
Corporation, a Texas limited partnership interest
a Nevada corporation partnership
Future Energy NCI-Shawnee Limited 99% limited
Corporation, Partnership partnership interest
a Nevada corporation a Texas limited partnership
Future Petroleum BMC Development No. 1 1% general
Corporation, Limited Partnership partnership interest
a Texas corporation a Texas limited partnership
Future Petroleum Future Acquisition 1995, Ltd. 1% general
Corporation, a Texas limited partnership partnership interest
a Texas corporation
Future Petroleum NCI-Shawnee Limited Partnership 1% general
Corporation, a Texas limited partnership partnership interest
a Texas corporation
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.
1. The name and address of the Debtor ("Debtor") is:
Future Petroleum Corporation
a Texas corporation
2351 West Northwest Highway
Dallas, Texas 75220
Attention: Carl Price
2. 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
Bargo Energy Company
700 Louisiana, Suite 4650
Houston, Texas 77002
Attention: Tim J. Goff
TJG Investments Inc.
700 Louisiana, Suite 4650
Houston, Texas 77002
Attention: Tim J. Goff
3. This Financing Statement covers the following types or items of
property (collectively, the "Collateral"):
(a) Pledged Shares. All of the following, whether now or hereafter
existing, which are owned by such Debtor or in which such Debtor otherwise has
any rights: the shares of stock described on Exhibit A hereto and all other
shares of stock in Future Energy Corporation, a Nevada corporation Future
Petroleum Corporation, a Texas corporation, and Future Cal-Tex Corporation, a
Texas corporation, which are now or hereafter owned by Debtor, all certificates
representing any such shares, all options and other rights, contractual or
otherwise, at any time existing with respect to such shares, and all dividends,
cash, instruments and other property now or hereafter received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
shares.
(b) Partnership Rights. All of the following (herein collectively called
the "Partnership Rights"), whether now or hereafter existing, which are owned by
Debtor or in which Debtor otherwise has any rights:
(i) all proceeds, interest, profits, and other payments or rights to
payment attributable to Debtor's interests in the Partnerships, and all
distributions, cash, instruments and other property now or hereafter
received, receivable or otherwise made with respect to or in exchange for
any interest of Debtor in any Partnership, including interim distributions,
returns of capital, loan repayments, and payments made in liquidation of
any Partnership, and whether or not the same arise or are payable under any
partnership agreement or certificate forming any Partnership or any other
agreement governing any Partnership or the relations among the partners in
any Partnership (and any and all such partnership agreements, certificates,
and other agreements being herein called the "Partnership Agreements"); and
(ii) all other interests and rights of Debtor in any of the
Partnerships, whether under the Partnership Agreements or otherwise,
including without limitation any right to cause the dissolution of any
Partnership or to appoint or nominate a successor to Debtor as a partner in
any Partnership.
(c) Proceeds. All proceeds of any and all of the foregoing Collateral
and, to the extent not otherwise included, all payments under insurance (whether
or not Secured Party is the loss payee thereof) or under any indemnity, warranty
or guaranty by reason of loss to or otherwise with respect to any 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).
As used above, "Partnership" means each of BMC Development No. 1 Limited
Partnership, Future Acquisition 1995, Ltd., and NCI-Shawnee Limited Partnership,
each a Texas limited partnership, and any successors of any such partnerships.
4. This Financing Statement is presented for filing to the Secretary of
State of Texas.
FUTURE PETROLEUM CORPORATION
A Texas corporation
By: /s/ Carl Price
B. Carl Price, President
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.
1. The name and address of the Debtor ("Debtor") is:
Future Energy Corporation
a Nevada corporation
2351 West Northwest Highway
Dallas, Texas 75220
Attention: Carl Price
2. 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
Bargo Energy Company
700 Louisiana, Suite 4650
Houston, Texas 77002
Attention: Tim J. Goff
TJG Investments Inc.
700 Louisiana, Suite 4650
Houston, Texas 77002
Attention: Tim J. Goff
3. This Financing Statement covers the following types or items of
property (collectively, the "Collateral"):
(a) Pledged Shares. All of the following, whether now or hereafter
existing, which are owned by such Debtor or in which such Debtor otherwise has
any rights: the shares of stock described on Exhibit A hereto and all other
shares of stock in Future Energy Corporation, a Nevada corporation Future
Petroleum Corporation, a Texas corporation, and Future Cal-Tex Corporation, a
Texas corporation, which are now or hereafter owned by Debtor, all certificates
representing any such shares, all options and other rights, contractual or
otherwise, at any time existing with respect to such shares, and all dividends,
cash, instruments and other property now or hereafter received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
shares.
(b) Partnership Rights. All of the following (herein collectively called
the "Partnership Rights"), whether now or hereafter existing, which are owned by
Debtor or in which Debtor otherwise has any rights:
(i) all proceeds, interest, profits, and other payments or rights to
payment attributable to Debtor's interests in the Partnerships, and all
distributions, cash, instruments and other property now or hereafter
received, receivable or otherwise made with respect to or in exchange for
any interest of Debtor in any Partnership, including interim distributions,
returns of capital, loan repayments, and payments made in liquidation of
any Partnership, and whether or not the same arise or are payable under any
partnership agreement or certificate forming any Partnership or any other
agreement governing any Partnership or the relations among the partners in
any Partnership (and any and all such partnership agreements, certificates,
and other agreements being herein called the "Partnership Agreements"); and
(ii) all other interests and rights of Debtor in any of the
Partnerships, whether under the Partnership Agreements or otherwise,
including without limitation any right to cause the dissolution of any
Partnership or to appoint or nominate a successor to Debtor as a partner in
any Partnership.
(c) Proceeds. All proceeds of any and all of the foregoing Collateral
and, to the extent not otherwise included, all payments under insurance (whether
or not Secured Party is the loss payee thereof) or under any indemnity, warranty
or guaranty by reason of loss to or otherwise with respect to any 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).
As used above, "Partnership" means each of BMC Development No. 1 Limited
Partnership, Future Acquisition 1995, Ltd., and NCI-Shawnee Limited Partnership,
each a Texas limited partnership, and any successors of any such partnerships.
4. This Financing Statement is presented for filing to the Secretary of
State of Nevada.
FUTURE ENERGY CORPORATION
A Nevada corporation
By: /s/ Carl Price
B. Carl Price, President
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.
1. The name and address of the Debtor ("Debtor") is:
Future Petroleum Corporation
a Utah corporation
2351 West Northwest Highway
Dallas, Texas 75220
Attention: Carl Price
2. 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
Bargo Energy Company
700 Louisiana, Suite 4650
Houston, Texas 77002
Attention: Tim J. Goff
TJG Investments Inc.
700 Louisiana, Suite 4650
Houston, Texas 77002
Attention: Tim J. Goff
3. This Financing Statement covers the following types or items of
property (collectively, the "Collateral"):
(a) Pledged Shares. All of the following, whether now or hereafter
existing, which are owned by such Debtor or in which such Debtor otherwise has
any rights: the shares of stock described on Exhibit A hereto and all other
shares of stock in Future Energy Corporation, a Nevada corporation Future
Petroleum Corporation, a Texas corporation, and Future Cal-Tex Corporation, a
Texas corporation, which are now or hereafter owned by Debtor, all certificates
representing any such shares, all options and other rights, contractual or
otherwise, at any time existing with respect to such shares, and all dividends,
cash, instruments and other property now or hereafter received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
shares.
