<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13D/A
(Amendment No. 1)
Under the Securities Exchange Act of 1934*
Future Petroleum Corporation
(Name of Issuer)
Common Stock, par value $.01 per share
(Title of Class of Securities)
390 916 100
(CUSIP Number)
Gary R. Petersen
EnCap Investments L.C.
1100 Louisiana, Suite 3150
Houston, Texas 77002
(713) 659-6100
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
August 14, 1998
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of ss.ss. 240.13d-1(e), 240.13d-1(f) or 204.13d-1(g), check the
following box. [ ]
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See ss. 240.13d-7(b) for other
parties to whom copies are to be sent.
*The remainder of the cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE> 2
CUSIP NO. 390 916 100 SCHEDULE 13D
<TABLE>
<S> <C> <C> <C>
(1) Names of Reporting Persons I.R.S. Identification Nos. of Above Persons
ENERGY CAPITAL INVESTMENT COMPANY PLC
- -----------------------------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ]
(b) [ ]
- -----------------------------------------------------------------------------------------------------
(3) SEC Use Only
- -----------------------------------------------------------------------------------------------------
(4) Source of Funds (See Instructions) OO (SEE ITEM 3)
- -----------------------------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [ ]
- -----------------------------------------------------------------------------------------------------
(6) Citizenship or Place of Organization ENERGY CAPITAL INVESTMENT COMPANY
PLC IS A COMPANY FORMED UNDER THE
LAWS OF THE COUNTRY OF ENGLAND
- -----------------------------------------------------------------------------------------------------
Number of (7) Sole Voting Power 0
Shares Bene- ------------------------------------------------------------------------
ficially
Owned by (8) Shared Voting Power 2,269,886(1)
Each ------------------------------------------------------------------------
Reporting
Person With (9) Sole Dispositive Power 0
------------------------------------------------------------------------
(10) Shared Dispositive Power 2,269,886(1)
- -----------------------------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
2,269,886(2)
- -----------------------------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ](2)
- -----------------------------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11) 16.6%(3)
- -----------------------------------------------------------------------------------------------------
(14) Type of Reporting Person (See Instructions) PN
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) Voting and dispositive power is shared among Energy PLC and EnCap
Investments (defined in Item 2).
(2) Energy PLC disclaims any beneficial ownership of EnCap LP's (defined in Item
2) shares and only claims beneficial ownership of the above-mentioned
2,269,886 shares. Please see Item 5.
(3) Based on 13,696,733 shares issued and outstanding as of August 14, 1998 as
reported in the Form 10-QSB of the Issuer for the quarter ended June 30,
1998.
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CUSIP NO. 390 916 100 SCHEDULE 13D
<TABLE>
<S> <C> <C> <C>
(1) Names of Reporting Persons I.R.S. Identification Nos. of Above Persons
ENCAP INVESTMENTS L.C.
- -----------------------------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ]
(b) [ ]
- -----------------------------------------------------------------------------------------------------
(3) SEC Use Only
- -----------------------------------------------------------------------------------------------------
(4) Source of Funds (See Instructions) OO (SEE ITEM 3)
- -----------------------------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [ ]
- -----------------------------------------------------------------------------------------------------
(6) Citizenship or Place of Organization ENCAP INVESTMENTS L.C. IS A LIMITED
LIABILITY COMPANY ORGANIZED UNDER THE
LAWS OF THE STATE OF TEXAS
- -----------------------------------------------------------------------------------------------------
Number of (7) Sole Voting Power 0
Shares Bene- ------------------------------------------------------------------------
ficially
Owned by (8) Shared Voting Power 4,694,859(1)
Each ------------------------------------------------------------------------
Reporting
Person With (9) Sole Dispositive Power 0
----------------------------------------------------------------------
(10) Shared Dispositive Power 4,694,859(1)
- -----------------------------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person 4,694,859(2)
- -----------------------------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ](2)
- -----------------------------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11) 34.3%(3)
- -----------------------------------------------------------------------------------------------------
(14) Type of Reporting Person (See Instructions) OO
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) Voting and dispositive power is shared among Energy PLC and EnCap
Investments, and EnCap LP and EnCap Investments respectively (defined in
Item 2).
(2) EnCap Investments disclaims any beneficial ownership of EnCap LP's or Energy
PLC's (defined in Item 2) shares.
(3) Based on 13,696,733 shares issued and outstanding as of August 14, 1998 as
reported in the Form 10-QSB of the Issuer for the quarter ended June 30,
1998.
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CUSIP NO. 390 916 100
SCHEDULE 13D
<TABLE>
<S> <C> <C> <C>
(1) Names of Reporting Persons I.R.S. Identification Nos. of Above Persons
ENCAP EQUITY 1994 LIMITED PARTNERSHIP
- -----------------------------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ]
(b) [ ]
- -----------------------------------------------------------------------------------------------------
(3) SEC Use Only
- -----------------------------------------------------------------------------------------------------
(4) Source of Funds (See Instructions) OO (SEE ITEM 3)
- -----------------------------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [ ]
- -----------------------------------------------------------------------------------------------------
(6) Citizenship or Place of Organization ENCAP EQUITY 1994 LIMITED PARTNERSHIP IS
A LIMITED PARTNERSHIP ORGANIZED UNDER THE
LAWS OF THE STATE OF TEXAS
- -----------------------------------------------------------------------------------------------------
Number of (7) Sole Voting Power 0
Shares Bene- ------------------------------------------------------------------------
ficially
Owned by (8) Shared Voting Power 2,424,973(1)
Each ------------------------------------------------------------------------
Reporting
Person With (9) Sole Dispositive Power 0
----------------------------------------------------------------------
(10) Shared Dispositive Power 2,424,973(1)
- -----------------------------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
2,424,973(2)
- -----------------------------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ](2)
- -----------------------------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
17.7%(3)
- -----------------------------------------------------------------------------------------------------
(14) Type of Reporting Person (See Instructions) PN
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) Voting and dispositive power is shared among EnCap LP and EnCap Investments
(defined in Item 2).
(2) EnCap LP disclaims any beneficial ownership of Energy PLC's (defined in Item
2) shares and only claims beneficial ownership of the above-mentioned
2,424,973 shares. Please see Item 5.
(3) Based on 13,696,733 shares issued and outstanding as of August 14, 1998 as
reported in the Form 10-QSB of the Issuer for the quarter ended June 30,
1998.
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ITEM 1. SECURITY AND ISSUER.
No modification.
ITEM 2. IDENTITY AND BACKGROUND.
No modification.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Item 3 has been amended and restated in its entirety as follows:
DECEMBER 13, 1995 TRANSACTION. Future Petroleum Corporation, a Texas
corporation and a wholly-owned subsidiary of Issuer ("SUB"), EnCap LP and Energy
PLC entered into an Agreement of Limited Partnership dated as of December 13,
1995 (the "ORIGINAL AGREEMENT"), establishing Future Acquisition 1995, Ltd., a
Texas limited partnership ("FUTURE LP"). Sub is the sole general partner of
Future LP. EnCap LP and Energy PLC are limited partners of Future LP.
Under the terms of the Original Agreement, (i) Sub contributed properties
to Future LP, (ii) EnCap LP contributed $785,120 to Future LP, which funds were
used by Future LP to acquire oil and gas properties and pay organizational costs
and (iii) Energy PLC contributed $471,536 to Future LP, which funds were used by
Future LP to acquire oil and gas properties and pay organizational costs. EnCap
LP and Energy PLC also agreed, subject to certain limitations contained in the
Original Agreement, to fund certain development costs with respect to Future
LP's oil and gas properties; the Original Agreement contemplates that such
amounts would not exceed $243,660 (EnCap LP) and $146,340 (Energy PLC),
respectively.
As additional consideration for the agreement of EnCap LP and Energy PLC
to enter into the Original Agreement and provide the funds contemplated
thereunder, Issuer issued the following warrants to acquire Common Stock as
follows:
Stock Purchase Warrant No. 1004 issued to EnCap LP and entitling
EnCap LP to acquire 156,192 shares of Common Stock; and
Stock Purchase Warrant No. 1003 issued to Energy PLC and entitling
Energy PLC to acquire 93,808 shares of Common Stock.
APRIL 18, 1996 TRANSACTION. Sub, EnCap LP and Energy PLC entered into a
letter amendment to the Original Agreement dated April 18, 1996 (the "LETTER
AMENDMENT"). Under the terms of the Letter Amendment, (i) EnCap LP agreed to
make additional capital contributions to Future LP in the following amounts and
for the following purposes: $42,453 to pay for organizational cost overruns,
$13,433 to provide funds for working capital and $49,783 to pay for drilling and
completion cost overruns; and (ii) Energy PLC agreed to make additional capital
contributions to Future LP in the following amounts and for the following
purposes: $25,497 to pay for organizational cost overruns, $8,067 to provide
funds for working capital and $29,899 to pay for drilling and completion cost
overruns. Issuer joined in the execution of the Letter Amendment and, pursuant
thereto and in consideration of EnCap LP's and Energy PLC's agreement to make
additional capital contributions to Future LP, agreed to issue additional
warrants to acquire Common Stock as follows:
Stock Purchase Warrant No. 1006 issued to EnCap LP and entitling
EnCap LP to acquire 23,429 shares of Common Stock; and
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Stock Purchase Warrant No. 1005 issued to Energy PLC and entitling
Energy PLC to acquire 14,071 shares of Common Stock.
JANUARY 29, 1997 TRANSACTION. Sub, EnCap LP and Energy PLC further amended
the Original Agreement by entering into a First Amended and Restated Agreement
of Limited Partnership of Future LP dated as of January 29, 1997 (the "AMENDED
AND RESTATED AGREEMENT"). Under the terms of the Amended and Restated Agreement,
each of EnCap LP and Energy PLC made additional capital contributions to Future
LP in the amount of $1,171,500, which capital contributions were used by Future
LP to acquire additional oil and gas properties.
As additional consideration for the agreement of EnCap LP and Energy PLC
to enter into the Amended and Restated Agreement and provide Future LP the
additional funds described above, Issuer issued Common Stock as follows:
100,000 shares of Common Stock issued to EnCap LP; and
100,000 shares of Common Stock issued to Energy PLC.
In connection therewith, Issuer, EnCap LP and Energy PLC entered into that
certain Agreement of Issuer dated as of January 29, 1997, whereunder (among
other things) (i) Issuer granted to EnCap LP and Energy PLC piggyback
registration rights with respect to the Warrant Shares (i.e., the shares
issuable upon exercise of the above referenced Stock Purchase Warrants) and the
shares of Common Stock referenced above. EnCap and Energy PLC agreed not to sell
any shares of the Common Stock referenced above for a specified period of time
preceding and after a public offering by Issuer of Common Stock.
APRIL 28, 1997 TRANSACTION. Sub, EnCap LP and Energy PLC amended the
Amended and Restated Agreement by entering into an April 1997 Amendment to First
Amended and Restated Agreement of Partnership of Future LP dated as of April 28,
1997 (the "APRIL 1997 AMENDMENT"). Under the terms of the April 1997 Amendment,
the Limited Partners agreed to make additional capital contributions to Future
LP in the aggregate amount not to exceed $493,400, of which an amount not to
exceed $350,000 could be used by Future LP to make distributions to Sub and
Issuer for the purpose of effecting a public offering of securities by Issuer
and for other general corporate purposes. The Issuer, Sub, Future LP, Energy PLC
and EnCap LP also entered into an agreement dated April 28, 1997 (the "APRIL
1997 AGREEMENT"). Under the terms of the April 1997 Agreement, Issuer issued
12,500 shares of Common Stock to each of EnCap LP and Energy PLC and agreed
under certain circumstances to issue an additional 100,000 shares of Common
Stock to each of EnCap LP and Energy PLC. On November 25, 1997, however, in
connection with the consummation of the November 25, 1997 transaction (see
below), each of Energy PLC and EnCap LP waived their rights to receive the
100,000 shares of Common Stock of the Issuer referenced in the April 1997
Agreement. Issuer granted to EnCap LP and Energy PLC piggyback registration
rights with respect to the shares of Common Stock issued pursuant to the April
1997 Agreement.
NOVEMBER 25, 1997 TRANSACTION. Issuer, Energy PLC, EnCap LP and Gecko
Booty 1994 I Limited Partnership entered into that certain Purchase and Sale
Agreement dated November 25, 1997 (the "NOVEMBER 1997 PURCHASE AGREEMENT").
Pursuant to the November 1997 Purchase Agreement, Energy PLC and EnCap LP sold
limited partnership interests in BMC Development No. 1 Limited Partnership and
Future LP to the Issuer, and in return Energy PLC received, in addition to a
promissory note, 765,547 shares of Common Stock covered by this Schedule 13D and
EnCap LP received, in addition to a promissory note, 809,453 shares of Common
Stock covered by this Schedule 13D. Pursuant to a Registration Rights Agreement
dated as of November 29, 1997 (the "1997 REGISTRATION RIGHTS AGREEMENT"), by and
among Issuer, EnCap LP and Energy PLC, Issuer granted to EnCap LP and Energy
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<PAGE> 7
PLC certain demand and piggyback registration rights with respect to the shares
of Common Stock issued pursuant to the November 1997 Purchase Agreement. As
additional consideration, Energy PLC and EnCap LP delivered to the Issuer for
cancellation stock warrants entitling them to purchase 107,879 and 179,621
shares, respectively of Common Stock.
MAY 1, 1998 TRANSACTION. Issuer, EnCap LP, Energy PLC and NCI Enterprises,
Inc. entered into that certain Purchase and Sale Agreement dated as of May 1,
1998 (the "MAY 1998 PURCHASE AGREEMENT"). Pursuant to the May 1998 Purchase
Agreement, EnCap LP and Energy PLC sold limited partnership interests in
NCI-Shawnee Limited Partnership to the Issuer, and in return Energy PLC
received, in addition to a promissory note, 18,762 shares of Common Stock
covered by this Schedule 13D and EnCap LP received, in addition to a promissory
note, 31,238 shares of Common Stock covered by this Schedule 13D. Pursuant to an
Amendment No. 1 to Registration Rights Agreement dated as of May 1, 1998, by and
among Issuer, EnCap LP and Energy PLC, the parties amended the 1997 Registration
Rights Agreement to extend demand and piggyback registration rights with respect
to the shares of Common Stock issued pursuant to the May 1998 Purchase
Agreement.
AUGUST 14, 1998 TRANSACTION. On August 14, 1998, the Issuer acquired
certain oil and gas properties located in Kern County, California (the
"PROPERTIES") from a subsidiary of Bargo Energy Resources, Ltd, a Texas limited
partnership ("BARGO"), pursuant to that certain Agreement and Plan of Merger
dated August 14, 1998 (the "MERGER AGREEMENT"), by and among the Issuer, Future
CAL-TEX Corporation, a Texas corporation and a wholly-owned subsidiary of the
Issuer ("FUTURE SUB"), Bargo and SCL-CAL Company, a Texas corporation and a
wholly-owned subsidiary of Bargo ("BARGO SUB"). Under the Merger Agreement,
Bargo Sub was merged with and into Future Sub, with Future Sub being the
surviving entity. As a result of the merger, Future Sub assumed certain
liabilities of Bargo Sub, including $5,800,000 in indebtedness and other
obligations of Bargo Sub, and issued to Bargo (i) 4,694,859 shares of Common
Stock, and (ii) a warrant to purchase 250,000 shares of Common Stock.
Contemporaneously with consummating the merger under the Merger Agreement,
the Issuer also entered into a $20,000,000 senior secured credit facility with a
commercial bank (the "SENIOR CREDIT FACILITY"). To facilitate the Issuer
obtaining the Senior Credit Facility, Energy PLC and EnCap LP agreed to
subordinate and restructure certain indebtedness owed by the Issuer to them (the
"ENCAP DEBT"). To effect such agreement, (i) Energy PLC and EnCap LP entered
into that certain Master Subordination Agreement dated August 14, 1998 (the
"MASTER SUBORDINATION AGREEMENT"), with the lender under the Senior Credit
Facility and (ii) the Issuer, Energy PLC and EnCap LP entered into that certain
Note Restructuring Agreement dated August 14, 1998 (the "NOTE RESTRUCTURING
AGREEMENT"). Under the Note Restructuring Agreement and in consideration of
Energy PLC's and EnCap LP's agreement to subordinate the EnCap Debt to the
Senior Credit Facility and to restructure the EnCap Debt, the Issuer issued
1,373,077 shares of Common Stock to Energy PLC and 1,471,782 shares of Common
Stock to EnCap LP. Pursuant to pledge agreements regarding such Senior Credit
Facility, each of which is dated August 14, 1998 (the "PLEDGE AGREEMENTS"),
Bargo, EnCap LP, Energy PLC and the Price Group (as defined below) have pledged
their shares of Common Stock to secure the Issuer's borrowings under the Senior
Credit Facility. If an event of default occurs under the Senior Credit Facility,
the lender will have the right to vote all of the shares of Common Stock of the
Issuer subject to the Pledge Agreements, and following foreclosure on the Common
Stock, will have the right to sell the Common Stock as provided in the Pledge
Agreement and applicable law.
Contemporaneously with the execution of the Merger Agreement, the Issuer,
Energy PLC and EnCap LP also entered into that certain Registration Rights
Agreement (the "REGISTRATION RIGHTS AGREEMENT") dated August 14, 1998. Under the
Registration Rights Agreement, Energy PLC and EnCap LP are accorded (i) after
August 14, 1998, two demand registration rights, and (ii) unlimited piggyback
registration rights. The Registration Rights Agreement specifically supersedes
(A) the 1997 Registration
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<PAGE> 8
Rights Agreement, as amended, and (B) the registration rights accorded Energy
PLC and EnCap LP under the April 1997 Agreement, it being agreed that the
agreements described in (A) and (B) above are now terminated and of no force and
effect.
Contemporaneously with the Merger Agreement, the Issuer, Carl Price, Don
Wm. Reynolds, Energy PLC, EnCap LP and Bargo executed and delivered that certain
Shareholders' Agreement dated August 14, 1998 (the "SHAREHOLDERS' AGREEMENT").
Under the Shareholders' Agreement, it was agreed that the Board of Directors of
the Issuer would be composed of seven members and that the Price Group (as
defined below) would have three nominees to the Issuer's Board of Directors, the
Bargo Group (as defined below) would have two nominees to the Issuer's Board of
Directors and the EnCap Group (as defined below) would have two nominees to the
Issuer's Board of Directors. Under the Shareholders' Agreement, each of the
above shareholder groups has agreed to vote for the director nominees of the
other shareholder groups. Further, the parties to the Shareholders' Agreement
have agreed that one of the nominees of Bargo will be the Chairman of the Board
of Directors of the Issuer. As used above, "PRICE GROUP" shall mean Messrs.