(b) Partnership Rights. All of the following (herein collectively called
the "Partnership Rights"), whether now or hereafter existing, which are owned by
Debtor or in which Debtor otherwise has any rights:
(i) all proceeds, interest, profits, and other payments or rights to
payment attributable to Debtor's interests in the Partnerships, and all
distributions, cash, instruments and other property now or hereafter
received, receivable or otherwise made with respect to or in exchange for
any interest of Debtor in any Partnership, including interim distributions,
returns of capital, loan repayments, and payments made in liquidation of
any Partnership, and whether or not the same arise or are payable under any
partnership agreement or certificate forming any Partnership or any other
agreement governing any Partnership or the relations among the partners in
any Partnership (and any and all such partnership agreements, certificates,
and other agreements being herein called the "Partnership Agreements"); and
(ii) all other interests and rights of Debtor in any of the
Partnerships, whether under the Partnership Agreements or otherwise,
including without limitation any right to cause the dissolution of any
Partnership or to appoint or nominate a successor to Debtor as a partner in
any Partnership.
(c) Proceeds. All proceeds of any and all of the foregoing Collateral
and, to the extent not otherwise included, all payments under insurance (whether
or not Secured Party is the loss payee thereof) or under any indemnity, warranty
or guaranty by reason of loss to or otherwise with respect to any 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).
As used above, "Partnership" means each of BMC Development No. 1 Limited
Partnership, Future Acquisition 1995, Ltd., and NCI-Shawnee Limited Partnership,
each a Texas limited partnership, and any successors of any such partnerships.
4. This Financing Statement is presented for filing to the Secretary of
State of Texas.
FUTURE PETROLEUM CORPORATION
A Utah corporation
By: /s/ Carl Price
B. Carl Price, President
FUTURE PETROLEUM CORPORATION.
2351 West Northwest Highway
Dallas, Texas 75220
October 15, 1998
AMENDED REGISTRATION OF PLEDGE OF UNCERTIFICATED SECURITY
BMC Development No. 1 Limited Partnership
Future Acquisition 1995, Ltd.
NCI-Shawnee Limited Partnership
c/o Future Petroleum Corporation, general partner
2351 West Northwest Highway
Dallas, Texas 75220
Attention: Secretary
Ladies and Gentlemen:
The undersigned are the registered owners of the entire general and
limited partnership interest in BMC Development No. 1 Limited Partnership,
Future Acquisition 1995, Ltd., and NCI-Shawnee Limited Partnership, each a
Texas limited partnership (the "Partnerships").
The undersigned have pledged their entire general and limited
partnership interests in the Partnerships registered to the undersigned to
Energy Capital Investment Company PLC, EnCap Equity 1994 Limited Partnership,
Bargo Energy Company and TJG Investments Inc. ("Secured Party"). Please
register this pledge in the partnership records of the Partnerships and upon
such registration, execute this letter in the space below and return an
executed original to the undersigned at the above address and to Secured Party
c/o EnCap Investments L.C., 1100 Louisiana, Suite 3150, Houston, Texas 77002,
Attention: Colin Nisbeth.
This Amended Registration of Pledge supersedes and replaces those
certain Registrations of Pledge dated November 25, 1997 and May 1, 1998 by the
undersigned.
FUTURE ENERGY CORPORATION,
a Nevada corporation
By: /s/ Carl Price
B. Carl Price, President
FUTURE PETROLEUM CORPORATION,
a Texas corporation
By: /s/ Carl Price
B. Carl Price, President
AS OF THIS 15th DAY OF OCTOBER, 1998, the undersigned hereby CONSENTS TO AND
ACKNOWLEDGES the foregoing pledge, and the undersigned did register the
foregoing pledge in its limited partnership records of the Partnership
FUTURE PETROLEUM CORPORATION,
a Texas corporation, general partner of each of the Partnerships
By: /s/ Carl Price
B. Carl Price, President
EXHIBIT 10.14
Future Texas, Future Nevada,
BMC LP, Future LP
SECOND AMENDMENT TO GUARANTY
THIS SECOND AMENDMENT TO GUARANTY (this "Amendment") is made as of
October 15, 1998 by each of the undersigned (each individually a "Guarantor"
and collectively, "Guarantors"), in favor of Energy Capital Investment Company
PLC, an English investment company ("Energy PLC"), EnCap Equity 1994 Limited
Partnership, a Texas limited partnership ("EnCap LP"), Bargo Energy Company, a
Texas general partnership ("Bargo") and TJG Investments Inc., a Texas
corporation ("TJG"; Energy PLC,. EnCap LP, Bargo and TJG, collectively,
"Sellers").
RECITALS:
A. Energy PLC and EnCap LP have heretofore extended credit to Future
Petroleum Corporation, a Utah corporation ("Buyer") pursuant to that certain
Note Restructuring Agreement dated August 14, 1998 among Buyer, Energy PLC and
EnCap LP (as from time to time amended, supplemented or restated, the "EnCap
Note Agreement"), as evidenced by (i) that certain Renewal Promissory Note of
even date herewith made by Buyer and payable to the order of Energy PLC in the
original principal amount of $2,616,629.16, which renewed and extended the
indebtedness described therein (such promissory note, 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 "Energy PLC Note")
and (ii) that certain Renewal Promissory Note of even date herewith made by
Buyer and payable to the order of EnCap LP in the original principal amount of
$2,883,370.84, which renewed and extended the indebtedness described therein
(such promissory note, 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 "EnCap LP Note").
B. Guarantors entered into that certain Guaranty dated as of
November 25, 1997, as amended by a First Amendment to Guaranty dated May 1,
1998 (as amended, the "Original Guaranty") in favor of Energy PLC and EnCap
LP, pursuant to which Guarantors guaranteed the indebtedness of Buyer under
the EnCap Note Agreement, the Energy PLC Note and the EnCap Note.
C. Bargo and TJG are contemporaneously herewith extending credit to
Buyer pursuant to that certain Purchase and Sale Agreement of even date
herewith among Buyer, Bargo and TJG (as from time to time amended,
supplemented or restated, the "Bargo/TJG Purchase Agreement"), as evidenced by
(i) that certain Promissory Note of even date herewith made by Buyer and
payable to the order of Bargo in the original principal amount of $3,397,600
(such promissory note, 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 "Bargo Note") and (ii) that certain Promissory Note
of even date herewith made by Buyer and payable to the order of TJG in the
original principal amount of $602,400 (such promissory note, 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 "TJG
Note"; the Energy PLC Note, the EnCap Note, the Bargo Note and the TJG Note,
collectively, the "Notes").
D. Guarantors and Sellers desire to amend the Original Guaranty as
expressly set forth herein.
NOW, THEREFORE, in consideration of the premises, of the benefits which
will inure to Guarantors 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, Guarantors hereby agree
with Sellers, as follows:
ARTICLE I - Definitions and References
1.1 Terms Defined in the Original Guaranty. Unless the context
otherwise requires or unless otherwise expressly defined herein, the terms
defined in the Original Guaranty shall have the same meanings whenever used in
this Amendment.