Price and Reynolds, "BARGO GROUP" shall mean Bargo and "ENCAP GROUP" shall mean
Energy PLC and EnCap LP. Also under the Shareholders' Agreement, each of the
above shareholders grants to the other shareholders both "tag along rights" and
a "right of first offer." The right of first offer provides that any party to
the Shareholders' Agreement proposing to sell shares of Common Stock pursuant to
a bona fide offer must first offer the shares to the other shareholders at the
price at which such Common Stock is proposed to be sold; provided, however, that
the right of first refusal shall not apply to (i) sales of Common Stock pursuant
to Rule 144, (ii) pursuant to a registration statement filed with the Securities
and Exchange Commission or (iii) by a shareholder to its equity owners
(collectively, the "EXEMPT TRANSFERS"). The tag along rights provide that any
party to the Shareholders' Agreement proposing to sell shares of Common Stock
pursuant to a bona fide offer must, if requested by the other shareholders,
cause the purchase, for the same purchase price and on the same terms, of a
proportionate number of shares of Common Stock owned by such other shareholders;
provided, however, that such tag along rights shall not apply to Exempt
Transfers. The Shareholders' Agreement specifically supersedes that certain
Voting Agreement dated November 25, 1997, by and among Carl Price, Don Wm.
Reynolds, Energy PLC and EnCap LP.
The provisions of the Shareholders' Agreement relating to voting and
transfer of Common Stock may be deemed to form a group composed of the parties
to the Shareholders' Agreement.
Pursuant to the terms of an Agreement, dated August 14, 1998, Carl Price,
EnCap LP, Energy PLC and Bargo have agreed to amend ("BY LAW AMENDMENTS") the
By-Laws of the Issuer to provide that, for so long as Bargo is entitled to
nominate one or more persons to the Board of Directors of the Issuer as provided
in the Shareholders' Agreement, without the approval of one of the directors
nominated by Bargo, the Issuer cannot take certain actions, including, without
limitation, (i) incur or be liable for indebtedness other than indebtedness
under the Issuer's credit facility with a commercial bank, obligations under
operating leases entered into in the ordinary course of the Issuer's business,
and purchase money indebtedness in an aggregate principal amount not to exceed
$200,000 at any time; (ii) merge or consolidate with or into any other business
entity; (iii) sell, transfer, lease, exchange, alienate or dispose of certain
assets; (iv) 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); or (v) engage in any material
transaction with any of its affiliates on terms which are less favorable to it
than those which would have bigger obtainable at the time in arms-length dealing
with persons other than such affiliates.
ITEM 4. PURPOSE OF TRANSACTION.
Item 4 has been amended and restated in its entirety as follows:
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EnCap LP and Energy PLC hold a substantial ownership position in the
Issuer in order to be able to influence the business and management of the
Issuer. EnCap LP and Energy PLC, through their collective nominees on the Board
of Directors, intend to actively participate in the business and management of
the Issuer. Pursuant to the Merger Agreement, four of seven directors of the
Issuer were designated by Bargo, EnCap LP and Energy PLC, thereby effecting a
change in control of the Issuer.
The parties to the Shareholders' Agreement, voting together as provided in
such agreement, have the ability to control the Issuer with respect to the
election of directors. Pursuant to the Note Restructuring Agreement, EnCap LP
and Energy PLC have the right to approve certain transactions. Pursuant to the
Bylaw Amendments, the Bargo nominees to the Board of Directors have the right to
approve certain transactions.
Energy PLC and EnCap LP intended to monitor and evaluate their investment
in the Issuer in light of pertinent factors, including oil and gas prices,
market conditions, the Issuer's performance and prospects, the trading prices of
the Common Stock, conditions in the oil and gas industry and general economic
conditions. Energy PLC and EnCap LP may make additional purchases of Common
Stock in the future through market transactions or otherwise, maintain their
current investment or dispose of some or all of the Common Stock.
Except as set forth above, the reporting persons have no present plans or
proposals that relate to or that would result in any of the actions specified in
clauses (a) though (j) of Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
Item 5 has been amended and restated in its entirety as follows:
(a) The following describes the number of shares of Common Stock and
Warrants and the percent of outstanding Common Stock owned by the reporting
persons and the parties to the Shareholders' Agreement. All percentages are
based on 13,696,733 shares issued and outstanding as of August 14, 1998
(subsequent to the transactions described herein) as reported in the Form 10-QSB
of the Issuer for the quarter ended June 30, 1998. Amounts beneficially owned by
parties to the Shareholders' Agreement are based on representations and
warranties made by such persons in the Shareholders' Agreement.
<TABLE>
<CAPTION>
Derivative Total Shares Beneficially
Shares Outstanding Securities Owned
----------------- ---------- -------------------------
Name Number % Number %(2)
- ----------------- --------- ----- --------- ----
<S> <C> <C> <C> <C> <C>
Bargo ........... 4,694,859 34.3 250,000 4,944,859 35.5
EnCap PLC ....... 2,269,886 16.6 -- 2,269,886 16.6
EnCap LP. ....... 2,424,973 17.7 -- 2,424,973 17.7
EnCap Investments 4,694,859 34.3 -- 4,694,859 34.3
Mr. Price ....... 1,089,149 8.0 633,508(1) 1,722,657 12.0
Mr. Reynolds .... 753,362 5.5 -- 753,362 5.5
</TABLE>
- ----------
(1) Includes 587,200 shares of Common Stock that may be acquired
pursuant to employee stock options which may be exercised
immediately. Also includes 45,788 shares of Common Stock, the
maximum number of shares which Mr. Price has the right to acquire
during the 60 days following August 14, 1998 under an employment
agreement with the Issuer.
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(2) In accordance with SEC regulations under Section 13(d) of the
Exchange Act, the percent shown in this column for each shareholder
represents the number of shares of Common Stock owned by the
shareholder plus the derivative securities owned by such shareholder
divided by the number of shares outstanding plus the number of
derivative securities owned by such shareholder.
(b) Energy PLC. Pursuant to the Investment Agreement (as defined in Item
6), Energy PLC shares the power to vote or direct the vote and to dispose or
direct the disposition of 2,269,886 shares of Common Stock with EnCap
Investments. In addition, all shares of Common Stock owned by Energy PLC are
subject to the voting and transfer provisions of the Shareholders' Agreement.
EnCap LP. Through its general partner, EnCap LP shares the power to
vote or direct the vote and to dispose or direct the disposition of 2,424,973
shares of Common Stock with EnCap Investments, its general partner. In addition,
all shares of Common Stock owned by EnCap LP are subject to the voting and
transfer provisions of the Shareholders' Agreement.
EnCap Investments. EnCap Investments shares the power to vote and
direct the vote or to dispose or direct the disposition of 4,694,859 shares of
Common Stock with each of Energy PLC by virtue of the Investment Agreement (as
defined in Item 6) and EnCap LP as its general partner. In addition, all shares
of Common Stock beneficially owned by EnCap Investments are subject to the
voting and transfer provisions of the Shareholders' Agreement. EnCap Investments
disclaims beneficial ownership of any shares of Common Stock owned by either
EnCap LP or Energy PLC.
Executive Officers and Directors. Except as otherwise described
herein, to the knowledge of the EnCap Group, no executive officer or director of
Energy PLC or managing director of EnCap Investments has the power to vote or
direct the vote or dispose or direct the disposition of any shares of Common
Stock.
(c) Except as otherwise described herein or in any Exhibit filed herewith,
to the knowledge of the EnCap Group, none of the persons named in response to
paragraph (a) above has effected any transaction in shares of the Common Stock
during the past 60 days.
(d) Except as otherwise described herein, no person other than EnCap LP,
EnCap Investments and Energy PLC has the right to receive or the power to direct
the receipt of dividends from, or the proceeds from the sale of, the shares of
Common Stock deemed to be beneficially owned by them.
(e) It is inapplicable for the purposes herein to state the date on which
a party ceased to be the owner of more than five percent (5%) of the shares of
Common Stock.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SECURITIES OF THE ISSUER.
Item 6 has been amended and restated in its entirety as follows:
Except as otherwise described herein, there are no contracts,
arrangements, understandings or relationships (legal or otherwise) between any
of the individuals or entities described in Item 2 or between such persons and
any other person with respect to the shares of Common Stock deemed to be
beneficially owned by Energy PLC, EnCap LP and EnCap Investments.
EnCap Investments, as the general partner of EnCap LP, is a party to the
Agreement of Limited Partnership of EnCap LP, and is a party to that certain
Investment Advisory Agreement dated February 4,
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1994 between EnCap Investments and Energy PLC (the "INVESTMENT AGREEMENT")
whereby EnCap Investments acts as an investment advisor to Energy PLC.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Item 7 has been amended and restated in its entirety as follows:
<TABLE>
<S> <C>
Exhibit 1 - Joint Filing Agreement dated September 2, 1998 between Energy
PLC, EnCap LP and EnCap Investments (filed herewith).*
Exhibit 4.1 - Voting Agreement dated November 25, 1997 between B. Carl Price,
Don W. Reynolds, Energy Capital Investment Company PLC and EnCap
Equity 1994 Limited Partnership.**
Exhibit 4.2 - Stock Purchase Warrant No. 1003 dated December 13, 1995 granted
to Energy Capital Investment Company PLC.**
Exhibit 4.3 - Stock Purchase Warrant No. 1005 dated April 18, 1996 granted to
Energy Capital Investment Company PLC.**
Exhibit 4.4 - Stock Purchase Warrant No. 1004 dated December 13, 1995 granted
to EnCap Equity 1994 Limited Partnership.**
Exhibit 4.5 - Stock Purchase Warrant No. 1006 dated April 18, 1996 granted to
EnCap Equity 1994 Limited Partnership.**
Exhibit 4.6 - Investment Advisory Agreement dated February 4, 1994.**
Exhibit 4.7 - Shareholders' Agreement dated August 14, 1998 between Future
Petroleum Corporation, B. Carl Price, Don Wm. Reynolds, Energy
Capital Investment Company PLC, EnCap Equity 1994 Limited
Partnership and Bargo Energy Resources, Ltd.*
Exhibit 4.8 - Note Restructuring Agreement dated August 14, 1998 between
Future Petroleum Corporation, Energy Capital Investment Company
PLC and EnCap Equity 1994 Limited Partnership.*
Exhibit 4.9 - Registration Rights Agreement dated August 14, 1998 between
Future Petroleum Corporation, Energy Capital Investment Company
PLC and EnCap Equity 1994 Limited Partnership.*
Exhibit 4.10 - Pledge Agreement dated August 14, 1998 between Energy Capital
Investment Company PLC and Bank of America National Trust and
Savings Association.*
Exhibit 4.11 - Pledge Agreement dated August 14, 1998 between EnCap Equity 1994
Limited Partnership and Bank of America National Trust and
Savings Association.*
Exhibit 4.12 - Master Subordination Agreement dated August 14, 1998 between
Energy Capital Investment Company PLC, EnCap Equity 1994 Limited
Partnership and America National Trust and Savings Association.*
Exhibit 4.13 - Agreement and Plan of Merger dated August 14, 1998 between Bargo
Energy Resources, Ltd, SCL-CAL Company, Future Petroleum
Corporation and Future CAL-TEX.*
</TABLE>
Page 11
<PAGE> 12
<TABLE>
<S> <C>
Exhibit 4.14 - Agreement regarding Bylaws dated August 14, 1998 between B. Carl
Price, Energy Capital Investment Company PLC, EnCap Equity 1994
Limited Partnership and Bargo Energy Resources, Ltd.*
Exhibit 10.1 - April 1997 Agreement dated April 28, 1997 between Future
Petroleum Corporation, Future Petroleum Corporation, a Texas
corporation, Future Acquisition 1995, Ltd, Energy Capital
Investment Company PLC and EnCap Equity 1994 Limited
Partnership.**
Exhibit 10.2 - Purchase and Sale Agreement dated November 25, 1997 by and among
Future Petroleum Corporation, Energy Capital Investment Company
PLC, EnCap Equity 1994 Limited Partnership, and Gecko Booty 1994
I Limited Partnership.**
Exhibit 10.3 - First Amended and Restated Agreement of Limited Partnership of
Future Acquisition 1995, Ltd. dated January 29, 1997 by and
among Future Petroleum Corporation, a Texas corporation, EnCap
Equity 1994 Limited Partnership and Energy Capital Investment
Company PLC, as amended by the Letter Amendment dated April 18,
1996 and the First Amended and Restated Agreement of Limited
Partnership dated as of April 28, 1997.**
Exhibit 10.4 - Agreement of Parent dated January 29, 1997 by and among Future
Petroleum Corporation, Future Acquisition 1995, Ltd., Energy
Capital Investment Company PLC and EnCap Equity 1994 Limited
Partnership.**
</TABLE>
* Filed herewith.
** Incorporated by reference to the same titled exhibit to the reporting
persons' Schedule 13D, dated June 29, 1998.
Page 12
<PAGE> 13
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: September 2, 1998 ENERGY CAPITAL INVESTMENT COMPANY PLC
By: /s/ Gary R. Petersen
----------------------------------
Gary R. Petersen
Director
Date: September 2, 1998 ENCAP EQUITY 1994 LIMITED PARTNERSHIP
By: EnCap Investments L.C., General
Partner
/s/ Gary R. Petersen
--------------------------------------
Gary R. Petersen
Managing Director
Date: September 2, 1998 ENCAP INVESTMENTS L.C.
/s/ Gary R. Petersen
--------------------------------------
Gary R. Petersen
Managing Director
Page 13
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
Exhibit 1 - Joint Filing Agreement dated September 2, 1998 between Energy
PLC, EnCap LP and EnCap Investments (filed herewith).*
Exhibit 4.1 - Voting Agreement dated November 25, 1997 between B. Carl Price,
Don W. Reynolds, Energy Capital Investment Company PLC and EnCap
Equity 1994 Limited Partnership.**
Exhibit 4.2 - Stock Purchase Warrant No. 1003 dated December 13, 1995 granted
to Energy Capital Investment Company PLC.**
Exhibit 4.3 - Stock Purchase Warrant No. 1005 dated April 18, 1996 granted to
Energy Capital Investment Company PLC.**
Exhibit 4.4 - Stock Purchase Warrant No. 1004 dated December 13, 1995 granted
to EnCap Equity 1994 Limited Partnership.**
Exhibit 4.5 - Stock Purchase Warrant No. 1006 dated April 18, 1996 granted to
EnCap Equity 1994 Limited Partnership.**
Exhibit 4.6 - Investment Advisory Agreement dated February 4, 1994.**
Exhibit 4.7 - Shareholders' Agreement dated August 14, 1998 between Future
Petroleum Corporation, B. Carl Price, Don Wm. Reynolds, Energy
Capital Investment Company PLC, EnCap Equity 1994 Limited
Partnership and Bargo Energy Resources, Ltd.*
Exhibit 4.8 - Note Restructuring Agreement dated August 14, 1998 between
Future Petroleum Corporation, Energy Capital Investment Company
PLC and EnCap Equity 1994 Limited Partnership.*
Exhibit 4.9 - Registration Rights Agreement dated August 14, 1998 between
Future Petroleum Corporation, Energy Capital Investment Company
PLC and EnCap Equity 1994 Limited Partnership.*
Exhibit 4.10 - Pledge Agreement dated August 14, 1998 between Energy Capital
Investment Company PLC and Bank of America National Trust and
Savings Association.*
Exhibit 4.11 - Pledge Agreement dated August 14, 1998 between EnCap Equity 1994
Limited Partnership and Bank of America National Trust and
Savings Association.*
Exhibit 4.12 - Master Subordination Agreement dated August 14, 1998 between
Energy Capital Investment Company PLC, EnCap Equity 1994 Limited
Partnership and America National Trust and Savings Association.*
Exhibit 4.13 - Agreement and Plan of Merger dated August 14, 1998 between Bargo
Energy Resources, Ltd, SCL-CAL Company, Future Petroleum
Corporation and Future CAL-TEX.*
Exhibit 4.14 - Agreement regarding Bylaws dated August 14, 1998 between B. Carl
Price, Energy Capital Investment Company PLC, EnCap Equity 1994
Limited Partnership and Bargo Energy Resources, Ltd.*
</TABLE>
<PAGE> 1
EXHIBIT 1
AGREEMENT
The undersigned reporting persons hereby agree that the statements
filed pursuant to this Schedule 13D/A dated September 2, 1998, to which this
Agreement is filed as an exhibit, are filed on behalf of each of them.
Date: September 2, 1998 ENERGY CAPITAL INVESTMENT COMPANY PLC
By: /s/ Gary R. Petersen
----------------------------------
Gary R. Petersen
Director
Date: September 2, 1998 ENCAP EQUITY 1994 LIMITED PARTNERSHIP
/s/ Gary R. Petersen
---------------------------------------
Gary R. Petersen
Managing Director
Date: September 2, 1998 ENCAP INVESTMENTS L.C.
/s/ Gary R. Petersen
---------------------------------------
Gary R. Petersen
Managing Director
<PAGE> 1
EXHIBIT 4.7
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT (this "Agreement") is made and entered
into this 14th day of August, 1998, by and among Future Petroleum Corporation, a
Utah corporation ("Future"), B. Carl Price, a Texas resident ("Price"), Don Wm.
Reynolds, a Texas resident ("Reynolds"), Energy Capital Investment Company PLC,
an English investment company ("Energy PLC"), EnCap Equity 1994 Limited
Partnership, a Texas limited partnership ("EnCap LP"), and Bargo Energy
Resources, Ltd., a Texas limited partnership ("Bargo").
RECITALS:
A. Price, Reynolds, Energy PLC and EnCap LP are currently shareholders
in Future.
B. As of even date herewith, Bargo is being issued shares of common
stock of Future, $0.01 par value per share ("Common Stock"), in connection with
the consummation of a merger of a wholly-owned subsidiary of Bargo into and with
a wholly-owned subsidiary of Future pursuant to that certain Agreement and Plan
of Merger dated as of August 14, 1998, by and among Bargo, SCL-Cal Company, a
Texas corporation, Future and Future CAL-TEX Corporation, a Texas corporation.
C. As of even date herewith, Energy PLC and EnCap LP are being issued
additional shares of Common Stock in consideration of their agreement to
subordinate certain indebtedness owed to them by Future to a new senior credit
facility.
D. The parties hereto deem it in the mutual best interests to make the
agreements contained herein.
AGREEMENT:
NOW, THEREFORE, for and in consideration of the foregoing Recitals and
the mutual agreements contained herein, the sufficiency of which is hereby
acknowledged and confirmed, the parties hereto, intending to be legally bound
hereby, agree as follows:
SECTION 1. DEFINITIONS.
(a) The following defined terms shall have the respective meanings
assigned to them below:
(i) "Affiliate" shall mean, with respect to any person, any
person directly or indirectly controlling, controlled by or under
common control with, such other person. For purposes of this
definition, the term "control," when used with respect to any person,
shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such
person, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" shall
meanings correlative to the foregoing.
<PAGE> 2
(ii) "Bargo Group" shall mean Bargo and any transferee of a
member of the Bargo Group that executes or is required to execute an
Addendum Agreement.
(iii) "Designated Nominee" shall mean a person designated by a
Subject Shareholder as a nominee for election to Future's Board of
Directors.
(iv) "EnCap Group" shall mean Energy PLC, EnCap LP and any
transferee of a member of the EnCap Group that executes or is required
to execute an Addendum Agreement.
(v) "Market Price" of the Common Stock means the average
closing prices of the Common Stock for the ten trading days preceding
an Offering Notice under Section 4(b) over the principal securities
exchange in which the Common Stock is traded or, if not traded on an
exchange, the average closing price for ten trading days preceding such
Offering Notice as reported on the NASDAQ NMS, or if not traded on an
exchange or the NASDAQ NMS, the average of the closing bid and asked
prices of the Common Stock for such ten day period.