1.2 Other Defined Terms. Unless the context otherwise requires,
the following terms when used in this Amendment shall have the meanings
assigned to them in this 1.2.
"Amendment" means this Second Amendment to Guaranty.
"Guaranty" means the Original Guaranty, as amended by this Second
Amendment to Guaranty.
ARTICLE II - Amendments
2.1 Notes. The definition of "Notes" in the Original Guaranty is
hereby amended to include (a) those certain Renewal Promissory Notes of even
date herewith made by Buyer and payable to the order of Energy PLC in the
original principal amount of $2,616,629.16 and EnCap LP in the original
principal amount of $2,883,370.84, given in renewal and extension, but not
novation or extinguishment, of the Notes as defined in the Original Guaranty,
and (b) those certain Promissory Notes of even date herewith made by Buyer and
payable to the order of Bargo in the original principal amount of $3,397,600
and TJG in the original principal amount of $602,400, in each case as from
time to time amended, and all promissory notes given in substitution, renewal
or extension therefor or as from time to time amended, and all promissory
notes given in substitution, renewal or extension therefor or thereof, in
whole or in part.
2.2 Purchase Agreement. The definition of "Purchase Agreement" in
the Original Guaranty is hereby amended to include the EnCap Note Agreement
and the Bargo/TJG Purchase Agreement, as such documents are amended,
supplemented or restated. The definition of "Obligation Documents" in the
Original Guaranty is hereby amended to include the "Amended Security
Documents" as such term is defined in the EnCap Note Agreement and the
"Security Documents" as such term is defined in the Bargo/TJG Purchase
Agreement.
2.3 Guaranty. Each 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:
(a) the Notes, including all principal, all interest thereon and all
other sums payable thereunder; and
(b) All other sums payable under the other Obligation Documents,
whether for principal, interest, fees or otherwise;
all as further set forth in the Guaranty.
ARTICLE III -- Miscellaneous
3.1. Ratification of Guaranty. The Original Guaranty as hereby
amended is hereby ratified and confirmed in all respects. Any reference to
the Guaranty in any Note Document shall be deemed to refer to this Amendment
also, and any reference in any Note Document to any other document or
instrument amended, renewed, extended or otherwise affected by this Amendment
shall also refer to this Amendment. The execution, delivery and effectiveness
of this Amendment shall not operate as a waiver of any right, power or remedy
of Sellers under the Guaranty or any other Note Document nor constitute a
waiver of any provision of the Guaranty or any other Note Document.
3.2. Survival of Agreements. Guarantors hereby represent and
warrant that all representations and warranties contained in the Original
Guaranty are true and correct as of the date hereof. All representations,
warranties, covenants and agreements of Guarantors herein shall survive the
execution and delivery of this Amendment and the performance hereof, including
without limitation the extension of credit pursuant to the EnCap Note
Agreement and the Bargo/TJG Purchase Agreement, and shall further survive
until all of the Obligations are paid in full. All statements and agreements
contained in any certificate or instrument delivered by Guarantors hereunder
or under the Guaranty to Sellers shall be deemed to constitute representations
and warranties by, or agreements and covenants of, Guarantors under this
Amendment and under the Guaranty.
3.3. Documents. This Amendment is a Note Document, and all
provisions in the Guaranty pertaining to Note Documents apply hereto.
3.4. Counterparts. This Amendment may be separately executed in
counterparts and by the different parties hereto in separate counterparts,
each of which when so executed shall be deemed to constitute one and the same
Amendment.
IN WITNESS WHEREOF, each Guarantor has caused this Amendment to be
executed and delivered this Amendment by its officer thereunto duly
authorized, as of the date first above written.
FUTURE ENERGY CORPORATION,
a Nevada corporation
By: /s/ Carl Price
B. Carl Price, President
FUTURE PETROLEUM CORPORATION,
a Texas corporation
By: /s/ Carl Price
B. Carl Price, President
BMC DEVELOPMENT NO. 1 LIMITED PARTNERSHIP,
a Texas limited partnership
FUTURE ACQUISITION 1995, LTD.,
a Texas limited partnership
By: FUTURE PETROLEUM CORPORATION,
a Texas corporation, General Partner
By: /s/ Carl Price
B. Carl Price, President
AGREED TO AND ACKNOWLEDGED:
ENERGY CAPITAL INVESTMENT COMPANY PLC
By: /s/ D. Martin Phillips
Name: D. Martin Phillips
Director
ENCAP EQUITY 1994 LIMITED PARTNERSHIP
By: ENCAP INVESTMENTS, L.C., General Partner
By: /s/ D. Martin Phillips
Name: D. Martin Phillips
Managing Director
BARGO ENERGY COMPANY
By: /s/ Tim J. Goff
Tim J. Goff, President
TJG INVESTMENTS INC.
By: /s/ Tim J. Goff
Tim J. Goff, President
EXHIBIT 10.15
NCI-Shawnee LP
FIRST AMENDMENT TO GUARANTY
THIS FIRST AMENDMENT TO GUARANTY (this "Amendment") is made as of
October 15, 1998 by each of the undersigned (each individually a "Guarantor"
and collectively, "Guarantors"), in favor of Energy Capital Investment Company
PLC, an English investment company ("Energy PLC"), EnCap Equity 1994 Limited
Partnership, a Texas limited partnership ("EnCap LP"), Bargo Energy Company, a
Texas general partnership ("Bargo") and TJG Investments Inc., a Texas
corporation ("TJG"; Energy PLC,. EnCap LP, Bargo and TJG, collectively,
"Sellers").
RECITALS:
A. Energy PLC and EnCap LP have heretofore extended credit to Future
Petroleum Corporation, a Utah corporation ("Buyer") pursuant to that certain
Note Restructuring Agreement dated August 14, 1998 among Buyer, Energy PLC and
EnCap LP (as from time to time amended, supplemented or restated, the "EnCap
Note Agreement"), as evidenced by (i) that certain Renewal Promissory Note of
even date herewith made by Buyer and payable to the order of Energy PLC in the
original principal amount of $2,616,629.16, which renewed and extended the
indebtedness described therein (such promissory note, 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 "Energy PLC Note")
and (ii) that certain Renewal Promissory Note of even date herewith made by
Buyer and payable to the order of EnCap LP in the original principal amount of
$2,883,370.84, which renewed and extended the indebtedness described therein
(such promissory note, 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 "EnCap LP Note").
B. Guarantors entered into that certain Guaranty dated as of May 1,
1998 (the "Original Guaranty") in favor of Energy PLC and EnCap LP, pursuant
to which Guarantors guaranteed the indebtedness of Buyer under the EnCap Note
Agreement, the Energy PLC Note and the EnCap Note.