(vi) "Other Shareholder" shall mean, when used with respect to
a Subject Shareholder, the other Subject Shareholders.
(vii) "Price Group" shall mean Price, Reynolds and any
transferee of a member of the Price Group that executes is required to
execute an Addendum Agreement.
(viii) "Purchase Price" means, for purposes of Section 4, an
amount stated in dollars equal to the total value of a bona fide
written offer from a person to purchase shares of Common Stock from a
Shareholder determined as follows: (i) cash payable at closing shall be
valued at the amount thereof, (ii) a security trading on a public
market and for which published trading prices are readily available
shall be valued at its closing sales price (or if a sales price is not
available, at the average of its closing bid and asked prices) on the
last business day preceding the date of the first Offering Notice with
respect to such offer, and (iii) a security not described in clause
(ii) or other property, including cash payable in one or more
installments after closing, shall be valued at its fair market value on
the last business day preceding the date of the first Offering Notice
with respect to such offer as determined at the option of the Selling
Shareholder (as defined in Section 4) either (a) by a qualified
independent third party appraiser (the expense of which shall be paid
by the Company) or (b) in good faith by the Board of Directors of the
Company (excluding any member of the Board who is a director, officer
or shareholder of the Selling Shareholder or who has the right to
purchase Common Stock under this Agreement) but only if all of such
Board members agree to accept the assignment to make such
determination.
(ix) "Shareholders" shall mean Bargo, Energy PLC, EnCap LP,
Price, Reynolds and any person who executes or is required to execute
an Addendum Agreement (attached hereto as Exhibit "A") with respect to
the Common Stock.
- 2 -
<PAGE> 3
(x) "Subject Shareholder" shall mean either the (i) Price Group,
(ii) EnCap Group or (iii) Bargo Group.
(xi) "Total Voting Power" shall mean the aggregate number of votes
which may be cast by holders of outstanding Voting Securities.
(xii) "Voting Securities" shall mean Common Stock and any other
securities of Future entitled to vote generally for the election of
directors of Future.
SECTION 2. AGREEMENT REGARDING BOARD REPRESENTATION.
(a) The Price Group shall have three Designated Nominees, the EnCap
Group shall have two Designated Nominees and the Bargo Group shall have two
Designated Nominees.
(b) Each Shareholder agrees (i) to use its reasonable best efforts to
cause Future's Board of Directors to be composed of seven members, (ii) to use
its reasonable best efforts to cause Future to nominate or cause to be nominated
to the Future Board of Directors the Designated Nominees of the Other
Shareholders and (iii) to vote or cause to be voted all Voting Securities
beneficially owned by such Shareholder in favor of the election of the
Designated Nominees of the Other Shareholders to Future's Board of Directors.
For purposes of this Agreement, "beneficial ownership" or "beneficially own"
shall be determined in accordance with Rule 13d-3 under the Securities Exchange
Act of 1934, as amended.
(c) In the event of the death, incapacity, resignation or removal of a
Subject Shareholder's Designated Nominee preventing his or her serving on
Future's Board of Directors, each Shareholder will promptly cause the election
or appointment of another Designated Nominee of such Subject Shareholder to fill
the vacancy created thereby.
(d) Each Shareholder agrees to cause a designee of the Bargo Group to
be elected Chairman of the Board of Directors of Future. Tim J. Goff shall serve
as the Bargo Group's initial designee. In the event Mr Goff no longer serves as
the Bargo Group's designee, the Bargo Group agrees that all of its subsequent
replacement designees as Chairman of the Board of Directors shall be subject to
the prior approval of a majority of the Board of Directors of Future, which
approval shall not be unreasonably withheld, and if a replacement designee is
not so approved, the Bargo Group shall designate another designee acceptable to
Future's Board of Directors.
SECTION 3. TAG ALONG RIGHTS.
(a) If any Shareholder (for purposes of this Section 3, a "Selling
Shareholder") proposes to sell, dispose of or otherwise transfer any shares
(whether currently owned or hereafter acquired) of Common Stock (the shares of
Common Stock proposed to be transferred being called the "Subject Shares") other
than pursuant to an Exempt Transfer (as defined below), the Selling Shareholder
shall refrain from effecting such transaction unless, prior to the consummation
thereof, the Shareholders other than the Selling Shareholder (the "Tag Along
Shareholders"), shall have been afforded the opportunity to join in such sale on
the basis hereinafter described. Each of the Shareholders agrees
- 3 -
<PAGE> 4
not to transfer any shares of Common Stock indirectly in a manner that would be
inconsistent with the essential intent of this Section 3.
(b) Not less than 30 nor more than 120 days prior to the consummation
of any proposed sale, disposition or transfer of the Subject Shares, the Selling
Shareholder shall notify, or cause to be notified, each Tag Along Shareholder in
writing of each such proposed transfer. Such notice ("Sale Notice") shall set
forth: (i) the name of the transferor (the "Proposed Purchaser") and the number
of Subject Shares proposed to be transferred, (ii) the name and address of the
Proposed Purchaser, (iii) the proposed amount and form of consideration and
terms and conditions of payment offered by such Proposed Purchaser and (iv) that
the Proposed Purchaser has been informed of the tag along right provided for in
this Section 3 and has agreed to purchase shares of Common Stock owned by such
Tag Along Shareholder in accordance with the terms hereof. The tag along right
may be exercised by any Tag Along Shareholder by delivery of a written notice to
the Selling Shareholder proposing to sell the Subject Shares (the "Tag-Along
Notice") within 30 days following its receipt of the notice specified above. The
Tag-Along Notice shall state the amount of shares of Common Stock (the
"Tag-Along Shares") that such Tag-Along Shareholder proposes to include in such
transfer to the Proposed Purchaser. If no Tag-Along Notice is received during
the 30-day period referred to above (or if such Notices do not cover all the
Subject Shares proposed to be transferred), the Selling Shareholder shall have
the right, for a 90-day period after the expiration of the 30-day period
referred to above, to transfer the-Subject Shares specified in the Tag-Along
Notice (or the remaining Subject Shares) on terms and conditions no more
favorable than those stated in the Tag- Along Notice and in accordance with the
provisions of this Section 3.
(c) In the event that the number of shares of Common Stock that the
Selling and Tag Along Shareholders propose to sell is greater than the number of
shares of Common Stock that the Proposed Purchaser proposes to buy, each such
Shareholder (a "Participating Shareholder") shall be permitted to sell the total
number of shares of Common Stock that the Proposed Purchaser agrees to purchase
multiplied by the Pro Rata Percentage (as defined) attributable to such
Participating Shareholder, unless otherwise agreed by all of the Participating
Shareholders. The Pro Rata Percentage shall mean a percentage equal to X divided
by Y, where "X" is equal to the number of issued and outstanding shares of
Common Stock currently held by such Participating Shareholder, and where "Y" is
equal to the aggregate number of shares of Common Stock then owned by all of the
Participating Shareholders.
(d) Any such purchase shall be made on the same price and other terms
and conditions as the Proposed Purchaser has offered with respect to the Subject
Shares. In the event that the Proposed Purchaser does not purchase the Tag-Along
Shares from the Tag Along Shareholders on the same terms and conditions as
specified in the Sale Notice, then the Selling Shareholder shall not be
permitted to sell any Subject Shares to the Proposed Purchaser in the proposed
transfer. The closing of any purchase from the Tag Along Shareholders shall
occur contemporaneously with the purchase and sale of the Subject Shares or at
such other time as such Tag-Along Shareholder and the Proposed Purchaser shall
agree.
(e) As used herein, the term "Exempt Transfer" shall mean any sale,
disposition or transfer of the Subject Shares to be effected (i) through a
registration of such shares under the
- 4 -
<PAGE> 5
Securities Act of 1933, as amended (the "Securities Act"), (ii) pursuant to and
in compliance with Rule 144 promulgated by the Securities and Exchange
Commission pursuant to the Securities Act, or (iii) transfers by a Selling
Shareholder to any person who is a partner or equity holder of such Selling
Shareholder, a successor of, or an entity all of the equity interests of which
are directly or indirectly owned by, the Selling Shareholder or an Affiliate of
the Selling Shareholder; provided that no transfer pursuant to (iii) above shall
be an Exempt Transfer unless the transferee agrees in writing to be bound by
this Agreement and executes an Addendum Agreement hereto.
(f) The provisions of this Section 3 shall not apply to any bona fide
charge, pledge or mortgage by any Shareholder of any shares of Common Stock
owned or held by it or its rights under this Agreement; provided that any
disposition of any such shares of Common Stock after foreclosure of such charge,
pledge or mortgage shall be governed by the provisions of this Agreement, and
the purchaser or purchasers of the shares shall have entered into an Addendum
Agreement with Future and the other Shareholders.
SECTION 4. RIGHT OF FIRST REFUSAL.
(a) No Shareholder may sell, transfer or dispose of any shares (whether
currently owned or hereafter acquired) of Common Stock except in compliance with
this Section 4. If any Shareholder desires to dispose of any shares of Common
Stock owned or held by it pursuant to a bona fide offer, such Shareholder (for
purposes of this Section 4, a "Selling Shareholder") shall offer such shares for
sale at the Purchase Price to the other Shareholders, all in accordance with the
following provisions of this Section 4.
(i) The Selling Shareholder shall deliver a written notice
("Offering Notice") to the other Shareholders, and within 30 days from
the receipt of such Offering Notice, the other Shareholders shall
deliver written notice ("Reply Notice") to the Selling Shareholder. If
by their Reply Notice the other Shareholders accept the offer of the
Selling Shareholder, such Reply Notice shall constitute an agreement
binding upon the Selling Shareholder and the other Shareholders to sell
and purchase the offered shares at the Purchase Price. Once the
Offering Notice is delivered, the offer by the Selling Shareholder may
not be withdrawn prior to the expiration of the option of the other
Shareholders, as provided in this Section 4.
(ii) Any dispute concerning the calculation of the Purchase Price
shall be resolved by the Board of Directors of the Company, excluding
any member of the Board who is, or is a director, officer, partner or
stockholder of, the Selling Shareholder or who has a right to purchase
stock from the Selling Shareholder in the transaction for which the
Purchase Price is being determined; provided that if all directors are
excluded pursuant to the foregoing, such disputes shall be submitted to
binding arbitration as provided in Exhibit B. The Purchase Price shall
be paid in cash at the closing.
(iii) If the other Shareholders do not accept an offer of the
Selling Shareholder pursuant to the foregoing provisions of this
Section 4 the Selling Shareholder shall be freed and discharged, except
as herein stated, from all obligations under the terms of this
Agreement other than to sell the offered shares to the purchaser and at
the price and upon the
- 5 -
<PAGE> 6
terms stated in the Offering Notice given by the Selling Shareholder
pursuant to this Section 4, but only if such sale shall be completed
within a period of ninety days from the date of delivery of the
Offering Notice to the other Shareholders. If the Selling Shareholder
does not complete such sale within such ninety-day period, all the
provisions of this Agreement, including the provisions of this Section
4, shall apply to any future sale or offer for sale of such shares of
Common Stock owned by the Selling Shareholder.
(b) Upon any involuntary disposition of a Shareholder's shares of
Common Stock, such Shareholder or its representative shall send notice thereof,
disclosing in full to the Company and the other Shareholders the nature and
details of such involuntary disposition and offer such shares for sale at the
Market Price of Common Stock to the other Shareholders, all in accordance with
the following provisions of this Section 4. As used in this Section 4(b), the
term "Selling Shareholder" shall mean such Shareholder or its representative, as
the case may be.
(i) The Selling Shareholder shall deliver an Offering Notice to the
other Shareholders. Each of the other Shareholders shall have 30 days
from the receipt of their respective Offering Notice to deliver a Reply
Notice to the Selling Shareholder. If by their Reply Notice the other
Shareholders accept the offer of the Selling Shareholder, such Reply
Notice shall constitute an agreement binding upon the Selling
Shareholder and the other Shareholders to sell and purchase the offered
shares at the price and upon the terms stated in the Offering Notice of
the Selling Shareholder.
(ii) In connection with any purchase and sale of shares of Common
Stock pursuant to paragraph (i) of this Section 4(b), the purchaser or
purchasers shall pay the purchase price for the shares in cash at the
closing.
(iii) If the Shareholders do not accept the offer of the Selling
Shareholder pursuant to the foregoing provisions of this Section 4(b),
the Selling Shareholder shall be freed and discharged from all
obligations under the terms of this Agreement except to dispose of the
offered shares by involuntary disposition but only if the transferee
under any such disposition shall have entered into and Addendum
Agreement with the Company and the other Shareholders. If such
involuntary disposition is not effected, all the provisions of this
Agreement, including the provisions of this Section 4, shall apply to
any future involuntary disposition of such shares of Common Stock owned
by the Selling Shareholder.
(c) The provisions of this Section 4 shall not apply to any bona fide
charge, pledge or mortgage by any Shareholder of any shares of Common Stock
owned or held by it or its rights under this Agreement; provided that any
disposition of any such shares of Common Stock after foreclosure of such charge,
pledge or mortgage shall be governed by the provisions of this Agreement, and
the purchaser or purchasers of the shares shall have entered into an Addendum
Agreement with Future and the other Shareholders.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS.
Each Shareholder hereby represents and warrants to the other
Shareholders as follows:
- 6 -
<PAGE> 7
(a) As of the date hereof, such Shareholder is the record and
beneficial owner of the number of shares of Common Stock set forth opposite its
name in the attached Exhibit 4(a).
(b) Such Shareholder, if not a natural person, is duly formed, validly
existing and in good standing under the laws of the jurisdiction of its
formation.
(c) Such Shareholder has full power and authority to execute, deliver,
and perform this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by such Shareholder
and constitutes a valid and legally binding obligation of such Shareholder,
enforceable against such Shareholder in accordance with its terms.
(d) The execution, delivery, and performance by such Shareholder of
this Agreement do not and will not (i) if not a natural person, be in
contravention of or violate any provision of its charter or other governing
documents, as amended to the date hereof, (ii) conflict with or result in a
violation of any provision of, or constitute (with or without the giving of
notice or the passage of time or both) a default under, or give rise (with or
without the giving of notice or the passage of time or both) to any right of
termination, cancellation, or acceleration under, any bond, debenture, note,
mortgage, indenture, lease, contract, agreement, or other instrument or
obligation to which such Shareholder is a party or by which such Shareholder or
any of its properties may be bound or (iii) violate any applicable law, rule or
regulation binding upon such Shareholder.
(e) No consent, approval, order, or authorization of, or declaration,
filing, or registration with, any court or governmental agency or of any third
party is required to be obtained or made by such Shareholder in connection with
the execution, delivery, or performance by such Shareholder of this Agreement.
SECTION 6. SURVIVAL OF PROVISIONS.
All representations, warranties and covenants made by each party hereto
in this Agreement or any other document contemplated hereby shall be considered
to have been relied upon by the other parties hereto and shall survive the
execution and delivery of this Agreement or such other document, regardless of
any investigation made by or on behalf of any such party.
SECTION 7. ENTIRE AGREEMENT.
This Agreement and the other documents contemplated hereunder contain
the entire understanding of the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements, understandings, negotiations,
and discussions among the parties with respect to such subject matter,
including, without limitation that certain Voting Agreement dated November 25,
1997, by and between Future, Energy PLC, EnCap LP, Carl Price and Don Wm.
Reynolds and that certain Purchase and Sale Agreement dated November 25, 1997,
by and among Future, Energy PLC, EnCap LP and Gecko Booty 1994 I Limited
Partnership. Neither Future nor any Shareholder shall be a party to any
agreement involving any holder of capital stock of Future, as such, unless
Future and all such Shareholders are also parties to that agreement, except with
the written consent of Future and all such Shareholders who are not parties to
such an agreement.
- 7 -
<PAGE> 8
SECTION 8. AMENDMENTS.
This Agreement may be amended, modified, supplemented, restated or
discharged only by an instrument in writing signed by each of the Subject
Shareholders hereto. For purposes of this section, a Subject Shareholder shall
be deemed to have properly executed an amendment hereto upon the consent of the
holders of a majority of the then outstanding Voting Securities held by the
members of such Subject Shareholder.
SECTION 9. NOTICES.
All notices and other communications required under this Agreement
shall (unless otherwise specifically provided herein) be in writing and be
delivered personally, by recognized commercial courier or delivery service
(which provides a receipt), by telecopier (with receipt acknowledged), or by
registered or certified mail (postage prepaid), at the following addresses:
If to Bargo: c/o Bargo Energy Company
700 Louisiana, Suite 3700
Houston, Texas 77002
Attention: Tim J. Goff
Fax No.: 713-236-9799
If to B. Carl Price or
Don Wm. Reynolds: c/o Future Petroleum Corporation
2351 West Northwest Highway
Suite 2130
Dallas, Texas 75220
Attention: Carl Price
Fax No.: 214-350-8382
If to Energy PLC or
EnCap LP: c/o EnCap Investments, L.C.
1100 Louisiana, Suite 3150
Houston, Texas 77002
Attention: Gary R. Petersen or
Colin Nisbeth
Fax No.: 713-659-6130
and shall be considered delivered on the date of receipt. A Shareholder may
specify as its proper address any other post office address within the
continental limits of the United States by giving notice to the other
Shareholders, in the manner provided in this Section, at least ten (10) days
prior to the effective date of such change of address.
Any party hereto may designate a different address by notice to the
other parties.
- 8 -
<PAGE> 9
SECTION 10. TERMINATION.
This Agreement shall terminate upon the earlier of (i) the written
consent of each of the Shareholders, (ii) when the Shareholders collectively
hold an aggregate of less than 30%, or when, with respect to a Subject
Shareholder, such Subject Shareholder owns less than 5% of the issued and
outstanding shares of Common Stock (and this Agreement shall be terminated
solely with respect to such Subject Shareholder but shall remain in effect as to
those Subject Shareholders owning 5% or more of the issued and outstanding
shares of Common Stock).
SECTION 11. POWER OF ATTORNEY.
For the purpose of executing an Addendum Agreement, all the
Shareholders hereby appoint Future as their agent and attorney to execute such
Addendum Agreement on their behalf and expressly bind themselves to the Addendum
Agreement by Future's execution of that Agreement without further action on
their part.
SECTION 12. NO WAIVER.
The failure of any party hereto to insist upon strict performance of a
covenant hereunder or of any obligation hereunder, irrespective of the length of
time for which such failure continues, shall not be a waiver of such party's
right to demand strict compliance in the future. No consent or waiver, express
or implied, to or of any breach or default in the performance of any obligation
hereunder shall constitute a consent or waiver to or of any other breach or
default in the performance of the same or any other obligation hereunder.
SECTION 13. CHOICE OF LAW.
This Agreement shall be governed by the laws of the State of Utah.
SECTION 14. SUCCESSORS AND ASSIGNS.
This Agreement shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns.
SECTION 15. REFERENCES AND CONSTRUCTION.
(a) For purposes of this Agreement, whenever any Shareholder is
required to offer shares of Common Stock to the other Shareholders pursuant to
this Agreement, such offer shall be deemed to be made to the other Shareholders
pro rata in accordance with their respective holdings of shares of Common Stock
at the time of the offer, or in such other proportions as may be agreed upon by
all Shareholders electing to accept the offer who, pursuant to this agreement,
would purchase more or less than their pro rata share. Except as may otherwise
be agreed, each member of the group to whom such shares are so offered shall
have the right to purchase that proportion of the number of such offered shares
that the number of shares of Common Stock owned by such member bears to
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<PAGE> 10
the total number of shares of Common Stock owned by the members of the group
electing to accept the offer.