C. Bargo and TJG are contemporaneously herewith extending credit to
Buyer pursuant to that certain Purchase and Sale Agreement of even date
herewith among Buyer, Bargo and TJG (as from time to time amended,
supplemented or restated, the "Bargo/TJG Purchase Agreement"), as evidenced by
(i) that certain Promissory Note of even date herewith made by Buyer and
payable to the order of Bargo in the original principal amount of $3,397,600
(such promissory note, 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 "Bargo Note" and (ii) that certain Promissory Note
of even date herewith made by Buyer and payable to the order of TJG in the
original principal amount of $602,400 (such promissory note, 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 "TJG
Note"; the Energy PLC Note, the EnCap Note, the Bargo Note and the TJG Note,
collectively, the "Notes").
D. Guarantors and Sellers desire to amend the Original Guaranty as
expressly set forth herein.
NOW, THEREFORE, in consideration of the premises, of the benefits which
will inure to Guarantors 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, Guarantors hereby agree
with Sellers, as follows:
ARTICLE I - Definitions and References
1.1 Terms Defined in the Original Guaranty. Unless the context
otherwise requires or unless otherwise expressly defined herein, the terms
defined in the Original Guaranty shall have the same meanings whenever used in
this Amendment.
1.2 Other Defined Terms. Unless the context otherwise requires,
the following terms when used in this Amendment shall have the meanings
assigned to them in this 1.2.
"Amendment" means this First Amendment to Guaranty.
"Guaranty" means the Original Guaranty, as amended by this First
Amendment to Guaranty.
ARTICLE II - Amendments
2.1 Notes. The definition of "Notes" in the Original Guaranty is
hereby amended to include (a) those certain Renewal Promissory Notes of even
date herewith made by Buyer and payable to the order of Energy PLC in the
original principal amount of $2,616,629.16 and EnCap LP in the original
principal amount of $2,883,370.84, given in renewal and extension, but not
novation or extinguishment, of the Notes as defined in the Original Guaranty,
and (b) those certain Promissory Notes of even date herewith made by Buyer and
payable to the order of Bargo in the original principal amount of $3,397,600
and TJG in the original principal amount of $602,400, in each case as from
time to time amended, and all promissory notes given in substitution, renewal
or extension therefor or as from time to time amended, and all promissory
notes given in substitution, renewal or extension therefor or thereof, in
whole or in part.
2.2 Purchase Agreement. The definition of "Purchase Agreement" in
the Original Guaranty is hereby amended to include the EnCap Note Agreement
and the Bargo/TJG Purchase Agreement, as such documents are amended,
supplemented or restated. The definition of "Obligation Documents" in the
Original Guaranty is hereby amended to include the "Amended Security
Documents" as such term is defined in the EnCap Note Agreement and the
"Security Documents" as such term is defined in the Bargo/TJG Purchase
Agreement.
2.3 Guaranty. Each 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:
(a) the Notes, including all principal, all interest thereon and all
other sums payable thereunder; and
(b) All other sums payable under the other Obligation Documents,
whether for principal, interest, fees or otherwise;
all as further set forth in the Guaranty.
ARTICLE III -- Miscellaneous
3.1. Ratification of Guaranty. The Original Guaranty as hereby
amended is hereby ratified and confirmed in all respects. Any reference to
the Guaranty in any Note Document shall be deemed to refer to this Amendment
also, and any reference in any Note Document to any other document or
instrument amended, renewed, extended or otherwise affected by this Amendment
shall also refer to this Amendment. The execution, delivery and effectiveness
of this Amendment shall not operate as a waiver of any right, power or remedy
of Sellers under the Guaranty or any other Note Document nor constitute a
waiver of any provision of the Guaranty or any other Note Document.
3.2. Survival of Agreements. Guarantors hereby represent and
warrant that all representations and warranties contained in the Original
Guaranty are true and correct as of the date hereof. All representations,
warranties, covenants and agreements of Guarantors herein shall survive the
execution and delivery of this Amendment and the performance hereof, including
without limitation the extension of credit pursuant to the EnCap Note
Agreement and the Bargo/TJG Purchase Agreement, and shall further survive
until all of the Obligations are paid in full. All statements and agreements
contained in any certificate or instrument delivered by Guarantors hereunder
or under the Guaranty to Sellers shall be deemed to constitute representations
and warranties by, or agreements and covenants of, Guarantors under this
Amendment and under the Guaranty.
3.3. Documents. This Amendment is a Note Document, and all
provisions in the Guaranty pertaining to Note Documents apply hereto.
3.4. Counterparts. This Amendment may be separately executed in
counterparts and by the different parties hereto in separate counterparts,
each of which when so executed shall be deemed to constitute one and the same
Amendment.
IN WITNESS WHEREOF, each Guarantor has caused this Amendment to be
executed and delivered this Amendment 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/ Carl Price
B. Carl Price, President
AGREED TO AND ACKNOWLEDGED:
ENERGY CAPITAL INVESTMENT COMPANY PLC
By: /s/ D. Martin Phillips
Name: D. Martin Phillips
Director
ENCAP EQUITY 1994 LIMITED PARTNERSHIP
By: ENCAP INVESTMENTS, L.C., General Partner
By: /s/ D. Martin Phillips
Name: D. Martin Phillips
Managing Director
BARGO ENERGY COMPANY
By: /s/ Tim J. Goff
Tim J. Goff, President
TJG INVESTMENTS INC.
By: /s/ Tim J. Goff
Tim J. Goff, President
EXHIBIT 10.16
NCI-Shawnee LP
FIRST AMENDMENT TO SECURITY AGREEMENT
THIS FIRST AMENDMENT TO SECURITY AGREEMENT (this "Amendment") is made as
of October 15, 1998 by each of the undersigned (each individually a "Debtor"
and collectively, "Debtors"), in favor of Energy Capital Investment Company
PLC, an English investment company ("Energy PLC"), EnCap Equity 1994 Limited
Partnership, a Texas limited partnership ("EnCap LP"), Bargo Energy Company, a
Texas general partnership ("Bargo") and TJG Investments Inc., a Texas
corporation ("TJG"; Energy PLC, EnCap LP, Bargo and TJG , collectively,
"Secured Party").
RECITALS:
A. Energy PLC and EnCap LP have heretofore extended credit to Future
Petroleum Corporation, a Utah corporation ("Buyer") pursuant to that certain
Note Restructuring Agreement dated August 14, 1998 among Buyer, Energy PLC and
EnCap LP (as from time to time amended, supplemented or restated, the "EnCap
Note Agreement"), as evidenced by (i) that certain Renewal Promissory Note of
even date herewith made by Buyer and payable to the order of Energy PLC in the
original principal amount of $2,616,629.16, which renewed and extended the
indebtedness described therein (such promissory note, 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 "Energy PLC Note")
and (ii) that certain Renewal Promissory Note of even date herewith made by
Buyer and payable to the order of EnCap LP in the original principal amount of
$2,883,370.84, which renewed and extended the indebtedness described therein
(such promissory note, 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 "EnCap LP Note").
B. Debtors entered into that certain Security Agreement dated as of
May 1, 1998 (the "Original Agreement") in favor of Energy PLC and EnCap LP,
pursuant to which Debtors granted to Energy PLC and EnCap LP a security
interest in the Collateral as defined therein to secure the indebtedness of
Buyer under the EnCap Note Agreement, the Energy PLC Note and the EnCap Note.