(b) The provisions of Sections 3 and 4 shall not apply to transactions
between members of a group, so that transactions between members of the Price
Group shall not be subject to Sections 3 and 4, transactions between members of
the EnCap Group shall not be subject to Sections 3 and 4 and transactions
between members of the Bargo Group shall not be subject to Sections 3 and 4 and
any shares transferred pursuant to such transactions shall remain subject to
this Agreement. The parties hereto consent to the pledge of shares of Common
Stock pursuant to those certain Pledge Agreements (stock) by Bargo, Energy PLC
and EnCap LP, B. Carl Price and Don Wm. Reynolds, respectively, in favor of Bank
of America National Trust and Savings Association and agree that Sections 3 and
4 hereof shall not be applicable to such pledges or any foreclosures or resales
thereunder.
(c) All references in this Agreement to articles, sections, subsections
and other subdivisions refer to corresponding articles, sections, subsections
and other subdivisions of this Agreement unless expressly provided otherwise.
(d) Titles appearing at the beginning of any of such subdivisions are
for convenience only and shall not constitute part of such subdivisions and
shall be disregarded in construing the language contained in such subdivisions.
(e) The words "this Agreement", "this instrument", "herein", "hereof",
"hereby", hereunder" and words of similar import refer to this Agreement as a
whole and not to any particular subdivision unless expressly so limited.
(f) Words in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise requires.
(g) Unless the context otherwise requires or unless otherwise provided
herein, the terms defined in this Agreement which refer to a particular
agreement, instrument or document also refer to and include all renewals,
extensions, modifications, amendments or restatements of such agreement,
instrument or document, provided that nothing contained in this subsection shall
be construed to authorize such renewal, extension, modification, amendment or
restatement.
(h) Examples shall not be construed to limit, expressly or by
implication, the matter they illustrate.
(i) The word "or" is not exclusive and the word "includes" and its
derivatives means "includes, but is not limited to" and corresponding derivative
expressions.
(j) No consideration shall be given to the fact or presumption that one
party had a greater or lesser hand in drafting this Agreement.
(k) All references herein to "$" or "dollars" shall refer to U.S.
Dollars.
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<PAGE> 11
SECTION 16. ENDORSEMENTS.
The certificate or certificates representing the Voting Securities now
owned or hereafter acquired by the Shareholders shall have conspicuously
stamped, printed, or typed on the face or back thereof a legend substantially in
the following form:
"The shares represented hereby are subject to that certain
Shareholders' Agreement dated as of August 14, 1998, by and among the
Company, B. Carl Price, Don Wm. Reynolds, Energy Capital Investment
Company PLC, and EnCap Equity 1994 Limited Partnership and Bargo Energy
Resources, Ltd. A copy of the Shareholders' Agreement and all
applicable amendments thereto will be furnished by the Company to the
holder hereof without charge upon written request to the Company at its
principal place of business or registered office."
SECTION 17. SPECIFIC PERFORMANCE.
Each of the parties hereto recognizes that any breach of the terms of
this Agreement may give rise to irreparable harm for which money damages would
not be an adequate remedy, and accordingly agree that, in addition to other
remedies, any nonbreaching party shall be entitled to enforce the terms of this
Agreement by a decree of specific performance without the necessity of proving
the inadequacy as a remedy of money damages.
SECTION 18. COUNTERPARTS.
This Agreement may be executed in multiple counterparts, with each such
counterpart constituting an original and all of such counterparts constituting
but one and the same agreement.
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<PAGE> 12
EXHIBIT 4(a)
-----------
<TABLE>
<CAPTION>
Number of Shares
Shareholder of Common Stock
<S> <C>
B. Carl Price..................................................... 1,089,149
Don Wm. Reynolds.................................................. 753,362
Energy Capital Investment Company PLC............................. 2,269,886
EnCap Equity 1994 Limited Partnership............................. 2,424,973
Bargo Energy Resources, Ltd....................................... 4,694,859
</TABLE>
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<PAGE> 1
EXHIBIT 4.8
NOTE RESTRUCTURING AGREEMENT
THIS NOTE RESTRUCTURING AGREEMENT (this "AGREEMENT") is made and
entered into this 14th day of August, 1998, by and among Future Petroleum
Corporation, a Utah corporation ("FUTURE"), Energy Capital Investment Company
PLC, an English investment company ("ECIC"), and EnCap Equity 1994 Limited
Partnership, a Texas limited partnership ("ENCAP LP").
RECITALS:
A. Reference is herein made to (i) that certain Purchase and Sale
Agreement dated November 27, 1997, by and among Future, ECIC, EnCap LP and
Gecko Booty 1994 I Limited Partnership, a Texas limited partnership ("GECKO
BOOTY"), as amended by that certain May 1998 Amendment to Purchase and Sale
Agreement dated as of May 1, 1998, by and among Future, ECIC and EnCap LP (the
"NOVEMBER 1997 PURCHASE AGREEMENT"), and (ii) that certain Purchase and Sale
Agreement dated May 1, 1998, by and among Future, ECIC, EnCap and NCI
Enterprises, Inc., a Texas corporation (the "MAY 1998 PURCHASE AGREEMENT").
B. Under the November 1997 Purchase Agreement, (i) each of ECIC
and EnCap LP transferred and assigned to a subsidiary of Future certain limited
partnership interests described more particularly therein in exchange for (x)
shares Common Stock (as defined herein) and a promissory note executed by
Future in the principal amount of $3,123,041, in the instance of ECIC (the
"ECIC NOTE"), and (y) shares of Common Stock and a promissory note executed by
Future in the principal amount of $3,301,959 (the "ENCAP LP NOTE"), in the
instance of EnCap LP, and (ii) Gecko Booty transferred and assigned to a
subsidiary of Future certain oil and gas properties described more particularly
therein for a promissory note executed by Future in the principal amount of
$175,000 (the "GECKO BOOTY NOTE").
C. Under the May 1997 Purchase Agreement, each of ECIC and EnCap
LP transferred and assigned to a subsidiary of Future certain limited
partnership interests specified more particularly therein in exchange for (i)
shares of Common Stock and a promissory note executed by Future in the
principal amount of $247,653.12, in the instance of ECIC, and (ii) shares of
Common Stock and a promissory note executed by Future in the principal amount
of $412,346.88. At the time of the closing of the transactions under the May
1997 Purchase Agreement, Future executed and delivered (a) to ECIC, a Renewal
Promissory Note (the "ECIC MAY 1998 RENEWAL NOTE") in the principal amount of
$3,370,694.12 (which note, by its terms, constituted a renewal, extension and
increase of the ECIC Note) and (b) to EnCap LP, a Renewal Promissory Note (the
"ENCAP LP MAY 1998 RENEWAL NOTE")in the principal amount of $3,714,305.88
(which note, by its terms, constituted a renewal, extension and increase of the
EnCap LP Note).
D. Future proposes to execute and deliver that certain Agreement
and Plan of Merger of even date herewith by and among Future, Bargo Energy
Resources, Ltd., a Texas
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limited partnership, SCL-CAL Company, a Texas corporation, and a wholly-owned
subsidiary of Future (the "MERGER AGREEMENT"). Future also propose to execute
and deliver that certain Credit Agreement of even date herewith (the "SENIOR
CREDIT FACILITY") by and between Future and Bank of America National Trust and
Savings Association, a national banking association ("SENIOR LENDER").
E. In connection with the transactions contemplated under the
immediately preceding paragraph, it is contemplated that (i) ECIC and EnCap LP
will subordinate the indebtedness owed to them by Future to the Senior Credit
Facility, (ii) Future, ECIC and EnCap LP will revise and restructure the
indebtedness owed by Future to ECIC, EnCap LP and Gecko Booty and (iii) that
Future will issue additional shares of Common Stock to ECIC and EnCap LP, all
of which actions are intended to qualify as a recapitalization under Section
368(a)(1)(E) of the Internal Revenue Code.
F. The parties hereto deem it in their mutual best interests to
enter into this Agreement to reflect their agreements with respect to the
matters described above.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing Recitals and the
mutual covenants and agreements contained herein, the parties hereto do hereby
agree as follows:
ARTICLE I
DEFINITIONS, REFERENCES AND CONSTRUCTION
SECTION 1.1. CERTAIN DEFINED TERMS. When used in this Agreement, the
following terms shall have the respective meanings assigned to them in this
Section 1.1 or in the section, subsections or other subdivisions referred to
below:
"ADDITIONAL SECURITY DOCUMENTS" shall mean the agreements, documents
and other instruments listed in Exhibit 1.1--Additional Security Documents.
"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 Note Restructuring Agreement, as hereafter
changed, amended or modified in accordance with the terms hereof.
"AMENDED RENEWAL NOTES" shall mean the ECIC Amended Renewal Note and
the EnCap LP Amended Renewal Note.
"BMC LP" shall mean BMC Development No. 1 Limited Partnership, a Texas
limited partnership.
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<PAGE> 3
"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 Future's management or
their designees to be voted in favor of persons nominated by Future's Board of
Directors) of 33% or more of the outstanding voting securities of Future,
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 Future), exclusive of the
issuance of shares of Common Stock contemplated under this Agreement and the
Merger Agreement, or (b) one-third or more of the directors of Future shall
consist of persons not nominated by Future'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 the Shareholders' Agreement).
"CLOSING DATE" shall mean the date on which all of the transactions
under the Merger Agreement and the Senior Credit Facility are to be
consummated.
"CLOSING SHARES" shall mean the shares of Common Stock issued to ECIC
and EnCap LP under Section 2.2(b) and Section 2.2(c), respectively.
"COLLATERAL" shall mean all property of any kind which is subject to a
Lien in favor of ECIC or EnCap LP or which, under the terms of any Amended
Security Document, is purported to be subject to such a Lien.
"COMMISSION" shall mean the Securities and Exchange Commission (or any
successor body thereto).
"COMMON STOCK" shall mean shares of common stock of Future, $0.01 par
value per share, and any shares issued or issuable with respect thereto by way
of a stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
"CONSOLIDATED" refers to the consolidation of any person, in
accordance with GAAP, with its properly consolidated subsidiaries. References
herein to a person's Consolidated financial statements, financial position,
financial condition, liabilities, etc. refer to the consolidated financial
statements, financial position, financial condition, liabilities, etc. of such
person and its properly consolidated subsidiaries.
"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.
"ECIC" shall have the meaning assigned to such term in the
introductory paragraph to this Agreement.
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<PAGE> 4
"ECIC AMENDED RENEWAL NOTE" shall mean the ECIC May 1998 Renewal Note,
as amended by the ECIC Amendment to Note.
"ECIC AMENDMENT TO NOTE" shall have the meaning assigned to such term
in Section 2.1(f).
"ECIC MAY 1998 RENEWAL NOTE" shall have the meaning assigned to such
term in Paragraph C of the Recitals hereto.
"ENCAP LP" shall have the meaning assigned to such term in the
introductory paragraph to this Agreement.
"ENCAP LP AMENDED RENEWAL NOTE" shall mean the EnCap LP May 1998
Renewal Note, as amended by the EnCap LP Amendment to Note.
"ENCAP LP AMENDMENT TO NOTE" shall have the meaning assigned to such
term in Section 2.1(g).
"ENCAP LP MAY 1998 RENEWAL NOTE" shall have the meaning assigned to
such term in Paragraph C of the Recitals hereto.
"ENGINEERING REPORT" shall mean the engineering report referenced in
Section 6.2(d).
"EVENT OF DEFAULT" shall have the meaning assigned to such term in
Section 8.1.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and all rules and regulations promulgated under such Act.
"FISCAL QUARTER" shall mean a three-month period ending on March 31,
June 30, September 30 and December 31 of any year.
"FISCAL YEAR" shall mean the twelve-month period ending on December 31
of any year.
"FUTURE" shall have the meaning assigned to such term in the
introductory paragraph to this Agreement.
"FUTURE CAL-TEX CORPORATION" shall mean Future CAL-TEX Corporation, a
Texas corporation.
"FUTURE LP" shall mean Future Acquisition 1995, Ltd., a Texas limited
partnership.
"FUTURE NEVADA" shall mean Future Energy Corporation, a Nevada
corporation.
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<PAGE> 5
"FUTURE TEXAS" shall mean Future Petroleum Corporation, a Texas
corporation.
"GAAP" shall mean those generally accepted accounting principles and
practices which are recognized as such by the Financial Accounting Standards
Board (or any generally recognized successor).
"GECKO BOOTY"shall have the meaning assigned to such term in Paragraph
A of the Recitals hereto.
"GECKO BOOTY NOTE" shall have the meaning assigned to such term in
Paragraph B of the Recitals hereto.
"INDEBTEDNESS" of any person means Liabilities in any of the following
categories: (a) Liabilities for borrowed money; (b) Liabilities constituting an
obligation to pay the deferred purchase price of property or services; (c)
Liabilities evidenced by a bond, debenture, note or similar instrument; (d)
Liabilities which would under GAAP be shown on such person's balance sheet as
a liability, and is payable more than one year from the date of creation
thereof (other than reserves for taxes and reserves for contingent
obligations); (e) Liabilities arising under futures contracts, forward
contracts, swap, cap or collar contracts, option contracts, hedging contracts,
other derivative contracts, or similar agreements; (f) Liabilities constituting
principal under leases capitalized in accordance with GAAP; (g) Liabilities
arising under conditional sales or other title retention agreements; (h)
Liabilities owing under direct or indirect guaranties of Liabilities of any
other person or constituting obligations to purchase or acquire or to otherwise
protect or insure a creditor against loss in respect of Liabilities of any
other person (such as obligations under working capital maintenance agreements,
agreements to keep-well, or agreements to purchase Liabilities, assets, goods,
securities or services), but excluding endorsements in the ordinary course of
business of negotiable instruments in the course of collection; (i) Liabilities
(for example, repurchase agreements) consisting of an obligation to purchase
securities or other property, if such Liabilities arises out of or in
connection with the sale of the same or similar securities or property; (j)
Liabilities with respect to letters of credit or applications or reimbursement
agreements therefor; (k) Liabilities with respect to payments received in
consideration of oil, gas, or other minerals yet to be acquired or produced at
the time of payment (including obligations under "take-or-pay" contracts to
deliver gas in return for payments already received and the undischarged
balance of any production payment created by such person or for the creation of
which such person directly or indirectly received payment), or (l) Liabilities
with respect to other obligations to deliver goods or services in consideration
of advance payments therefor; provided, however, that the "Indebtedness" of any
person shall not include Liabilities that were incurred by such person on
ordinary trade terms to vendors, suppliers, or other persons providing goods
and services for use by such person in the ordinary course of its business,
unless and until such Liabilities are outstanding more than 90 days past the
original invoice or billing date therefor.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended.
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<PAGE> 6
"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)
Future's and its Subsidiaries' Consolidated financial condition, (b) the
operations or properties of Future and its Subsidiaries, considered as a whole,
(c) Future's ability to timely pay the Obligations, or (d) the enforceability
of the material terms of this Agreement or any other Note Document.
"MAY 1998 PURCHASE AGREEMENT" shall have the meaning assigned to such
term in Paragraph A of the Recitals hereto.
"MERGER AGREEMENT" shall have the meaning assigned to such term in
Paragraph D of the Recitals hereto.
"NCI-SHAWNEE LP" shall mean NCI-Shawnee Limited Partnership, a Texas
limited partnership.
"NOTE DOCUMENT" shall mean this Agreement, the Amended Renewal Notes,
the Security Documents, the security and other similar documents previously
delivered by Future or its Subsidiaries under the Purchase Agreements and all
other agreements, certificates, documents, commitments and writings at any time
delivered in connection herewith or therewith.
"NOVEMBER 1997 PURCHASE AGREEMENT" shall have the meaning assigned to
such term in Paragraph A of the Recitals hereto.
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<PAGE> 7
"OBLIGATIONS" shall mean all Liabilities owing ECIC and EnCap LP under
or pursuant to the this Agreement, the Amended Renewal Notes or any of the
other Note Documents.
"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 Future set forth in the most recent Engineering Report utilizing a
10% discount rate, by (b) Future's total outstanding Indebtedness.
"PERMITTED INVESTMENT" shall mean any investment, loan, advance,
guaranty or capital contribution by Future or any Subsidiary in any of the
following: (a) properties or assets to be used in the ordinary course of
business of Future and its Subsidiaries; (b) current assets arising from the
sale of goods and services in the ordinary course of business of Future and its
Subsidiaries; (c) investments in one or more of Future'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.
"PURCHASE AGREEMENTS" shall mean the November 1997 Purchase Agreement
and the May 1998 Purchase Agreement.
"RESTRICTED PAYMENT" shall mean any Distribution (as defined below) in
respect of Future or any Subsidiary thereof (other than on account of capital
stock or other equity interests of a Subsidiary owned legally or beneficially
by Future or another Subsidiary), including any Distribution resulting in the
acquisition by Future 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).
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<PAGE> 8
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
and all rules and regulations under such Act.
"SECURITY DOCUMENTS" shall have the meaning assigned to such term in
the November 1997 Purchase Agreement plus the Additional Security Documents.
"SENIOR CREDIT FACILITY" shall have the meaning assigned to such term
in Paragraph D of the Recitals hereto.
"SENIOR LENDER" shall have the meaning assigned to such term in
Paragraph D of the Recitals hereto.
"SHAREHOLDERS' AGREEMENT" shall have the meaning assigned to such term
in the Merger Agreement.
"SUBORDINATION AGREEMENT" shall have the meaning assigned to such term
in Section 2.1(b).
"SUBSIDIARY" shall mean, with respect to any person, any corporation,
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned fifty percent or more by such person
SECTION 1.2. REFERENCES AND CONSTRUCTION.
(a) All references in this Agreement to articles, sections,
subsections and other subdivisions refer to corresponding articles, sections,
subsections and other subdivisions of this Agreement unless expressly provided
otherwise.
(b) Titles appearing at the beginning of any of such subdivisions
are for convenience only and shall not constitute part of such subdivisions and
shall be disregarded in construing the language contained in such subdivisions.
(c) The words "this Agreement", "this instrument", "herein",
"hereof", "hereby", "hereunder" and words of similar import refer to this
Agreement as a whole and not to any particular subdivision unless expressly so
limited.
(d) Words in the singular form shall be construed to include the
plural and vice versa, unless the context otherwise requires. Pronouns in
masculine, feminine and neuter genders shall be construed to include any other
gender.
(e) Unless the context otherwise requires or unless otherwise
provided herein, the terms defined in this Agreement which refer to a
particular Agreement, instrument or
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<PAGE> 9
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 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 -- Additional Security Documents, 2.1(b), 2.1(f),
2.1(g) and 2.2(d)(iii) 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
CERTAIN AGREEMENTS IN RESPECT OF THE FUTURE INDEBTEDNESS
SECTION 2.1. CERTAIN AGREEMENTS. On the Closing Date and subject
to Section 2.2 and the other terms and provisions hereof:
(a) ECIC and EnCap LP agree to consent to the execution and
delivery by Future of the Merger Agreement and the Senior Credit Facility.