C. Bargo and TJG are contemporaneously herewith extending credit to
Buyer pursuant to that certain Purchase and Sale Agreement of even date
herewith among Buyer, Bargo and TJG (as from time to time amended,
supplemented or restated, the "Bargo/TJG Purchase Agreement"), as evidenced by
(i) that certain Promissory Note of even date herewith made by Buyer and
payable to the order of Bargo in the original principal amount of $3,397,600
(such promissory note, 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 "Bargo Note") and (ii) that certain Promissory Note
of even date herewith made by Buyer and payable to the order of TJG in the
original principal amount of $602,400 (such promissory note, 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 "TJG
Note"; the Energy PLC Note, the EnCap Note, the Bargo Note and the TJG Note,
collectively, the "Notes").
D. Debtors and Secured Party desire to amend the Original Agreement
as expressly set forth herein.
NOW, THEREFORE, in consideration of the premises, of the benefits which
will inure to Debtors from Secured Party's 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 Secured Party to extend credit under the Notes, Debtors hereby
agrees with Secured Party, as follows:
ARTICLE I - Definitions and References
1.1 Terms Defined in the Original Agreement. Unless the context
otherwise requires or unless otherwise expressly defined herein, the terms
defined in the Original Agreement shall have the same meanings whenever used
in this Amendment.
1.2 Other Defined Terms. Unless the context otherwise requires,
the following terms when used in this Amendment shall have the meanings
assigned to them in this 1.2.
"Amendment" means this First Amendment to Security Agreement.
"Security Agreement" means the Original Agreement, as amended by
this First Amendment to Security Agreement.
ARTICLE II - Amendments
2.1 Notes. The definition of "Notes" in the Original Agreement is
hereby amended to include (a) those certain Renewal Promissory Notes of even
date herewith made by Buyer and payable to the order of Energy PLC in the
original principal amount of $2,616,629.16 and EnCap LP in the original
principal amount of $2,883,370.84, given in renewal and extension, but not
novation or extinguishment, of the Notes as defined in the Original Agreement,
and (b) those certain Promissory Notes of even date herewith made by Buyer and
payable to the order of Bargo in the original principal amount of $3,397,600
and TJG in the original principal amount of $602,400, in each case as from
time to time amended, and all promissory notes given in substitution, renewal
or extension therefor or as from time to time amended, and all promissory
notes given in substitution, renewal or extension therefor or thereof, in
whole or in part.
2.2 Purchase Agreement. The definition of "Purchase Agreement" in
the Original Agreement is hereby amended to include the EnCap Note Agreement
and the Bargo/TJG Purchase Agreement.
2.3 Grant and Re-Grant of Security Interest. As collateral
security for all of the Secured Obligations, each Debtor hereby pledges and
assigns, and re-pledges and re-assigns, to Secured Party and grants and re-
grants to Secured Party a continuing security interest, for the benefit of
Secured Party, in and to all right, title and interest of each Debtor in and
to any and all of the Collateral, whether now owned or existing or hereafter
acquired or arising and regardless of where located.
ARTICLE III -- Miscellaneous
3.1. Ratification of Security Agreement. The Original Agreement
as hereby amended is hereby ratified and confirmed in all respects. Any
reference to the Security Agreement in any Note Document shall be deemed to
refer to this Amendment also, and any reference in any Note Document to any
other document or instrument amended, renewed, extended or otherwise affected
by this Amendment shall also refer to this Amendment. The execution, delivery
and effectiveness of this Amendment shall not operate as a waiver of any
right, power or remedy of Secured Party under the Security Agreement or any
other Note Document nor constitute a waiver of any provision of the Security
Agreement or any other Note Document.
3.2. Survival of Agreements. Debtors hereby represent and warrant
that all representations and warranties contained in the Original Agreement
are true and correct as of the date hereof. All representations, warranties,
covenants and agreements of Debtors herein shall survive the execution and
delivery of this Amendment and the performance hereof, including without
limitation the extension of credit pursuant to the EnCap Note Agreement and
the Bargo/TJG Purchase Agreement, and shall further survive until all of the
Obligations are paid in full. All statements and agreements contained in any
certificate or instrument delivered by Debtors hereunder or under the Security
Agreement to Secured Party shall be deemed to constitute representations and
warranties by, or agreements and covenants of, Debtors under this Amendment
and under the Security Agreement.
3.3. Documents. This Amendment is a Note Document, and all
provisions in the Security Agreement pertaining to Note Documents apply
hereto.
3.4. Counterparts. This Amendment may be separately executed in
counterparts and by the different parties hereto in separate counterparts,
each of which when so executed shall be deemed to constitute one and the same
Amendment.
IN WITNESS WHEREOF, each Debtor has caused this Amendment to be executed
and delivered this Amendment 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/ Carl Price
B. Carl Price, President
AGREED TO AND ACKNOWLEDGED:
ENERGY CAPITAL INVESTMENT COMPANY PLC
By: /s/ D. Martin Phillips
Name: D. Martin Phillips
Director
ENCAP EQUITY 1994 LIMITED PARTNERSHIP
By: ENCAP INVESTMENTS, L.C., General Partner
By: /s/ D. Martin Phillips
Name: D. Martin Phillips
Managing Director
BARGO ENERGY COMPANY
By: /s/ Tim J. Goff
Tim J. Goff, President
TJG INVESTMENTS INC.
By: /s/ Tim J. Goff
Tim J. Goff, President
Address of Bargo and TJG:
700 Louisiana, Suite 4650
Houston, Texas 77002
Attention: Tim J. Goff
Telephone: (713) 236-9792
Facsimile: (713) 236-9799
EXHIBIT 10.17
Future Cal-Tex
FIRST AMENDMENT TO GUARANTY
THIS FIRST AMENDMENT TO GUARANTY (this "Amendment") is made as of October
15, 1998 by each of the undersigned (each individually a "Guarantor" and
collectively, "Guarantors"), in favor of Energy Capital Investment Company PLC,
an English investment company ("Energy PLC"), EnCap Equity 1994 Limited
Partnership, a Texas limited partnership ("EnCap LP"), Bargo Energy Company, a
Texas general partnership ("Bargo") and TJG Investments Inc., a Texas
corporation ("TJG"; Energy PLC,. EnCap LP, Bargo and TJG, collectively,
"Sellers").
RECITALS:
A. Energy PLC and EnCap LP have heretofore extended credit to Future
Petroleum Corporation, a Utah corporation ("Buyer") pursuant to that certain
Note Restructuring Agreement dated August 14, 1998 among Buyer, Energy PLC and
EnCap LP (as from time to time amended, supplemented or restated, the "EnCap
Note Agreement"), as evidenced by (i) that certain Renewal Promissory Note of
even date herewith made by Buyer and payable to the order of Energy PLC in the
original principal amount of $2,616,629.16, which renewed and extended the
indebtedness described therein (such promissory note, 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
"Energy PLC Note") and (ii) that certain Renewal Promissory Note of even date
herewith made by Buyer and payable to the order of EnCap LP in the original
principal amount of $2,883,370.84, which renewed and extended the indebtedness
described therein (such promissory note, 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 "EnCap LP Note").