(b) ECIC and EnCap LP agree to execute and deliver that certain
Master Subordination Agreement by and among ECIC, EnCap LP and Senior Lender
dated as of even date herewith, substantially in the form of such document
attached hereto as Exhibit 2.1(b) in all material respects (the "SUBORDINATION
AGREEMENT").
(c) Future agrees to pay in full the Gecko Booty Note.
(d) Future agrees to make a payment of principal on the ECIC May
1998 Renewal Note in the amount of $754,065.03.
(e) Future agrees to make a payment of principal on the EnCap LP
May 1998 Renewal Note in the amount of $830,934.97.
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(f) Future agrees to execute and deliver to ECIC that certain
Amendment to ECIC Renewal Note substantially in the form of such document
attached hereto as Exhibit 2.1(f) in all material respects (the "ECIC AMENDMENT
TO NOTE").
(g) Future agrees to execute and deliver to EnCap LP that certain
Amendment to Renewal Note substantially in the form of such document attached
hereto as Exhibit 2.1(g) in all material respects (the "ENCAP AMENDMENT TO
NOTE").
(h) Future agrees to execute and deliver (or cause to be executed
and delivered) to ECIC and EnCap LP the Additional Security Documents.
(i) Future agrees to issue the Closing Shares as provided in
Section 2.2.
SECTION 2.2. CERTAIN CONDITIONS PRECEDENT.
(a) The obligations of the parties under Section 2.1 and elsewhere
herein shall be subject to the following conditions precedent:
(i) The Merger Agreement shall have been executed and
delivered by the parties thereto and the transactions to be
consummated thereunder at closing shall have been consummated.
(ii) The Senior Credit Facility shall have been executed
and delivered by the Senior Lender and the transactions to be
consummated thereunder at closing shall have been consummated.
(iii) The Subordination Agreement shall have been executed
and delivered by the Senior Lender.
(b) The obligations of ECIC under Section 2.1 and elsewhere herein
shall be further subject to the receipt by it on the Closing Date of a stock
certificate or certificates evidencing 1,373,077 shares of Common Stock.
(c) The obligations of EnCap LP under Section 2.1 and elsewhere
herein shall be further subject to the receipt by it on the Closing Date of a
stock certificate or certificates evidencing 1,471,783 shares of Common Stock.
(d) The obligations of ECIC and EnCap LP under Section 2.1 and
elsewhere herein shall be further subject to the receipt by it on the Closing
Date of the following:
(i) Certificates of existence and good standing with
respect to Future, Future-CAL, Future Texas, Future Nevada, Future
LP, BMC LP and NCI-Shawnee LP.
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<PAGE> 11
(ii) Copies certified by the Board of Directors or General
Partners, as applicable, of resolutions adopted by Future, Future
Texas, Future Nevada, Future LP, BMC LP, NCI-Shawnee LP and Future
CAL-TEX, as necessary, with respect to the execution, delivery and
performance of this Agreement, the ECIC Amendment to Note, the EnCap
LP Amendment to Note and the Additional Security Documents.
(iii) Opinion of Kruse, Landa & Maycock LLP reasonably
acceptable to ECIC and EnCap LP dated the Closing Date and covering
the matters described in Exhibit 2.2(d)(iii).
SECTION 2.3. AGREEMENT REGARDING TREATMENT OF TRANSACTION. The
parties hereto agree that the transactions contemplated by this Agreement shall
be treated for U.S. federal income tax purposes as a "recapitalization" of
Future under Section 368(a)(1)(E) of the Internal Revenue Code, and as an
exchange of the ECIC May 1998 Renewal Note for the ECIC Amended Renewal Note
and of the EnCap LP May 1998 Renewal Note for the EnCap Amended Renewal Note
plus the Closing Shares, and that all indebtedness involved in such exchange
shall be treated as "securities" under Section 354 of the Internal Revenue Code
to the extent permitted by applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ECIC AND ENCAP LP
Each of ECIC and EnCap LP hereby severally and as to itself
represents and warrants to Future as follows:
SECTION 3.1. ORGANIZATION AND EXISTENCE. It is duly formed and
validly existing under the laws of the jurisdiction of its formation.
SECTION 3.2. POWER AND AUTHORITY. It has all requisite power and
authority to execute, deliver, and perform this Agreement and each other
Agreement, instrument, or document executed or to be executed by it in
connection with the transactions contemplated hereby to which it is a party and
to consummate the transactions contemplated hereby and thereby. The execution,
delivery, and performance by it of this Agreement and each other Agreement,
instrument, or document executed or to be executed by it in connection with the
transactions contemplated hereby to which it is a party, and the consummation
by it of the transactions contemplated hereby and thereby, have been duly and
validly authorized by all necessary action on its part.
SECTION 3.3. VALID AND BINDING AGREEMENT. This Agreement has been
duly executed and delivered by it and constitutes, and each other Agreement,
instrument, or document executed or to be executed by it in connection with the
transactions contemplated hereby to which it is a party has been, or when
executed will be, duly executed and delivered by it and
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constitutes, or when executed and delivered will constitute, a valid and
legally binding obligation of it, enforceable against it in accordance with
their respective terms, except that such enforceability may be limited by (a)
applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws
affecting creditors' rights generally and (b) equitable principles which may
limit the availability of certain equitable remedies (such as specific
performance) in certain instances.
SECTION 3.4. NON-CONTRAVENTION. Neither the execution, delivery, and
performance by it of this Agreement and each other Agreement, instrument, or
document executed or to be executed by it in connection with the transactions
contemplated hereby to which it is a party 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 its partnership Agreement or other
governing instruments, (b) conflict with or result in a violation of any
provision of, or constitute (with or without the giving of notice or the
passage of time or both) a default under, or give rise (with or without the
giving of notice or the passage of time or both) to any right of termination,
cancellation, or acceleration under, any bond, debenture, note, mortgage,
indenture, lease, contract, Agreement, or other instrument or obligation to
which it is a party or by which it or any of its properties may be bound, (c)
result in the creation or imposition of any lien or other encumbrance upon its
properties, or (d) violate any applicable law, rule or regulation binding upon
it.
SECTION 3.5. APPROVALS. No consent, approval, order, or authorization
of, or declaration, filing, or registration with, any court or governmental
agency or of any third party is required to be obtained or made by it in
connection with the execution, delivery, or performance by it of this Agreement
and each other Agreement, instrument, or document executed or to be executed by
it in connection with the transactions contemplated hereby to which it is a
party or the consummation by it of the transactions contemplated hereby and
thereby.
SECTION 3.6. PENDING LITIGATION. There are no pending suits,
actions, or other proceedings in which it is a party which affect the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
SECTION 3.7. INVESTMENT EXPERIENCE. It is able to bear the economic
risks of its investment in the Closing Shares, and consequently without limiting
the generality of the foregoing, it is able to hold the Closing Shares acquired
pursuant to the terms hereof for an indefinite period of time and has a
sufficient net worth to sustain a loss of all or a portion of its investment in
the Closing Shares in the event such loss should occur. It has such knowledge
and experience in financial and business matters that it is capable of
evaluating the risks and merits of an investment in the Closing Shares.
SECTION 3.8. INVESTMENT INTENT. It is acquiring the Closing Shares
for its own account for investment and not with view to the distribution,
resale, subdivision, or
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fractionalization thereof, and it has no present plans to enter into any
contract, undertaking, Agreement, or arrangement for any such distribution,
resale, subdivision, or fractionalization.
SECTION 3.9. RESTRICTED SECURITIES. It is aware that it must bear
the economic risk of its investment in the Closing Shares for an indefinite
period of time because the Closing Shares have not been registered under the
Securities Act or under the securities laws of any state of the United States,
and therefore cannot be sold unless they are subsequently registered under the
Securities Act and any applicable state securities laws or unless an exemption
from such registration is available. It also recognizes that no U.S. federal or
state agency has passed upon the Closing Shares to be issued hereunder to date
or made any finding or determination as to the fairness of an investment in such
shares. It agrees that the Closing Shares acquired by it hereunder shall not be
sold, assigned, pledged, hypothecated or otherwise transferred unless they are
registered under the Securities Act and applicable state securities laws or
unless an exemption from such registration is available.
SECTION 3.10. LEGEND. It acknowledges that a legend in substantially
the following form will be placed on any certificate(s) evidencing the Closing
Shares issued hereunder:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS AND ARE "RESTRICTED
SECURITIES" WITHIN THE MEANING OF RULE 144 PROMULGATED UNDER
THE SECURITIES ACT. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT
COMPLYING WITH RULE 144 IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION OR OTHER COMPLIANCE WITH THE SECURITIES ACT."
It further understands that Future may refuse to register transfer of the
Closing Shares issued hereunder in the absence of compliance with Rule 144
unless it furnishes Future with a "no-action" or interpretive letter from the
Commission or an opinion of counsel reasonably acceptable to Future stating
that the transfer may be effected without registration under the Securities
Act.
SECTION 3.11. ACCURACY OF INFORMATION. All information which such it
has provided to Future or its agents or representatives concerning its
suitability to hold the Closing Shares following the transactions contemplated
hereby is complete, accurate and correct.
SECTION 3.12. NO SOLICITATION. It was not any time solicited by any
leaflet, public promotional meeting, circular, newspaper or magazine article,
radio or television advertisement, or any other form of general advertising or
solicitation in connection with the offer, sale or purchase of the Closing
Shares under this Agreement.
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SECTION 3.13. ACCREDITED INVESTOR. It is an "accredited investor,"
as such term is defined in Regulation D promulgated pursuant to the Securities
Act.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FUTURE
Future represents and warrants to ECIC and EnCap LP as follows:
SECTION 4.1. ORGANIZATION AND EXISTENCE. Future is a corporation
duly organized, legally existing and in good standing under the laws of the
State of Utah.
SECTION 4.2. POWER AND AUTHORITY. Future has full corporate power
and corporate authority to execute, deliver, and perform this Agreement and
each other Agreement, instrument, or document executed or to be executed by it
in connection with the transactions contemplated hereby to which it is a party
and to consummate the transactions contemplated hereby and thereby. The
execution, delivery, and performance by Future of this Agreement and each other
Agreement, instrument, or document executed or to be executed by Future 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 Future.
SECTION 4.3. VALID AND BINDING AGREEMENT. This Agreement has been
duly executed and delivered by Future and constitutes, and each other
Agreement, instrument, or document executed or to be executed by Future 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 Future and
constitutes, or when executed and delivered will constitute, a valid and
legally binding obligation of Future, enforceable against it in accordance with
their respective terms, except that such enforceability may be limited by (a)
applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws
affecting creditors' rights generally and (b) equitable principles which may
limit the availability of certain equitable remedies (such as specific
performance) in certain instances.
SECTION 4.4. NON-CONTRAVENTION. The execution, delivery, and
performance by Future of this Agreement and each other Agreement, instrument,
or document executed or to be executed by Future 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 Future, (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
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<PAGE> 15
which Future is a party or by which Future or any of its properties may be
bound, (c) except as contemplated by this Agreement, result in the creation or
imposition of any lien or other encumbrance upon the properties of Future, or
(d) violate any applicable law, rule or regulation binding upon Future.
SECTION 4.5. APPROVALS. No consent, approval, order, or
authorization of, or declaration, filing, or registration with, any court or
governmental agency or of any third party is required to be obtained or made by
Future in connection with the execution, delivery, or performance by Future of
this Agreement and each other Agreement, instrument, or document executed or to
be executed by Future in connection with the transactions contemplated hereby
to which it is a party or the consummation by it of the transactions
contemplated hereby and thereby, other than compliance with any applicable
requirements of the Securities Act and any applicable state securities laws.
SECTION 4.6. PENDING LITIGATION. There are no pending suits,
actions, or other proceedings in which Future is a party which affect the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
SECTION 4.7. NOVEMBER 1997 AGREEMENT. Future is in compliance in
all material respects with the terms and provisions of Articles X and XI of the
November 1997 Agreement.
SECTION 4.8. CLOSING SHARES. The Closing Shares have been duly
authorized for such issuance and, when issued and delivered by Future in
accordance with the provisions of this Agreement, will be validly issued, fully
paid, and nonassessable. The issuance of the Closing Shares under this
Agreement is not subject to any preemptive or similar rights.
SECTION 4.9. SEC FILINGS. Except as otherwise disclosed to ECIC and
EnCap LP, Future is current in its obligations to file all periodic reports and
proxy statements with the Commission required to be filed under the Exchange
Act. Future's Annual Report on Form-10KSB for the year ended December 31,
1997, Future's Form 8-K/A filed on February 27, 1998, and Future's Quarterly
Report on Form-10QSB for the quarter ending March 31, 1998 (collectively, the
"SEC DOCUMENTS") are all of the documents the Future was required to file with
the Commission since January 1, 1998. As of their respective dates, the SEC
Documents complied as to form in all material respects with the requirements of
the Exchange Act and the rules and regulations of the Commission thereunder
applicable to such SEC Documents. The SEC Documents do not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of circumstances then existing. The audited Consolidated financial
statements and unaudited Consolidated interim financial statements of Future
included in the SEC Documents comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the Commission with respect thereto; present fairly in all material
respects, in conformity with GAAP applied on a consistent basis, the
Consolidated financial position of Future as of the dates thereof and its
Consolidated results of operations and changes in financial position for the
periods then ended
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(subject to normal year-end adjustments in the case of the unaudited interim
financial statements and the fact that certain information and notes have been
condensed or omitted in accordance with the Exchange Act and the rules
promulgated thereunder); and are in all material respects in accordance with
the books of account and records of Future and its subsidiaries. There are no
material liabilities of Future (contingent or otherwise), other than as
disclosed in the SEC Documents and the financial statements included therein
and except as contemplated by the Senior Credit Facility.
ARTICLE V
PREPAYMENTS OF THE AMENDED RENEWAL NOTES
SECTION 5.1. OPTIONAL PREPAYMENTS. Future may, upon five business
days' notice to the holders of the Amended Renewal Notes, from time to time and
without premium or penalty prepay the Amended Renewal Notes, in whole or in
part, so long as the aggregate amount of each partial prepayment of principal
on the Amended Renewal Notes 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 5.2. PREPAYMENTS ON THE SALE OF ASSETS. In the event that
Future 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"), Future shall, no later than two business days after such
sale, transfer or assignment is consummated, make a prepayment of the Future
Renewal Notes in an amount equal to the Designated Amount. Each holder of a
Amended Renewal Note shall be entitled to receive a pro rata share of the
Designated Amount, which pro rata share shall be determined by dividing the
then outstanding principal balance of such holder's Amended Renewal Note by the
sum of the then outstanding principal balances of the Amended Renewal Notes.
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.
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<PAGE> 17
"EXCESS PROCEEDS" shall mean, when used with respect to a
Subject Property, the cash proceeds received by Future 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 a holder of a Amended Renewal 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 5.3. PREPAYMENTS UPON THE OCCURRENCE OF A LIQUIDITY EVENT.
Upon receipt by Future of cash as a result of a Liquidity Event (as defined
below), Future shall, no later than two business days thereafter, make a
prepayment of the Amended Renewal Notes 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
Future of equity or debt securities for cash (exclusive, however, of
any offering of securities by Future in connection with any merger or
consolidation of Future with another entity).
"NET PROCEEDS" shall mean the aggregate cash proceeds received
by Future as a result of the Liquidity Event minus (a) the transaction
costs incurred by Future in connection with such Liquidity Event and
(b) that portion of the cash proceeds paid by Future to the Senior
Lender under the terms of the Senior Credit Facility.
Each holder of a Amended Renewal Note shall be entitled to receive a pro rata
share of any amount paid under this Section, which pro rata share shall be
determined by dividing the then outstanding principal balance of such holder's
Amended Renewal Note by the sum of the then outstanding principal balances of
the Amended Renewal Notes. Any amounts so received by a holder of a Amended
Renewal Note shall be applied first against any accrued but unpaid interest on
such note and second against the outstanding principal amount of such note.
ARTICLE VI
AFFIRMATIVE COVENANTS OF FUTURE
To induce ECIC and EnCap LP to enter into this Agreement, Future
warrants, covenants and agrees that until the full and final payment of the
Obligations, unless ECIC and EnCap LP have previously otherwise agreed:
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SECTION 6.1. PAYMENT AND PERFORMANCE. Future will pay all amounts
due under the Amended Renewal Notes in accordance with the terms thereof and
will observe, perform and comply with every covenant, term and condition
expressed or implied in this Agreement. Future will cause each of its
Subsidiaries to observe, perform and comply with every such term, covenant and
condition.
SECTION 6.2. BOOKS, FINANCIAL STATEMENTS AND REPORTS. Future and
each of its Subsidiaries will at all times maintain full and accurate books of
account and records. Future will maintain and will cause its Subsidiaries to
maintain a standard system of accounting, will maintain its Fiscal Year, and
will furnish the following statements and reports to each of ECIC and EnCap LP
at Future'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 Future 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 Future and acceptable to ECIC and EnCap LP,
stating that such Consolidated financial statements have been so prepared.
These financial statements shall contain a Consolidated balance sheet as of the
end of such Fiscal Year and Consolidated statements of earnings, of cash flows,
and of changes in owners' equity for such Fiscal Year, each setting forth in
comparative form the corresponding figures for the preceding Fiscal Year.
(b) As soon as available, and in any event within fifty (50) days
after the end of each Fiscal Quarter, Future's Consolidated balance sheet as
of the end of such Fiscal Quarter and Consolidated statements of Future'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 Future 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 ECIC and EnCap LP signed by the chief financial officer of Future
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 Future to
its stockholders and all registration statements, periodic reports and other
statements and schedules filed by Future 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
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attributable to the interest of the Future 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 ECIC and EnCap LP 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 Future, escalated at the same rate, if any, being
applied to prices, and (3) such other assumptions as shall be reasonably
acceptable to ECIC and EnCap LP.
(e) Promptly, such other information with respect to the business
and operations of Future and its Subsidiaries, as ECIC and EnCap LP may
reasonably request.
SECTION 6.3. NOTICE OF MATERIAL EVENTS AND CHANGE OF ADDRESS. Future
will promptly notify each of ECIC and EnCap LP 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 Future or any Subsidiary thereof or of any default by any Future 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 Future or any
Subsidiary thereof or with respect to Future or any of such
Subsidiary's properties, and
(e) the filing of any suit or proceeding against Future or
any Subsidiary thereof in which an adverse decision could cause a
Material Adverse Change.
Upon the occurrence of any of the foregoing Future 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. Future will also notify
ECIC and EnCap LP in writing at least twenty business days prior to the date
that Future or any Subsidiary thereof changes its name or the location of its
chief executive
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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 ECIC and EnCap LP to prepare the
same.
SECTION 6.4. MAINTENANCE OF PROPERTIES. Future 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 6.5. MAINTENANCE OF EXISTENCE AND QUALIFICATIONS. Future
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 6.6. PAYMENT OF TRADE LIABILITIES, TAXES, ETC. Future 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. Future 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 6.7. INSURANCE. Future 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 ECIC and EnCap LP any insurance
policies covering Collateral shall be endorsed (a) to provide for payment of
losses to ECIC and EnCap LP 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 ECIC and EnCap LP.