B. Guarantors entered into that certain Guaranty dated as of August 14,
1998 (the "Original Guaranty") in favor of Energy PLC and EnCap LP, pursuant to
which Guarantors guaranteed the indebtedness of Buyer under the
EnCap Note Agreement, the Energy PLC Note and the EnCap Note.
C. Bargo and TJG are contemporaneously herewith extending credit to
Buyer pursuant to that certain Purchase and Sale Agreement of even date herewith
among Buyer, Bargo and TJG (as from time to time amended, supplemented or
restated, the "Bargo/TJG Purchase Agreement"), as evidenced by (i) that certain
Promissory Note of even date herewith made by Buyer and payable to the order of
Bargo in the original principal amount of $3,397,600 (such promissory note, 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
"Bargo Note") and (ii) that certain Promissory Note of even date herewith made
by Buyer and payable to the order of TJG in the original principal amount of
$602,400 (such promissory note, 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 "TJG Note"; the Energy PLC Note, the EnCap Note,
the Bargo Note and the TJG Note, collectively, the "Notes").
D. Guarantors and Sellers desire to amend the Original Guaranty as
expressly set forth herein.
NOW, THEREFORE, in consideration of the premises, of the benefits which
will inure to Guarantors 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, Guarantors hereby agree with
Sellers, as follows:
ARTICLE I - Definitions and References
1.1 Terms Defined in the Original Guaranty. Unless the context
otherwise requires or unless otherwise expressly defined herein, the terms
defined in the Original Guaranty shall have the same meanings whenever used in
this Amendment.
1.2 Other Defined Terms. Unless the context otherwise requires, the
following terms when used in this Amendment shall have the meanings assigned to
them in this 1.2.
"Amendment" means this First Amendment to Guaranty.
"Guaranty" means the Original Guaranty, as amended by this First Amendment
to Guaranty.
ARTICLE II - Amendments
2.1 Notes. The definition of "Notes" in the Original Guaranty is
hereby amended to include (a) those certain Renewal Promissory Note of even date
herewith made by Buyer and payable to the order of Energy PLC in the
original principal amount of $2,616,629.16 and EnCap LP in the original
principal amount of $2,883,370.84, given in renewal and extension, but not
novation or extinguishment, of the Notes as defined in the Original Guaranty,
and (b) those certain Promissory Notes of even date herewith made by Buyer and
payable to the order of Bargo in the original principal amount of $3,397,600 and
TJG in the original principal amount of $602,400, in each case as from time to
time amended, and all promissory notes given in substitution, renewal or
extension therefor or as from time to time amended, and all promissory notes
given in substitution, renewal or extension therefor or thereof, in whole or in
part.
2.2 Purchase Agreement. The definition of "Purchase Agreement" in the
Original Guaranty is hereby amended to include the EnCap Note Agreement and the
Bargo/TJG Purchase Agreement, as such documents are amended, supplemented or
restated. The definition of "Obligation Documents" in the Original Guaranty is
hereby amended to include the "Amended Security Documents" as such term is
defined in the EnCap Note Agreement and the "Security Documents" as such term is
defined in the Bargo/TJG Purchase Agreement.
2.3 Guaranty. Each 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:
(a) the Notes, including all principal, all interest thereon and all
other sums payable thereunder; and
(b) All other sums payable under the other Obligation Documents,
whether for principal, interest, fees or otherwise;
all as further set forth in the Guaranty.
ARTICLE III -- Miscellaneous
3.1. Ratification of Guaranty. The Original Guaranty as hereby amended
is hereby ratified and confirmed in all respects. Any reference to the Guaranty
in any Note Document shall be deemed to refer to this Amendment also,
and any reference in any Note Document to any other document or instrument
amended, renewed, extended or otherwise affected by this Amendment shall also
refer to this Amendment. The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of Sellers
under the Guaranty or any other Note Document nor constitute a waiver of any
provision of the Guaranty or any other Note Document.
3.2. Survival of Agreements. Guarantors hereby represent and warrant
that all representations and warranties contained in the Original Guaranty are
true and correct as of the date hereof. All representations, warranties,
covenants and agreements of Guarantors herein shall survive the execution and
delivery of this Amendment and the performance hereof, including without
limitation the extension of credit pursuant to the EnCap Note Agreement and the
Bargo/TJG Purchase Agreement, and shall further survive until all of the
Obligations are paid in full. All statements and agreements contained in any
certificate or instrument delivered by Guarantors hereunder or under the
Guaranty to Sellers shall be deemed to constitute representations and warranties
by, or agreements and covenants of, Guarantors under this Amendment and under
the Guaranty.
3.3. Documents. This Amendment is a Note Document, and all provisions
in the Guaranty pertaining to Note Documents apply hereto.
3.4. Counterparts. This Amendment may be separately executed in
counterparts and by the different parties hereto in separate counterparts, each
of which when so executed shall be deemed to constitute one and the same
Amendment.
IN WITNESS WHEREOF, each Guarantor has caused this Amendment to be executed
and delivered this Amendment by its officer thereunto duly authorized, as of the
date first above written.
FUTURE CAL-TEX CORPORATION,
a Texas corporation
By: /s/ Carl Price
B. Carl Price, President
AGREED TO AND ACKNOWLEDGED:
ENERGY CAPITAL INVESTMENT COMPANY PLC
By: /s/ D. Martin Phillips
Name: D. Martin Phillips
ENCAP EQUITY 1994 LIMITED PARTNERSHIP
By: ENCAP INVESTMENTS, L.C., General Partner
By: /s/ D. Martin Phillips
Name: D. Martin Phillips
Managing Director
BARGO ENERGY COMPANY
By: /s/ Tim J. Goff
Tim J. Goff, President
TJG INVESTMENTS INC.
By: /s/ Tim J. Goff
Tim J. Goff, President
EXHIBIT 10.18
Future Cal-Tex
FIRST AMENDMENT TO SECURITY AGREEMENT
THIS FIRST AMENDMENT TO SECURITY AGREEMENT (this "Amendment") is
made as of October 15, 1998 by each of the undersigned (each
individually a "Debtor" and collectively, "Debtors"), in favor of Energy
Capital Investment Company PLC, an English investment company ("Energy
PLC"), EnCap Equity 1994 Limited Partnership, a Texas limited
partnership ("EnCap LP"), Bargo Energy Company, a Texas general
partnership ("Bargo") and TJG Investments Inc., a Texas corporation
("TJG"; Energy PLC, EnCap LP, Bargo and TJG, collectively, "Secured
Party").
RECITALS:
A. Energy PLC and EnCap LP have heretofore extended credit to
Future Petroleum Corporation, a Utah corporation ("Buyer") pursuant to
that certain Note Restructuring Agreement dated August 14, 1998 among
Buyer, Energy PLC and EnCap LP (as from time to time amended,
supplemented or restated, the "EnCap Note Agreement"), as evidenced by
(i) that certain Renewal Promissory Note of even date herewith made by
Buyer and payable to the order of Energy PLC in the original principal
amount of $2,616,629.16, which renewed and extended the indebtedness
described therein (such promissory note, 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 "Energy PLC
Note") and (ii) that certain Renewal Promissory Note of even date
herewith made by Buyer and payable to the order of EnCap LP in the
original principal amount of $2,883,370.84, which renewed and extended
the indebtedness described therein (such promissory note, 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
"EnCap LP Note").
B. Debtors entered into that certain Security Agreement dated
as of August 14, 1998 (the "Original Agreement") in favor of Energy PLC
and EnCap LP, pursuant to which Debtors granted to Energy PLC and EnCap
LP a security interest in the Collateral as defined therein to secure
the indebtedness of Buyer under the EnCap Note Agreement, the Energy PLC
Note and the EnCap Note.
C. Bargo and TJG are contemporaneously herewith extending
credit to Buyer pursuant to that certain Purchase and Sale Agreement of
even date herewith among Buyer, Bargo and TJG (as from time to time
amended, supplemented or restated, the "Bargo/TJG Purchase Agreement"),
as evidenced by (i) that certain Promissory Note of even date herewith
made by Buyer and payable to the order of Bargo in the original
principal amount of $3,397,600 (such promissory note, 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
"Bargo Note") and (ii) that certain Promissory Note of even date
herewith made by Buyer and payable to the order of TJG in the original
principal amount of $602,400 (such promissory note, 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
"TJG Note"; the Energy PLC Note, the EnCap Note, the Bargo Note and the
TJG Note, collectively, the "Notes").
D. Debtors and Secured Party desire to amend the Original
Agreement as expressly set forth herein.
NOW, THEREFORE, in consideration of the premises, of the benefits
which will inure to Debtors from Secured Party's 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 Secured Party to extend credit
under the Notes, Debtors hereby agrees with Secured Party, as follows:
ARTICLE I - Definitions and References
1.1 Terms Defined in the Original Agreement. Unless the
context otherwise requires or unless otherwise expressly defined herein,
the terms defined in the Original Agreement shall have the same meanings
whenever used in this Amendment.
1.2 Other Defined Terms. Unless the context otherwise
requires, the following terms when used in this Amendment shall have the
meanings assigned to them in this 1.2.
"Amendment" means this First Amendment to Security Agreement.
"Security Agreement" means the Original Agreement, as amended
by this First Amendment to Security Agreement.
ARTICLE II - Amendments
2.1 Notes. The definition of "Notes" in the Original
Agreement is hereby amended to include (a) those certain Renewal
Promissory Notes of even date herewith made by Buyer and payable to the
order of Energy PLC in the original principal amount of $2,616,629.16
and EnCap LP in the original principal amount of $2,883,370.84, given in
renewal and extension, but not novation or extinguishment, of the Notes
as defined in the Original Agreement, and (b) those certain Promissory
Notes of even date herewith made by Buyer and payable to the order of
Bargo in the original principal amount of $3,397,600 and TJG in the
original principal amount of $602,400, in each case as from time to time
amended, and all promissory notes given in substitution, renewal or
extension therefor or as from time to time amended, and all promissory
notes given in substitution, renewal or extension therefor or thereof,
in whole or in part.
2.2 Purchase Agreement. The definition of "Purchase
Agreement" in the Original Agreement is hereby amended to include the
EnCap Note Agreement and the Bargo/TJG Purchase Agreement.
2.3 Grant and Re-Grant of Security Interest. As collateral
security for all of the Secured Obligations, each Debtor hereby pledges
and assigns, and re-pledges and re-assigns, to Secured Party and grants
and re-grants to Secured Party a continuing security interest, for the
benefit of Secured Party, in and to all right, title and interest of
each Debtor in and to any and all of the Collateral, whether now owned
or existing or hereafter acquired or arising and regardless of where
located.
ARTICLE III -- Miscellaneous
3.1. Ratification of Security Agreement. The Original
Agreement as hereby amended is hereby ratified and confirmed in all
respects. Any reference to the Security Agreement in any Note Document
shall be deemed to refer to this Amendment also, and any reference in
any Note Document to any other document or instrument amended, renewed,
extended or otherwise affected by this Amendment shall also refer to
this Amendment. The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of
Secured Party under the Security Agreement or any other Note Document
nor constitute a waiver of any provision of the Security Agreement or
any other Note Document.
3.2. Survival of Agreements. Debtors hereby represent and
warrant that all representations and warranties contained in the
Original Agreement are true and correct as of the date hereof. All
representations, warranties, covenants and agreements of Debtors herein
shall survive the execution and delivery of this Amendment and the
performance hereof, including without limitation the extension of credit
pursuant to the EnCap Note Agreement and the Bargo/TJG Purchase
Agreement, and shall further survive until all of the Obligations are
paid in full. All statements and agreements contained in any
certificate or instrument delivered by Debtors hereunder or under the
Security Agreement to Secured Party shall be deemed to constitute
representations and warranties by, or agreements and covenants of,
Debtors under this Amendment and under the Security Agreement.
3.3. Documents. This Amendment is a Note Document, and all
provisions in the Security Agreement pertaining to Note Documents apply
hereto.
3.4. Counterparts. This Amendment may be separately
executed in counterparts and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to
constitute one and the same Amendment.
IN WITNESS WHEREOF, each Debtor has caused this Amendment to be
executed and delivered this Amendment by its officer thereunto duly
authorized, as of the date first above written.
FUTURE CAL-TEX CORPORATION,
a Texas corporation
By: /s/ Carl Price
B. Carl Price, President
AGREED TO AND ACKNOWLEDGED:
ENERGY CAPITAL INVESTMENT COMPANY PLC
By: /s/ D. Martin Phillips
Name: D. Martin Phillips
Director
ENCAP EQUITY 1994 LIMITED PARTNERSHIP
By: ENCAP INVESTMENTS, L.C., General Partner
By: /s/ D. Martin Phillips
Name: D. Martin Phillips
BARGO ENERGY COMPANY
By: /s/ Tim J. Goff
Tim J. Goff, President
TJG INVESTMENTS INC.
By: /s/ Tim J. Goff
Tim J. Goff, President
Address of Bargo and TJG:
700 Louisiana, Suite 4650
Houston, Texas 77002
Attention: Tim J. Goff
Telephone: (713) 236-9792
Facsimile: (713) 236-9799
EXHIBIT 10.19
Future, Future Texas,
Future Nevada, BMC LP, Future LP
SECOND AMENDMENT TO SECURITY AGREEMENT
THIS SECOND AMENDMENT TO SECURITY AGREEMENT (this "Amendment") is made
as of October 15, 1998 by each of the undersigned (each individually a
"Debtor" and collectively, "Debtors"), in favor of Energy Capital Investment
Company PLC, an English investment company ("Energy PLC"), EnCap Equity 1994
Limited Partnership, a Texas limited partnership ("EnCap LP"), Bargo Energy
Company, a Texas general partnership ("Bargo") and TJG Investments Inc., a
Texas corporation ("TJG"; Energy PLC, EnCap LP, Bargo and TJG, collectively,
"Secured Party").