SECTION 6.8. COMPLIANCE WITH AGREEMENTS AND LAW. Future 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. Future and each of its Subsidiaries will conduct its business and
affairs in compliance with all laws applicable thereto.
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SECTION 6.9. AGREEMENT TO DELIVER SECURITY DOCUMENTS. Future
agrees to deliver and to cause each of its Subsidiaries to deliver, to further
secure the Amended Renewal Notes whenever requested by ECIC and EnCap LP in
their sole and absolute discretion, deeds of trust, mortgages, chattel
mortgages, security agreements, financing statements and other Security
Documents in form and substance satisfactory to them for the purpose of
granting, confirming, and perfecting liens or security interests in any real or
personal property now owned or hereafter acquired by Future and any such
Subsidiary.
SECTION 6.10. PERFECTION AND PROTECTION OF SECURITY INTERESTS AND
LIENS. Future will from time to time deliver, and will cause each of its
Subsidiaries from time to time to deliver, to ECIC and EnCap LP any financing
statements, continuation statements, extension agreements and other documents,
properly completed and executed (and acknowledged when required) by Future or
any such Subsidiary in form and substance satisfactory to ECIC and EnCap LP,
which they request for the purpose of perfecting, confirming, or protecting any
Liens or other rights in Collateral securing any Obligations.
SECTION 6.11. DESIGNATION OF AGENT FOR SALE. If either (a) the
Amended Renewal Notes have not been paid in full within the two-year period
commencing the Closing Date or (b) the PDP Reserves to Debt Ratio is less than
1.0 to 1.0 at any time after the Closing for a period of 180 consecutive days,
Future agrees (i) that upon the written request of holders of the Amended
Renewal Notes, it will retain a person designated by such holders for the
express purpose of locating a buyer for all or substantially all of the assets
of Future (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, Future 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, Future 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 VII
NEGATIVE COVENANTS OF FUTURE
To induce ECIC and EnCap LP to enter into this Agreement, Future
warrants, covenants and agrees that until the full and final payment of the
Obligations, unless ECIC and EnCap LP have previously otherwise agreed:
SECTION 7.1. INDEBTEDNESS. Neither Future nor any Subsidiary thereof
will in any manner owe or be liable for Indebtedness except:
(a) the Obligations;
(b) the Senior Credit Facility;
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(c) obligations under operating leases entered into in the
ordinary course of Future's or its Subsidiaries' business in arm's length
transactions at competitive market rates under competitive terms and conditions
in all respects;
(d) Indebtedness owed by Future or any Subsidiary thereof which is
subordinated to the Obligations upon terms and conditions satisfactory to ECIC
and EnCap LP in their sole and absolute discretion;
(e) 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;
(f) Indebtedness in the principal amount of approximately $20,000
owed Bank One Texas on a workover rig; and
(g) Indebtedness in the principal amount of approximately $20,000
owed Sam Henderson.
SECTION 7.2. LIMITATION ON LIENS. Neither Future 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) 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.
(d) Liens securing Indebtedness described in Section 7.1(e).
(e) Existing Lien in favor of Sam Henderson covering properties
located in Wichita County, Texas.
(f) Existing Lien in favor of Bank One Texas on the Indebtedness
described in Section 7.1 (f).
SECTION 7.3. LIMITATION ON MERGERS. Except as expressly provided in
this Section and exclusive of the merger contemplated by the Merger Agreement,
neither Future nor any Subsidiary thereof will merge or consolidate with or
into any other business entity. Any
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Subsidiary of Future may, however, be merged into or consolidated with either
Future or another Subsidiary which is wholly-owned by Future, so long as Future
or the Subsidiary wholly-owned by Future is the surviving business entity.
Future 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 Future 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 Future. No
Subsidiary of Future which is a partnership will allow any diminution of
Future's interest (direct or indirect) therein.
SECTION 7.4. LIMITATION ON SALES OF PROPERTY. Neither Future 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 7.5. LIMITATION ON INVESTMENTS AND NEW BUSINESSES. Neither
Future 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 7.6. TRANSACTIONS WITH AFFILIATES. Neither Future 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 Future and its wholly-owned Subsidiaries.
SECTION 7.7. RESTRICTED PAYMENTS. Future 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.
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ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.1. EVENTS OF DEFAULT. Each of the following constitutes
an "EVENT OF DEFAULT" for purposes of the Amended Renewal Notes and this
Agreement:
(a) a default in the payment of principal of any Amended Renewal
Note when and as the same shall become due and payable;
(b) a default in the payment of any interest upon any Amended
Renewal 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 VI or Article VII, which
default is not remedied within 30 days after the earlier of (i) the day on
which Future first obtains knowledge of such default or (ii) the day on which
written notice thereof is given to Future by the holder of any Amended Renewal
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 Future by the holder of any Amended Renewal 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 Future 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 Future first obtains knowledge of such default or (ii) the day on
which written notice thereof is given to Future by the holder of any Amended
Renewal Note;
(g) Future 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 or any other Agreement or
instrument, if such Agreement or instrument is materially significant to Future
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;
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<PAGE> 25
(i) Future 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 Future 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,
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<PAGE> 26
declaration or notice of acceleration, or any other notice or declaration of
any kind, all of which are hereby expressly waived by Future and each such
Subsidiary. Upon the occurrence of an Event of Default described in
subsection (a) or subsection (b), any holder of a Amended Renewal Note may
during its continuance, by written notice to Future declare the Amended Renewal
Note held by it to be due and payable, whereupon such Amended Renewal Note
shall forthwith mature and become due and payable. Upon the occurrence of any
other Event of Default, the Majority of Noteholders may at any time during its
continuance, declare all of the Amended Renewal Notes to be due and payable,
whereupon all of the Amended Renewal Notes shall forthwith mature and become
due and payable. As used in the immediately preceding sentence, the term
"MAJORITY OF THE NOTEHOLDERS" shall mean those holder(s) of Amended Renewal
Notes who hold 51% in aggregate principal amount of the Amended Renewal Notes
at the time outstanding, exclusive of any Amended Renewal Notes held by Future
or any Subsidiary.
SECTION 8.2. REMEDIES. If any Default shall occur and be
continuing, each Seller may protect and enforce its rights under the Note
Documents by any appropriate proceedings, including proceedings for specific
performance of any covenant or Agreement contained in any Note Document, and
each holder of a Amended Renewal 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 holders of the
Amended Renewal Notes 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 IX
NOTICES
All notices and other communications required under this Agreement
shall (unless otherwise specifically provided herein) be in writing and be
delivered personally, by recognized commercial courier or delivery service
(which provides a receipt), by telecopier (with receipt acknowledged), or by
registered or certified mail (postage prepaid), at the following addresses:
If to ECIC or EnCap LP: Energy Capital Investment Company PLC
EnCap Equity 1994 Limited Partnership
% EnCap Investments L.C.
1100 Louisiana
Suite 3150
Houston, Texas 77002
Attention: Gary R. Petersen or Colin Nisbeth
Fax No.: 713-659-6130
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If to Future: 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 Future or a
holder of a Amended Renewal Note 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 X
MISCELLANEOUS
SECTION 10.1. WAIVER AND AMENDMENT. No failure or delay (whether
by course of conduct or otherwise) by any holder of a Amended Renewal Note in
exercising any right, power or remedy which such holder may have under any of
the Note Documents shall operate as a waiver thereof or of any other right,
power or remedy, nor shall any single or partial exercise by such holder of any
such right, power or remedy preclude any other or further exercise thereof or
of any other right, power or remedy. No waiver of any provision of any Note
Document and no consent to any departure therefrom shall ever be effective
unless it is in writing and signed as provided below in this section, and then
such waiver or consent shall be effective only in the specific instances and
for the purposes for which given and to the extent specified in such writing.
This Agreement and the other Note Documents set forth the entire understanding
between the parties hereto with respect to the transactions contemplated herein
and therein and supersede all prior discussions and understandings with respect
to the subject matter hereof and thereof; without limiting the foregoing, the
parties hereto agree that, upon consummation of the transactions contemplated
hereby, the terms and provisions of Articles X, XI and XII of the November
1997 Purchase Agreement shall be deemed terminated and of no further effect
whatsoever. No waiver, consent, release, modification or amendment of or
supplement to this Agreement or the other Note Documents shall be valid or
effective against any party hereto unless the same is in writing and signed by
such party.
SECTION 10.2. JOINT ACKNOWLEDGMENT. THIS WRITTEN AGREEMENT AND THE
OTHER NOTE DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
SECTION 10.3. SURVIVAL OF AGREEMENTS. All of Future's various
representations, warranties, covenants and agreements in the Note Documents
shall survive the execution and delivery of this Agreement and the other Note
Documents and the performance hereof and
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<PAGE> 28
thereof, and shall further survive until all of the obligations are paid in
full to the holders of the Amended Renewal Notes and all of such holders'
obligations to Future are terminated.
SECTION 10.4. PAYMENT OF EXPENSES.
(a) Future will promptly pay all reasonable costs and expenses
incurred by or on behalf of the holders of the Amended Renewal Notes
(including attorneys' fees, consultants' fees and engineering fees, travel
costs and miscellaneous expenses) in connection with (i) the negotiation,
preparation, execution and delivery of the Note Documents, and any and all
consents, waivers or other documents or instruments relating thereto, (ii) the
borrowing hereunder and other action reasonably required in the course of
administration hereof, (iii) monitoring or confirming (or preparation or
negotiation of any document related to) Future's compliance with any covenants
or conditions contained in this Agreement or in any Note Document, and (iv) all
reasonable costs and expenses incurred by or on behalf of a holder of a Amended
Renewal Note (including attorneys' fees, consultants' fees and accounting
fees) in connection with 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.
(b) Provided the transactions contemplated by the Agreement are
consummated, Future will also promptly pay all reasonable costs and expenses of
ECIC and EnCap LP (including attorneys' fees) in connection with the
negotiation, preparation, execution and delivery of the Merger Agreement and
any and all other documents or instruments relating thereto.
SECTION 10.5. GOVERNING LAW. THE NOTE DOCUMENTS SHALL BE DEEMED
CONTRACTS AND INSTRUMENTS MADE UNDER THE LAWS OF THE STATE OF TEXAS AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF TEXAS AND THE LAW OF THE UNITED STATES OF AMERICA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. FUTURE 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 10.6. LIMITATION ON INTEREST. The holders of the Amended
Renewal Notes, Future 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 Future 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
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<PAGE> 29
all other provisions of the Note Documents which may be in conflict or apparent
conflict herewith. Each holder of a Amended Renewal 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 Future 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 Future (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 10.7. SEVERABILITY. If any term or provision of any Note
Document shall be determined to be illegal or unenforceable all other terms and
provisions of the Note Documents shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable Law.
SECTION 10.8. COUNTERPARTS. This Agreement may be separately
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to
constitute one and the same Agreement.
SECTION 10.9. WAIVER OF JURY TRIAL; PUNITIVE DAMAGES, ETC. EACH OF
FUTURE, ECIC AND ENCAP LP HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND
IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY APPLICABLE LAW, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON,
OR DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION
WITH THE NOTE DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED
THEREWITH, BEFORE OR AFTER MATURITY; WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY
SUCH LITIGATION ANY "SPECIAL DAMAGES", AS DEFINED BELOW, CERTIFIES THAT NO
PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS LETTER AGREEMENT, THE
OTHER NOTE DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS
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<PAGE> 30
SECTION. AS USED IN THIS SECTION, "SPECIAL DAMAGES" INCLUDES ALL SPECIAL,
CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT
DOES NOT INCLUDE ANY PAYMENTS OR FUNDS WHICH ANY PARTY HERETO HAS EXPRESSLY
PROMISED TO PAY OR DELIVER TO ANY OTHER PARTY HERETO.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year set forth above.
FUTURE PETROLEUM CORPORATION, a
Utah Corporation
By: /s/ CARL PRICE
---------------------------------
Name: Carl Price
Title: President
ENERGY CAPITAL INVESTMENT
COMPANY PLC
By: /s/ GARY R. PETERSEN
---------------------------------
Name: Gary R. Petersen
Title: Director
ENCAP EQUITY 1994 LIMITED PARTNERSHIP
By: ENCAP INVESTMENTS L.C., General Partner
By: /s/ GARY R. PETERSEN
---------------------------------
Name: Gary R. Petersen
Title: Managing Director
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<PAGE> 1
EXHIBIT 4.9
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and
entered into as of this 14th day of August, 1998, by and among Future Petroleum
Corporation, a Utah corporation (the "COMPANY"), Energy Capital Investment
Company PLC, an English investment company ("ENERGY PLC"), and EnCap Equity 1994
Limited Partnership, a Texas limited partnership ("ENCAP LP").
RECITALS:
A. Reference is herein made to that certain Agreement and Plan of
Merger dated as of August 14, 1998 (the "MERGER AGREEMENT"), by and among the
Company, Future CALTEX Corporation, a Texas corporation, Bargo Energy Resources,
Ltd., a Texas limited partnership, and SCL-CAL Company, a Texas corporation.
B. Energy PLC and EnCap LP are the current record and beneficial owners
of an aggregate 1,850,000 shares of Common Stock (the "FUND I CURRENT SHARES").
In connection with the transaction contemplated by the Merger Agreement, Energy
PLC and EnCap LP have agreed to subordinate certain indebtedness owed to them by
the Company. As part of the consideration for such agreement, the Company will
issue to Energy PLC and EnCap LP an aggregate of 2,844,859 shares of Common
Stock (the "FUND I ADDITIONAL SHARES").
.
C. In order to induce Energy PLC and EnCap LP to subordinate the
indebtedness referenced in the immediately preceding paragraph (and recognizing
that they would not be willing to take the above described actions in the
absence of this Agreement), the Company has agreed to provide Energy PLC and
EnCap LP with the registration rights set forth herein.
AGREEMENT:
NOW, THEREFORE, for and in consideration of the foregoing Recitals and
the mutual covenants contained herein, the sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby agree
as follows:
SECTION 1. DEFINITIONS AND REFERENCES.
(a) When used in this Agreement, the following terms shall have the
respective meanings assigned to them in this Section 1 or in the sections,
subsections or other subdivisions referred to below:
"AGREEMENT" shall mean this Agreement, as hereafter changed, modified
or amended in accordance with the terms hereof.
"BARGO AGREEMENT" shall have the meaning assigned to it in Section
11(b).
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<PAGE> 2
"BARGO HOLDERS" shall mean "Holders," as such term is defined in the
Bargo Agreement.
"BARGO SECURITIES" shall mean "Registrable Securities," as such term is
defined in the Bargo Agreement.
"COMMISSION" shall mean the Securities and Exchange Commission (or any
successor body thereto).
"COMPANY" shall have the meaning assigned to it in the introductory
paragraph hereof.
"COMMON STOCK" shall mean the common stock of the Company, $0.01 par
value per share.
"DEMAND REGISTRATION" shall have the meaning assigned to it in Section
2(a).
"ENCAP LP" shall have the meaning assigned to it in the introductory
paragraph hereof.
"ENERGY PLC" shall have the meaning assigned to it in the introductory
paragraph hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and all rules and regulations promulgated under such Act.
"FUND I ADDITIONAL SHARES" shall have the meaning assigned to such term
in Paragraph B of the Recitals hereto.
"FUND I CURRENT SHARES" shall have the meaning assigned to such term in
Paragraph B of the Recitals hereto.
"FUND I SHARES" shall mean the Fund I Current Shares and the Fund I
Additional Shares.
"HOLDER" shall mean any Person that holds Registrable Securities.
"HOLDER INDEMNIFIED PARTIES" shall have the meaning assigned to it in
Section 6(a).
"MERGER AGREEMENT" shall have the meaning assigned to it in Paragraph A
of the Recitals hereto.
"PERSON" shall mean any individual, corporation, partnership, joint
venture, limited partnership, limited liability company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
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<PAGE> 3
"PIGGYBACK REGISTRATION" shall have the meaning assigned to it in
Section 3.
"REGISTRABLE SECURITIES" shall mean (i) the Fund I Shares and (ii) any
securities issued or issuable with respect to any of the shares described in
clause (i) above by way of a stock dividend or other distribution or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization; provided, that a share of Common Stock or
security described in clauses (i) and (ii) shall cease to be a Registrable
Security for purposes of this Agreement at such time as either (A) counsel to
the Company renders an opinion to the Holder of such share or security to the
effect that such share or security can be freely transferred without
registration under the Securities Act (which counsel and opinion shall be
reasonably acceptable to such Holder), (B) counsel to a Holder of such share or
security renders an opinion to the Company to the effect that such share or
security can be freely transferred without registration under the Securities Act
(which counsel and opinion shall be reasonably acceptable to the Company), (C)
securities for which a registration statement with respect to the sale of such
securities has become effective under the Securities Act and such securities
shall have been disposed of in accordance with such registration statement, (D)
such securities have been sold as permitted by Rule 144 (or any successor
provision) under the Securities Act and the purchaser thereof does not receive
"restricted securities" as defined in Rule 144, or (E) such securities shall
have ceased to be outstanding.
"REGISTRATION EXPENSES" shall mean all expenses incident to the
Company's performance of or compliance with the registration rights granted
hereunder, including (without limitation) all registration, filing, listing and
NASD fees, fees and expenses of compliance with securities and blue sky laws,
all word processing, duplicating, printing and engraving expenses, messenger,
telephone and delivery expenses, and fees and disbursements of counsel for the
Company, of its independent certified public accountants and any of its
independent reserve engineers, including the expenses of any special audits or
"cold comfort" letters required by or incident to such performance and
compliance, premiums and other costs of policies of insurance against
liabilities arising out of the public offering of the Registrable Securities
being registered, and fees and disbursements of underwriters (excluding
discounts and commissions); provided, that Registration Expenses shall not
include any Selling Expenses. Without limiting the generality of any other
provision hereof, no holder of Registrable Securities shall be responsible for
any allocation of general and administrative (including all employee and
compensation expenses) expenses incurred by the Company in connection with an
offering.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and
all rules and regulations under such Act.
"SELLING EXPENSES" shall mean underwriting discounts or commissions,
any selling commissions and stock transfer taxes attributable to sales of
Registrable Securities and the fees and expenses of counsel for any Holder.
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<PAGE> 4
(b) All references in this Agreement to sections, subsections and other
subdivisions refer to corresponding sections, subsections and other subdivisions
of this Agreement unless expressly provided otherwise. Titles appearing at the
beginning of any of such subdivisions are for convenience only and shall not
constitute part of such subdivisions and shall be disregarded in construing the
language contained herein. The words "this Agreement", "this instrument",
"herein", "hereof", "hereby", "hereunder" and words of similar import refer to
this Agreement as a whole and not to any particular subdivision unless expressly
so limited. Words in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise requires. Pronouns in masculine,
feminine and neuter genders shall be construed to include any other gender.
SECTION 2. DEMAND REGISTRATION RIGHTS.
(a) One or more Holders of not less than 20% of the Registrable
Securities ("Initiating Holders") then outstanding may request at any time after
the expiration of the one-year period commencing as of the date hereof a
registration by the Company under the Securities Act of all or a part its
Registrable Securities (a "DEMAND REGISTRATION").