RECITALS:
A. Energy PLC and EnCap LP have heretofore extended credit to Future
Petroleum Corporation, a Utah corporation ("Buyer") pursuant to that certain
Note Restructuring Agreement dated August 14, 1998 among Buyer, Energy PLC and
EnCap LP (as from time to time amended, supplemented or restated, the "EnCap
Note Agreement"), as evidenced by (i) that certain Renewal Promissory Note of
even date herewith made by Buyer and payable to the order of Energy PLC in the
original principal amount of $2,616,629.16, which renewed and extended the
indebtedness described therein (such promissory note, 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 "Energy PLC Note")
and (ii) that certain Renewal Promissory Note of even date herewith made by
Buyer and payable to the order of EnCap LP in the original principal amount of
$2,883,370.84, which renewed and extended the indebtedness described therein
(such promissory note, 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 "EnCap LP Note").
B. Debtors entered into that certain Security Agreement dated as of
November 25, 1997, as amended by a First Amendment to Security Agreement dated
May 1, 1998 (as amended, the "Original Agreement") in favor of Energy PLC and
EnCap LP, pursuant to which Debtors granted to Energy PLC and EnCap LP a
security interest in the Collateral as defined therein to secure the
indebtedness of Buyer under the EnCap Note Agreement, the Energy PLC Note and
the EnCap Note.
C. Bargo and TJG are contemporaneously herewith extending credit to
Buyer pursuant to that certain Purchase and Sale Agreement of even date
herewith among Buyer, Bargo and TJG (as from time to time amended,
supplemented or restated, the "Bargo/TJG Purchase Agreement"), as evidenced by
(i) that certain Promissory Note of even date herewith made by Buyer and
payable to the order of Bargo in the original principal amount of $3,397,600
(such promissory note, 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 "Bargo Note") and (ii) that certain Promissory Note
of even date herewith made by Buyer and payable to the order of TJG in the
original principal amount of $602,400 (such promissory note, 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 "TJG
Note"; the Energy PLC Note, the EnCap Note, the Bargo Note and the TJG Note,
collectively, the "Notes").
D. Debtors and Secured Party desire to amend the Original Agreement
as expressly set forth herein.
NOW, THEREFORE, in consideration of the premises, of the benefits which
will inure to Debtors from Secured Party's 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 Secured Party to extend credit under the Notes, Debtors hereby
agrees with Secured Party, as follows:
ARTICLE I - Definitions and References
1.1 Terms Defined in the Original Agreement. Unless the context
otherwise requires or unless otherwise expressly defined herein, the terms
defined in the Original Agreement shall have the same meanings whenever used
in this Amendment.
1.2 Other Defined Terms. Unless the context otherwise requires, the
following terms when used in this Amendment shall have the meanings assigned
to them in this 1.2.
"Amendment" means this Second Amendment to Security Agreement.
"Security Agreement" means the Original Agreement, as amended by
this Second Amendment to Security Agreement.
ARTICLE II - Amendments
2.1 Notes. The definition of "Notes" in the Original Agreement is
hereby amended to include (a) those certain Renewal Promissory Notes of even
date herewith made by Buyer and payable to the order of Energy PLC in the
original principal amount of $2,616,629.16 and EnCap LP in the original
principal amount of $2,883,370.84, given in renewal and extension, but not
novation or extinguishment, of the Notes as defined in the Original Agreement,
and (b) those certain Promissory Notes of even date herewith made by Buyer and
payable to the order of Bargo in the original principal amount of $3,397,600
and TJG in the original principal amount of $602,400, in each case as from
time to time amended, and all promissory notes given in substitution, renewal
or extension therefor or as from time to time amended, and all promissory
notes given in substitution, renewal or extension therefor or thereof, in
whole or in part.
2.2 Purchase Agreement. The definition of "Purchase Agreement" in the
Original Agreement is hereby amended to include the EnCap Note Agreement and
the Bargo/TJG Purchase Agreement.
2.3 Grant and Re-Grant of Security Interest. As collateral security
for all of the Secured Obligations, each Debtor hereby pledges and assigns,
and re-pledges and re-assigns, to Secured Party and grants and re-grants to
Secured Party a continuing security interest, for the benefit of Secured
Party, in and to all right, title and interest of each Debtor in and to any
and all of the Collateral, whether now owned or existing or hereafter acquired
or arising and regardless of where located.
ARTICLE III -- Miscellaneous
3.1. Ratification of Security Agreement. The Original Agreement as
hereby amended is hereby ratified and confirmed in all respects. Any
reference to the Security Agreement in any Note Document shall be deemed to
refer to this Amendment also, and any reference in any Note Document to any
other document or instrument amended, renewed, extended or otherwise affected
by this Amendment shall also refer to this Amendment. The execution, delivery
and effectiveness of this Amendment shall not operate as a waiver of any
right, power or remedy of Secured Party under the Security Agreement or any
other Note Document nor constitute a waiver of any provision of the Security
Agreement or any other Note Document.
3.2. Survival of Agreements. Debtors hereby represent and warrant that
all representations and warranties contained in the Original Agreement are
true and correct as of the date hereof. All representations, warranties,
covenants and agreements of Debtors herein shall survive the execution and
delivery of this Amendment and the performance hereof, including without
limitation the extension of credit pursuant to the EnCap Note Agreement and
the Bargo/TJG Purchase Agreement, and shall further survive until all of the
Obligations are paid in full. All statements and agreements contained in any
certificate or instrument delivered by Debtors hereunder or under the Security
Agreement to Secured Party shall be deemed to constitute representations and
warranties by, or agreements and covenants of, Debtors under this Amendment
and under the Security Agreement.
3.3. Documents. This Amendment is a Note Document, and all provisions
in the Security Agreement pertaining to Note Documents apply hereto.
3.4. Counterparts. This Amendment may be separately executed in
counterparts and by the different parties hereto in separate counterparts,
each of which when so executed shall be deemed to constitute one and the same
Amendment.
IN WITNESS WHEREOF, each Debtor has caused this Amendment to be executed
and delivered this Amendment by its officer thereunto duly authorized, as of
the date first above written.
FUTURE PETROLEUM CORPORATION,
a Utah corporation
By: /s/ Carl Price
B. Carl Price, President
FUTURE ENERGY CORPORATION,
a Nevada corporation
By: /s/ Carl Price
B. Carl Price, President
FUTURE PETROLEUM CORPORATION,
a Texas corporation
By: /s/ Carl Price
B. Carl Price, President
BMC DEVELOPMENT NO. 1 LIMITED PARTNERSHIP,
a Texas limited partnership
FUTURE ACQUISITION 1995, LTD.,
a Texas limited partnership
By: Future Petroleum Corporation,
a Texas corporation, General Partner
By: /s/ Carl Price
B. Carl Price, President
AGREED TO AND ACKNOWLEDGED:
ENERGY CAPITAL INVESTMENT COMPANY PLC
By: /s/ D. Martin Phillips
Name: D. Martin Phillips
Director
ENCAP EQUITY 1994 LIMITED PARTNERSHIP
By: ENCAP INVESTMENTS, L.C., General Partner
By: /s/ D. Martin Phillips
Name: D. Martin Phillips
Managing Director
BARGO ENERGY COMPANY
By: /s/ Tim J. Goff
Tim J. Goff, President
TJG INVESTMENTS INC.
By: /s/ Tim J. Goff
Tim J. Goff, President
Address of Bargo and TJG:
700 Louisiana, Suite 4650
Houston, Texas 77002
Attention: Tim J. Goff
Telephone: (713) 236-9792
Facsimile: (713) 236-9799