(b) Notwithstanding subsection (a) above or anything else herein to the
contrary, the Company shall not be obligated to effect more than two
registrations pursuant to this Section 2; provided, however, that any
registration requested pursuant to this Section 2 will not be deemed to have
been effected (i) unless it has become effective and remained effective for the
lesser of (1) the period necessary to complete the sale or disposition of the
Registrable Securities covered by such registration statement, or (2) 180 days
after the effective date of such registration statement, except with respect to
any registration statement filed pursuant to Rule 415 under the Securities Act,
in which case the Company shall use its best efforts to keep such registration
statement effective until such time as all of the Registrable Securities cease
to be Registrable Securities; (ii) if, after it has become effective, such
registration is interfered with by any stop order, injunction or other order or
requirement of the Commission or other governmental agency or court for any
reason not attributable to the selling Holders and has not thereafter become
effective, or (iii) if the conditions to closing specified in the underwriting
agreement, if any, entered into in connection with such registration are not
satisfied or waived, other than solely by reason of a failure on the part of the
selling Holders; provided, further, that any such registration which does not
become effective after the Company has filed a registration statement in
accordance with the provisions of this Section 2 solely by reason of the refusal
to proceed of the Holder or Holders that have requested the Demand Registration
pursuant to subsection (a) above, including failure to comply with the
provisions of this Agreement (other than any refusal to proceed based upon the
advice of counsel to such Holder or Holders that the registration statement, or
the prospectus contained therein, contains an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing, or that such registration statement or such
prospectus, or the distribution contemplated thereby, otherwise violates or
would, if such distribution using such prospectus
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<PAGE> 5
took place, violate any applicable state or federal securities law) shall be
deemed to have been effected by the Company at the request of such Holder or
Holders.
(c) Notwithstanding subsection (a) above or anything else herein to the
contrary, it is hereby agreed that a Demand Registration must cover no less than
50% of the Registrable Securities then outstanding. In the event a Holder
requests that the Company effect a Demand Registration pursuant to this Section
2, the Company will (i) promptly give notice of the proposed registration to all
other Holders and (ii) use its reasonable best efforts to effect the
registration of the Registrable Securities specified in the request, together
with the Registrable Securities of any other Holder joining in such request as
are specified in a written request received by the Company within 20 days after
receipt of the notice referred to in clause (i) above.
(d) If the managing underwriter in any registration effected under this
Section 2 advises the Company that, in its reasonable opinion, the number of
securities requested to be included in such registration exceeds the number that
can be sold in such offering within a price range acceptable to the Holders of
66 2/3% of the Registrable Securities requested to be included in such
registration, the Company, except as provided in the following sentence, will
include in such registration, to the extent of the number and type that the
Company is so advised can be sold in such offering, Registrable Securities
requested to be included in such registration, pro rata among the Holders
requesting such registration on the basis of the estimated gross proceeds from
the sale thereof. If the total number of Registrable Securities requested to be
included in such registration cannot be included as provided in the preceding
sentence, holders of Registrable Securities requesting registration thereof
pursuant to this Section 2, representing not less than 33- 1/3% of the
Registrable Securities with respect to which registration has been requested and
constituting not less than 66 2/3% of the initiating Holders, shall have the
right to withdraw the request for registration by giving written notice to the
Company within 20 days after receipt of such notice by the Company and, in the
event of such withdrawal, such request shall not be counted for purposes of the
requests for registration to which holders of Registrable Securities are
entitled pursuant to this Section 2.
SECTION 3. PIGGYBACK REGISTRATION RIGHTS. If the Company proposes to
register any of its securities under the Securities Act other than (a) under
employee compensation or benefit programs, (b) an exchange offer or an offering
of securities solely to the existing stockholders or employees of the Company,
or (c) securities to be issued in a transaction described in Rule 145(a)
promulgated under the Securities Act, whether or not for sale for its own
account, and the registration form to be used may be used for the registration
of Registrable Securities, the Company will give prompt written notice to
Holders of Registrable Securities of its intention to effect such a registration
and will include in such registration all Registrable Securities with respect to
which the Company has received written requests for inclusion therein within 15
days after the receipt of the Company's notice (a "PIGGYBACK REGISTRATION"). The
Company shall use its reasonable best efforts to cause the managing underwriters
of a proposed underwritten offering to permit the Registrable Securities
requested to be included in the registration statement (or registration
statements) for such offering to be
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included therein on the same terms and conditions as any similar securities of
the Company included therein. Notwithstanding the foregoing, if the Company
gives notice of such a proposed registration, the total number of Registrable
Securities which shall be included in such registration shall be reduced pro
rata (on the basis of the estimated proceeds from the sale thereof) to such
number, if any, as in the reasonable opinion of the managing underwriters of
such offering would not adversely affect the marketability or offering price of
all of the securities proposed to be offered by the Company in such offering;
provided however, that (i) if such Piggyback Registration is incident to a
primary registration on behalf of the Company, the securities to be included in
the registration statement (or registration statements) for any Person other
than the Holders, the Bargo Holders (if the Bargo Holders have exercised their
rights under Section 3 of the Bargo Agreement) and the Company shall be first
reduced prior to any such pro rata reduction and (ii) if such Piggyback
Registration is incident to a secondary registration on behalf of holders of
securities of the Company, the securities to be included in the registration
statement (or registration statements) for any Person not exercising "demand"
registration rights other than the Holders and the Bargo Holders (if the Bargo
Holders have exercised their rights under Section 3 of the Bargo Agreement)
shall be first reduced prior to any such pro rata reduction; provided, further,
that if (1) the Holders have made a request under this Section 3 and the Bargo
Holders have made a request under Section 3 of the Bargo Agreement and (2) all
of the Registrable Securities of the Holders and all of the Bargo Securities of
the Bargo Holders cannot be included in the registration statement(s) under the
terms of such sections, the total number of Registrable Securities of the
Holders and the Bargo Securities of the Bargo Holders which shall be included in
such registration shall be reduced pro rata to such number, if any, as in the
reasonable opinion of the managing underwriters of such offering would not
adversely affect the marketability or offering price of all of the securities
proposed to be offered by the Company in such offering. Subject to any
applicable underwriting agreement, any Holder of Registrable Securities may
withdraw at any time any Registrable Securities registered under this Section 3.
No registration effected under this Section 3 shall relieve the Company of its
obligation to effect any registration upon request under Section 2.
SECTION 4. REGISTRATION PROCEDURES.
(a) Whenever the Holders have requested that any Registrable Securities
be registered pursuant to Section 2 or Section 3, the Company will as
expeditiously as possible:
(i) prepare and file with the Commission a registration statement
on the appropriate form with respect to such Registrable Securities,
and use its reasonable best efforts to cause such registration
statement to become and remain effective as soon as reasonably
practicable after the filing thereof (provided, that before filing a
registration statement or prospectus or any amendments or supplements
thereto, the Company will furnish copies of all such documents proposed
to be filed to any Holder covered by such registration statement);
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<PAGE> 7
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective until the earlier of (1)such time as all of such
Registrable Securities covered by such registration statement have been
sold (but not before the expiration of the applicable prospectus
delivery period) or (2) 180 days after the effective date of such
registration statement, except with respect to any registration
statement filed pursuant to Rule 415 under the Securities Act, in which
case the Company shall use its best efforts to keep such registration
statement effective until such time as all of the Registrable
Securities covered thereby cease to be Registrable Securities; and
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration
statement;
(iii) notify each Holder of Registrable Securities covered by the
registration statement ("SELLER") promptly after the Company shall
receive notice thereof of the time when such registration statement has
been filed;
(iv) furnish to each seller of Registrable Securities such number
of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement
(including, without limitation, each preliminary prospectus) and such
other documents as such Seller may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such
seller (it being understood that the Company consents to the use of the
prospectus and any amendment or supplement thereto by each Seller and
the underwriter or underwriters, if any, in connection with the
offering and sale of Registrable Securities covered by the prospectus
or any amendment or supplement thereto);
(v) use its reasonable best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of
such jurisdictions within the United States as any Seller reasonably
requests, to keep such registration or qualifications in effect for so
long as such registration statement remains in effect, and do any and
all other acts and things which may be reasonably necessary or
advisable to enable such seller to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such Seller
(provided that the Company will not be required to qualify generally to
do business or subject itself to any general service of process in any
jurisdiction where it is otherwise not then so subject);
(vi) notify each Seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event (including those set
forth in clauses (1) through (6) of paragraph (vii) below) which
requires the making of any change in the prospectus included in such
registration statement so that such document will not contain an untrue
statement of a
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<PAGE> 8
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading,
and, at the request of any such Seller, the Company will promptly
prepare and furnish to such Seller and each underwriter, if any, a
reasonable number of copies of a supplement or amendment to such
prospectus so that such prospectus will not contain an untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading;
(vii) The Company will also notify each Seller promptly, and (if
requested by a Seller) confirm such notice in writing, (1) when a
prospectus or any prospectus supplement or post-effective amendment has
been filed and, with respect to a registration statement or any
post-effective amendment, when the same has become effective under the
Securities Act and each applicable state law, (2) of any request by the
Commission or any other federal or state governmental authority for
amendments or supplements to a registration statement or related
prospectus or for additional information, (3) of the issuance by the
Commission of any stop order suspending the effectiveness of a
registration statement or the initiation of any proceedings for that
purpose, (4) if at any time the representations or warranties of the
Company or any subsidiary contained in any agreement (including any
underwriting agreement) contemplated hereby cease to be true and
correct in any material respect, (5) of the receipt by the Company of
any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for
sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, or (6) of the Company's reasonable
determination that a post-effective amendment to a registration
statement would be appropriate;
(viii) use its reasonable best efforts to cause all such
Registrable Securities to be listed on each securities exchange or
exchanges, automated quotation system or over-the-counter market upon
which securities of the Company of the same class are then listed;
(ix) enter into such customary agreements (including, without
limitation, underwriting agreements in customary form, substance and
scope) and take all such other action as the Holders of a majority of
the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition
of such Registrable Securities;
(x) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission and applicable state
securities authorities;
(xi) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending
or preventing the use of any related prospectus or suspending the
qualification of any Registrable Securities included in such
registration statement for sale in any jurisdiction, the
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<PAGE> 9
Company will use its reasonable best efforts promptly to obtain the
withdrawal of such order;
(xii) use its reasonable best efforts to cause such Registrable
Securities covered by such registration statement to be registered with
or approved by such other governmental agencies or authorities as may
be necessary to enable the Sellers thereof to consummate the
disposition of such Registrable Securities;
(xiii) in connection with an underwritten public offering of
securities, use its reasonable best efforts to obtain a signed
counterpart of a comfort letter from the Company's public accountants
in customary form and covering such matters of the type customarily
covered by comfort letters with respect to offerings of the type being
made pursuant to the registration statement as the Sellers reasonably
request and an opinion of counsel for the Company covering such matters
with respect to such registration statement as are customarily covered
in opinions of issuer's counsel and delivered to the underwriters in
underwritten public offerings of securities;
(xiv) the Company shall make available for inspection by the
sellers of such Registrable Securities, any underwriter participating
in any distribution pursuant to such registration statement and any
attorney, accountant or other professional retained by the Holder or
underwriter (in this paragraph collectively referred to as
"INSPECTORS"), all financial and other records, pertinent corporate
documents and properties of the Company as shall be reasonable
necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such
inspectors in connection with such registration statement;
(xv) cause representatives of the Company to participate in any
"road show" or "road shows" reasonably requested by any underwriter of
an underwritten or "best efforts" offering of any Registrable
Securities; and
(xvi) provide and cause to be maintained a transfer agent and
registrar (which, in each case, may be the Company) for all Registrable
Securities covered by such registration agreement from and after a date
not later than the effective date of such registration.
(b) Whenever the Holders of Registrable Securities have requested that
any Registrable Securities be registered pursuant to Section 2 or Section 3,
each Holder of Registrable Securities (including Registrable Securities in any
registration statement filed pursuant to this Agreement) will be deemed to have
agreed as follows:
(i) upon receipt of notice from the Company of the happening of any
event of the kind described in Section 4(a)(vi), the Holders of
Registrable Securities covered by such registration statement will
forthwith discontinue disposition of any such
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<PAGE> 10
Registrable Securities . until the Holders of Registrable Securities
receive copies of the supplemented or amended prospectus contemplated
by Section 4(a)(vi), or until they are advised in writing by the
Company that the use of the applicable prospectus may be resumed, and
they have received copies of any additional or supplemental filings
that are incorporated or deemed to be incorporated by reference in such
prospectus (it being the agreement of the parties hereto, however, that
the obligation of the Company with respect to maintaining the subject
registration statement current and effective shall be extended by a
period of days equal to the period the Holders of Registrable
Securities are required by this Section 4(b)(i) to discontinue
disposition of such Registrable Securities); and
(ii) furnish to the Company such information regarding each Seller,
the Registrable Securities held by such Seller, and the intended method
of disposition thereof as the Company shall reasonably request and as
shall be reasonably required in connection with the preparation of the
applicable registration statement and other actions taken by the
Company under this Agreement, and it shall be a condition precedent to
the obligation of the Company to take any action pursuant to this
Agreement in respect of the Registrable Securities owned by a Seller
that such information has been furnished to the Company by such Seller.
SECTION 5. EXPENSES OF REGISTRATION. The Company shall pay all
Registration Expenses in connection with each registration effected pursuant to
Sections 2 and 3. All Selling Expenses incurred by a Seller in connection with a
registration effected pursuant to the terms hereof shall be borne by such Seller
SECTION 6. INDEMNIFICATION.
(a) The Company shall indemnify and hold harmless, with respect to any
registration statement filed by it, to the full extent permitted by law, each
Holder of Registrable Securities covered by such registration statement, its
directors, officers, partners, agents, employees and each other Person, if any,
who controls such Holder within the meaning of Section 15 of the Securities Act
(collectively, "HOLDER INDEMNIFIED PARTIES") against all losses, claims,
damages, liabilities and expenses (including reasonable costs of investigation),
joint or several, to which any such Holder Indemnified Party may become subject
under the Securities Act, the Exchange Act, at common law or otherwise, insofar
as such losses, claims, damages, liabilities or expenses (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in any registration statement in which such Registrable
Securities were included as contemplated hereby or any omission or
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<PAGE> 11
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary, final or summary prospectus, together with the documents
incorporated by reference therein (as amended or supplemented if the Company
shall have filed with the Commission any amendment thereof or supplement
thereto), or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or (iii) any violation by the Company of any federal, state or
common law rule or regulation applicable to the Company and relating to action
of or inaction by the Company in connection with any such registration;
provided, that each such Seller's liability under such indemnification shall be
limited to the sales proceeds from the sale of the Company's securities owned by
the sellers pursuant to such registration statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement, and in each such
case, the Company shall reimburse each such Holder Indemnified Party for any
reasonable legal or other expenses incurred by any of them in connection with
investigating or defending any such loss, claim, damage, liability, expense,
action or proceeding; provided, however, that the Company shall not be liable to
any such Holder Indemnified Party in any such case to the extent, that any such
loss, claim, damage, liability or expense (or action or proceeding, whether
commenced or threatened, in respect thereof) arises out of or is based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement or amendment thereof or supplement thereto
or in any such preliminary, final or summary prospectus in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
any such Holder Indemnified Party for use in the preparation thereof. Such
indemnity and reimbursement of expenses and other obligations shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Holder Indemnified Parties and shall survive the transfer of such securities
by such Holder Indemnified Parties.
(b) Each Holder of Registrable Securities participating in any
registration hereunder shall severally (and not jointly or jointly and
severally) indemnify and hold harmless, to the fullest extent permitted by law,
the Company, its directors, officers, employees and agents, and each Person who
controls the Company (within the meaning of Section 15 of the Securities Act)
(collectively, "COMPANY INDEMNIFIED PARTIES") against all losses, claims,
damages, liabilities and expenses to which any Company Indemnified Party may
become subject under the Securities Act, the Exchange Act, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in any registration statement in which
such Holder's Registrable Securities were included or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary, final or summary prospectus, together with the documents
incorporated by reference therein (as amended or supplemented if the Company
shall have filed with the Commission any amendment thereof or supplement
thereto), or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading to the extent in the cases described in clauses (i) and (ii), that
such untrue statement or omission was furnished in writing by such Holder for
use in the preparation
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<PAGE> 12
thereof, or (iii) any violation by such Holder of any federal, state or common
law rule or regulation applicable to such Holder and relating to action of or
inaction by such Holder in connection with any such registration; provided, that
each such Seller's liability under such indemnification shall be limited to the
sales proceeds from the sale of the Company's securities owned by the sellers
pursuant to such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement, and in each such case,
such Holder shall reimburse each such Company Indemnified Party for any
reasonable legal or other expenses incurred by any of them in connection with
investigating or defending any such loss, claim, damage, liability, expense,
action or proceeding. Such indemnity obligation shall remain in full force and
effect regardless of any investigation made by or on behalf of the Company
Indemnified Parties (except as provided above) and shall survive the transfer of
such securities by such Holder.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) of written notice of the commencement of any action, suit, proceeding,
investigation or threat thereof made in writing with respect to which a claim
for indemnification may be made pursuant to this Section 6, such indemnified
party shall, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the indemnifying party of the threat or
commencement thereof; provided, however, that the failure to so notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. If any such claim or action
referred to under subsection (a) or (b) is brought against any indemnified party
and it then notifies the indemnifying party of the threat or commencement
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it wishes, jointly with any other indemnifying party similarly
notified, to assume the defense thereof with counsel reasonably satisfactory to
such indemnified party. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense of any such claim or
action, the indemnifying party shall not be liable to such indemnified party
under this Section 6 for any legal expenses of counsel or any other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation unless the indemnifying
party has failed to assume the defense of such claim or action or to employ
counsel reasonably satisfactory to such indemnified party. Under no
circumstances will the indemnifying party be obligated to pay the fees and
expenses of more than one law firm for all indemnified parties. The indemnifying
party shall not be required to indemnify the indemnified party with respect to
any amounts paid in settlement of any action, proceeding or investigation
entered into without the written consent of the indemnifying party, which
consent shall not be unreasonably withheld. No indemnifying party shall consent
to the entry of any judgment or enter into any settlement without the consent of
the indemnified party unless (i) such judgment or settlement does not impose any
obligation or liability upon the indemnified party other than the execution,
delivery or approval thereof, and (ii) such judgment or settlement includes as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a full release and discharge from all liability in respect
of
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<PAGE> 13
such claim for all Persons that may be entitled to or obligated to provide
indemnification or contribution under this Section 6.
(d) Indemnification similar to that specified in the preceding
subsections of this Section 6 (with appropriate modifications) shall be given by
the Company and each Seller with respect to any required registration or
qualification of securities under any state securities or blue sky laws.
(e) If the indemnification provided for in this Section 6 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b), then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the losses,
claims, damages, liabilities or expenses (or actions or proceedings in respect
thereof) referred to in subsection (a) or (b) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and the indemnified party on the other in connection with the statements,
omissions, actions or inactions which resulted in such losses, claims, damages,
liabilities or expenses as well as any other relevant equitable considerations.
The relative fault of the indemnifying party and the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the indemnifying party or the
indemnified party, any action or inaction by any such party, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement, omission, action or inaction. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages, liabilities
or expenses (or actions or proceedings in respect thereof) pursuant to this
subsection (e) shall be deemed to include, without limitation, any reasonable
legal or other expenses incurred by such indemnified party in connection with
investigating or defending any such action or claim (which shall be limited as
provided in subsection (c) if the indemnifying party has assumed the defense of
any such action in accordance with the provisions thereof) which is the subject
of this subsection (e). No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. Promptly after receipt by an indemnified party under this
subsection (e) of written notice of the commencement of any action, suit,
proceeding, investigation or threat thereof made in writing with respect to
which a claim for contribution may be made against an indemnifying party under
this subsection (e), such indemnified party shall, if a claim for contribution
in respect thereof is to be made against an indemnifying party, give written
notice to the indemnifying party in writing of the commencement thereof (if the
notice specified in subsection (c) has not been given with respect to such
action); provided, however, that the failure to so notify the indemnifying party
shall not relieve it from any obligation to provide contribution which it may
have to any indemnified party under this subsection (e) except to the extent
that the indemnifying party is actually prejudiced by the failure to give
notice.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this paragraph were determined by pro rata allocation
or by any other method of allocation
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<PAGE> 14
which does not take account the equitable considerations referred to in the
immediately preceding paragraph.
If indemnification is available under this Section 6, the indemnifying
parties shall indemnify each indemnified party to the fullest extent provided in
subsections (a) and (b), without regard to the relative fault of said
indemnifying party or any other equitable consideration provided for in this
subsection. The provisions of this subsection shall be in addition to any other
rights to indemnification or contribution which any indemnified party may have
pursuant to law or contract, shall remain in full force and effect regardless of
any investigation made by or on behalf of any indemnified party, and shall
survive the transfer of securities by any such party.
(f) In connection with any underwritten offering contemplated by this
Agreement which includes Registrable Securities, the Company and Seller shall be
required to enter into a customary underwriting agreement with the underwriter.
SECTION 7. SELECTION OF UNDERWRITERS. If a registration effected
pursuant to Section 2 is an underwritten offering or a best efforts underwritten
offering, the investment bankers or investment bankers and manager or managers
that will administer the offering shall be selected by the Holders of a majority
of the Registrable Securities to be registered in such registration; provided,
however, that such investment bankers and managers must be reasonably
satisfactory to the Company.
SECTION 8. RULE 144. The Company covenants to each Holder that, to the
extent that the Company shall be required to do so under the Exchange Act, the
Company shall (a) timely file the reports required to be filed by it under the
Exchange Act or the Securities Act (including, but not limited to, the reports
under Section 13 and 15(d) of the Exchange Act referred to in subparagraph (c)
(1) of Rule 144 adopted by the Commission under the Securities Act) and the
rules and regulations adopted by the Commission thereunder, and (b) take such
further action as any Holder may reasonably request, all to the extent required
from time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitations of the exemption
provided by Rule 144 under the Securities Act, as such Rule may be amended from
time to time, or any similar rule or regulation hereafter adopted by the
Commission. Upon the request of any Holder, the Company shall deliver to such
Holder a written statement as to whether it has complied with such requirements.
SECTION 9. MARKET STANDOFF AGREEMENT.
(a) In order to facilitate the possibility of future public offerings
of Common Stock, the Holders agree that in connection with an underwritten
public offering for cash by the Company of its Common Stock or securities
convertible into or exercisable or exchangeable for its Common Stock, each such
Holder (regardless of whether such Holder is participating in the offering) will
execute a customary agreement with the underwriters of such offering in
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substantially the form executed by directors and senior executive management of
the Company in which the Holder agrees not to sell Registrable Securities owned
by it for a period of up to 90 days following the effective date of the
registration statement for such offering. Holders agree that during the above
restricted period they will not directly or indirectly sell, offer to sell,
contract to sell (including without limitation any short sale), grant an option
to purchase or otherwise transfer of dispose of (other than donees who agree to
be similarly bound) shares of Registrable Securities at any time during such
period except securities included in such registration. In order to enforce the
foregoing covenant, the Company may impose stop-order instructions with respect
to such shares of Registrable Securities held by each Holder, which shall be
binding upon any assignee or successor of such Holder (and the shares or
securities of every other Person subject to the foregoing restriction), until
the end of the restricted period.
(b) During a period commencing on the filing by the Company of a
registration statement which includes Registrable Securities (other than
pursuant to Rule 415), the Company agrees not to effect any public sale or
distribution (including by registering securities held by others) of any
securities the same as or similar to those being registered by such registration
statement, or any securities convertible into or exchangeable or exercisable for
such securities, unless such sale or distribution is pursuant to such
registration statement.
SECTION 10. EXISTING FUND I REGISTRATION RIGHTS. The Company, Energy
PLC and EnCap LP agree that effective immediately upon the execution and
delivery of this Agreement by the parties hereto: (i) that certain Registration
Rights Agreement dated as of November 25, 1997, by and among the Company, Energy
PLC and EnCap LP, as amended by that certain Amendment No. 1 to Registration
Rights Agreement dated as of May 1, 1998, shall be terminated and be of no
further force and effect whatsoever; and (ii) that the registration rights
accorded Energy PLC and EnCap LP under that certain April 1997 Agreement dated
as of April 28, 1997, by and among the Company, Future Acquisition 1995, Ltd.,
Energy PLC and EnCap LP shall be terminated and of no further force and effect
whatsoever.
SECTION 11. OTHER EXISTING OR SUBSEQUENT REGISTRATION RIGHTS.
(a) The Company represents and warrants to Energy PLC and EnCap LP that
other than the registration rights referenced in Section 10 (which rights are
being terminated as provided in such Section), the registration rights granted
under this Agreement and the registration rights granted under the Bargo
Agreement, the Company is not currently a party to any other agreement whereby
it accords any Person any demand or piggy-back registration rights with respect
to such Person's Common Stock.
(b) Contemporaneously with executing and delivering this Agreement, the
Company is executing and delivering that certain (i) Registration Rights
Agreement dated as of even date herewith by and between the Company and Bargo
Energy Resources, Ltd. (the "BARGO AGREEMENT") and (ii) Registration Rights
Agreement dated as of even date herewith by and between the Company, Carl Price,
et al. (the "PRICE AGREEMENT"). The Company represents and warrants that it has
provided Energy PLC and EnCap LP with a true, complete and
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<PAGE> 16
accurate copy of the Bargo Agreement and the Price Agreement and agrees that it
will not agree to any amendment or other modification to the Bargo Agreement or
the Price Agreement without having first received the written consent of the
Holders of a majority of the Registrable Securities then outstanding.
(c) The Company agrees that it will not hereafter grant to any Person
demand registration rights without the prior written consent of the Holders of a
majority of the number of Registrable Securities then outstanding. The Company
agrees that it will not hereafter grant to any Person any piggy-back
registration rights that are inconsistent with or violates the rights granted to
the Holders of Registrable Securities under this Agreement.
SECTION 12. MISCELLANEOUS.
(a) Energy PLC and EnCap LP agree, and each other Holder of Registrable
Securities (including Registrable Securities in any registration statement filed
pursuant to this Agreement) will be deemed to have agreed, as follows:
(i) if any Registrable Securities are being registered in
any registration pursuant to this Agreement, the Holder thereof will
comply with all anti-stabilization, manipulation and similar provisions
of Section 10 of the Exchange Act, as amended, and any rules
promulgated thereunder by the Commission and, at the request of the
Company, will execute and deliver to the Company and to any underwriter
participating in such offering, an appropriate agreement to such
effect; and
(ii) at the end of any period during which the Company is
obligated to keep a registration statement current and effective as
described herein, the Holders of Registrable Securities included in the
registration statement shall discontinue sales thereof pursuant to such
registration statement.
(b) All questions concerning the construction, validity and
interpretation of this Agreement shall be governed by the internal law, and not
the law of conflicts, of the State of Texas.
(c) All covenants and agreements in this Agreement by or on behalf of
any of the parties hereto will bind and inure to the benefit of the respective
successors and assigns of the parties hereto. In addition, the rights and
obligations under this Agreement shall automatically be transferred to and
binding on any transferee or assignee of the Registrable Securities; provided,
that (i) the Company is, within a reasonable time after such transfer, furnished
with written notice of the name and address of such transferee or assignee and
the Registrable Securities with respect to which such registration rights are
being transferred or assigned, (ii) such transferee or assignee agrees in
writing to be bound by and subject to the terms and conditions of this Agreement
and (iii) the transfer and assignment of the subject Registrable Securities is
in compliance with the Securities Act and applicable state securities
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<PAGE> 17
laws or an exemption from the registration requirements of the Securities Act
and applicable state securities laws.
(d) This Agreement is intended by the parties as a final expression of
their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter herein contained. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein, with respect to
the registration rights granted by the Company to the Holders of the Registrable
Securities. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
(e) All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or sent
by reputable express courier service (charges prepaid), or mailed to the
recipient by certified or registered mail, return receipt requested and postage
prepaid, or sent by telefax, to the parties at the following address (or to such
other address or to the attention of such other person as the recipient party
has specified by prior like notice to the sending party):
If to the Company:
Future Petroleum Corporation
2351 West Northwest Highway
Dallas, Texas 75220
Telecopier No.: (214)350-8382
Attention: Carl Price
If to Energy PLC or EnCap LP:
c/o EnCap Investments L.C.
1100 Louisiana
Suite 3150
Houston, Texas 77002
Telecopier No.: (713) 659-6130
Attention: Gary R. Petersen, Managing Director
(f) If any provision of this Agreement is held to be unenforceable,
this Agreement shall be considered divisible and such provision shall be deemed
inoperative to the extent it is deemed unenforceable, and in all other respects
this Agreement shall remain in full force and effect; provided, however, that if
any such provision may be made enforceable by limitation thereof, then such
provision shall be deemed to be so limited and shall be enforceable to the
maximum extent permitted by applicable law.
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<PAGE> 18
(g) This Agreement may be executed by the parties hereto in any number
of counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same agreement. Each counterpart may consist of a
number of copies hereof each signed by less than all, but together signed by
all, the parties hereto.
(h) Each Holder of Registrable Securities, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of breach by it of the provisions of this Agreement and
hereby agrees to waive (to the extent permitted by law) the defense in any
action for specific performance that a remedy of law would be adequate.
(i) In any action or proceeding brought to enforce any provision of
this Agreement, or where any provision hereof is validly asserted as a defense,
the successful party shall be entitled to recover reasonable attorneys' fees in
addition to any other available remedy.
(j) The Company agrees to remove any stop transfer orders and similar
instructions and any legends on certificates representing Registrable Securities
describing transfer restrictions applicable to such securities upon the sale of
such securities (i) pursuant to an effective Registration Statement under the
Securities Act or (ii) in accordance with the provisions of Rule 144 under the
Securities Act.
(k) This Agreement may be amended, modified, supplemented, restated or
discharged (and provisions hereof may be waived) only by an instrument in
writing signed by the Company and the Holders of not less than 95% of the number
of Registrable Securities then outstanding.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 19
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
FUTURE PETROLEUM CORPORATION, a
Utah corporation
By: /s/ CARL PRICE
--------------------------------
Name: Carl Price
Title: President
ENERGY CAPITAL INVESTMENT COMPANY
PLC
By: /s/ GARY R. PETERSEN
--------------------------------
Name: Gary R. Petersen
Title : Director
ENCAP EQUITY 1994 LIMITED
PARTNERSHIP
By: EnCap Investments L.C.,
General Partner
By: /s/ GARY R. PETERSEN
--------------------------------
Name: Gary R. Petersen
Title: Managing Director
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<PAGE> 1
EXHIBIT 4.10
PLEDGE AGREEMENT
(STOCK)
THIS PLEDGE AGREEMENT (this "Pledge Agreement"), dated as of August 14,
1998, made by ENERGY CAPITAL INVESTMENT COMPANY PLC, an English investment
company (the "Pledgor"), in favor of BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, a national banking association (the "Lender").
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, dated as of August 14, 1998
(together with all amendments and other modifications, if any, from time to time
thereafter made thereto, the "Credit Agreement"), between FUTURE PETROLEUM
CORPORATION, a Utah corporation (the "Borrower") and the Lender, the Lender has
extended Commitments to make Loans to, and issue Letters of Credit at the
request of, the Borrower; and
WHEREAS, the Borrower or an Affiliate (as defined in the Credit
Agreement) of the Borrower has entered into or may enter into certain Hedging
Agreements (as defined in the Credit Agreement) with the Lender or an Affiliate
of the Lender, pursuant to the terms of the Credit Agreement;
WHEREAS, as a condition precedent to the making of the initial Loan and
the issuance of Letters of Credit under the Credit Agreement, and the Lender's
or such Affiliate of the Lender's obligations under the Hedging Agreements
referred to above, the Pledgor is required to execute and deliver this Pledge
Agreement; and
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement;
NOW THEREFORE, for good and valuable consideration the receipt of which
is hereby acknowledged, and in order to induce the Lender to make Loans
(including the initial Loan) to, and to issue Letters of Credit at the request
of, the Borrower pursuant to the Credit Agreement, and to induce the Lender or
such Affiliate of the Lender to enter into Hedging Agreements with the Borrower
or an affiliate of the Borrower, the Pledgor agrees, for the benefit of the
Lender, as follows:
<PAGE> 2
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Terms. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Borrower" is defined in the first recital.
"Collateral" is defined in Section 2.1.
"Credit Agreement" is defined in the first recital.
"Distributions" means all stock dividends, liquidating dividends,
shares of stock resulting from (or in connection with the exercise of) stock
splits, reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
capital stock constituting Collateral, but shall not include Dividends.
"Dividends" means cash dividends and cash distributions with respect to
any Pledged Shares or other Pledged Property made in the ordinary course of
business and not a liquidating dividend.
"Lender" is defined in the preamble.
"Pledge Agreement" is defined in the preamble.
"Pledged Property" means all Pledged Shares, and all other pledged
shares of capital stock, all other securities, all assignments of any amounts
due or to become due with respect to the Pledged Shares, all other instruments
which are now being delivered by the Pledgor to the Lender or may from time to
time hereafter be delivered by the Pledgor to the Lender for the purpose of
pledge under this Pledge Agreement or any other Loan Document, and all proceeds
of any of the foregoing.
"Pledged Share Issuer" means each Person identified in Attachment 1
hereto as the issuer of the Pledged Shares identified opposite the name of such
Person.
"Pledged Shares" means all shares of capital stock of any Pledged Share
Issuer which are delivered by the Pledgor to the Lender as Pledged Property
hereunder.
"Pledgor" is defined in the preamble.
"Secured Obligations" is defined in Section 2.2.
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<PAGE> 3
"Securities Act" is defined in Section 6.2.
"U.C.C." means the Uniform Commercial Code as in effect in the State of
Illinois.
SECTION 1.2 Credit Agreement Definitions. Unless otherwise defined
herein or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
SECTION 1.3 U.C.C. Definitions. Unless otherwise defined herein or the
context otherwise requires, terms for which meanings are provided in the U.C.C.
are used in this Pledge Agreement, including its preamble and recitals, with
such meanings.
ARTICLE II
PLEDGE
SECTION 2.1 Grant of Security Interest. The Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the
Lender, and hereby grants to the Lender a continuing security interest in, all
of the following property (the "Collateral"):
2.1.1 All issued and outstanding shares of capital stock of
each Pledged Share Issuer identified in Attachment 1 hereto.
2.1.2 All other Pledged Shares issued from time to time.
2.1.3 All other Pledged Property, whether now or hereafter
delivered to the Lender in connection with this Pledge Agreement.
2.1.4 All Dividends, Distributions, interest, and other
payments and rights with respect to any Pledged Property.
2.1.5 All proceeds of any of the foregoing.
SECTION 2.2 Security for Obligations. This Pledge Agreement secures the
prompt payment and performance in full of (a) all Obligations now or hereafter
existing under the Credit Agreement, the Notes and each other Loan Document,
whether for principal, interest, costs, fees, expenses, or otherwise, including
without limitation, Reimbursement Obligations, and (b) all other obligations of
the Borrower or the Pledgor to the Lender or any Affiliate of the Lender, now or
hereafter owing, howsoever created, arising or evidenced, whether direct or
indirect, primary or secondary, fixed or absolute or contingent, joint or
several, regardless of how evidenced or arising, including without limitation
all Hedging Obligations (as defined in the Credit Agreement) arising under the
Hedging Agreements, between the Borrower or any other Affiliate or now or
hereafter existing or due or to become due and (c) all other obligations of the
Borrower or any Affiliate of the Borrower and the
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<PAGE> 4
Lender or any Affiliate of the Lender, howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent or now or hereafter existing
or due or to become due (all such Obligations and other obligations being the
"Secured Obligations").
SECTION 2.3 Delivery of Pledged Property. All certificates or
instruments representing or evidencing any Collateral, including all Pledged
Shares, shall be delivered to and held by or on behalf of the Lender pursuant
hereto, shall be in suitable form for transfer by delivery, and shall be
accompanied by all necessary instruments of transfer or assignment, duly
executed in blank.
SECTION 2.4 Dividends on Pledged Shares. In the event that any Dividend
is to be paid on any Pledged Share at a time when no Default has occurred and is
continuing, such Dividend may be paid directly to the Pledgor. If any such
Default has occurred and is continuing then any such Dividend shall be paid
directly to the Lender.
SECTION 2.5 Continuing Security Interest. This Pledge Agreement shall
create a continuing security interest in the Collateral and shall
2.5.1 Remain in full force and effect until payment in full of
all Secured Obligations and the termination of the Commitments and any
other commitments of the Lender to the Pledgor,
2.5.2 Be binding upon the Pledgor and its successors,
transferees and assigns, and
2.5.3 Inure to the benefit of the Lender and its successors,
transferees, and assigns.
Without limiting the foregoing clause (c), the Lender may assign or otherwise
transfer (in whole or in part) any Note or Loan to any other Person or entity,
and such other Person or entity shall thereupon become vested with all the
rights and benefits in respect thereof granted to the Lender under any Loan
Document (including this Pledge Agreement) or otherwise, subject, however, to
any contrary provisions in such assignment or transfer, and to the provisions of
Section 10.11 of the Credit Agreement. Upon the indefeasible payment in full of
all principal and interest comprising the Secured Obligations and the
termination of the Commitments and any other commitments of the Lender to the
Pledgor, the security interest granted herein shall terminate and all rights to
the Collateral shall revert to the Pledgor. Upon any such termination, the
Lender will, at the Pledgor's sole expense, deliver to the Pledgor, without any
representations, warranties or recourse of any kind whatsoever, all certificates
and instruments representing or evidencing all Pledged Shares, together with all
other Collateral held by the Lender hereunder, and execute and deliver to the
Pledgor such documents as the Pledgor shall reasonably request to evidence such
termination.
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<PAGE> 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Warranties, etc. The Pledgor represents and warrants unto
the Lender, as at the date of each pledge and delivery hereunder (including each
pledge and delivery of Pledged Shares) by the Pledgor to the Lender of any
Collateral, as set forth in this Article.
3.1.1 Ownership, No Liens, etc. The Pledgor is the legal and
beneficial owner of, and has good and marketable title to (and has full
right and authority to pledge and assign) such Collateral, free and
clear of all liens, security interests, options, or other charges or
encumbrances, except any lien or security interest granted pursuant
hereto in favor of the Lender.
3.1.2 Valid Security Interest. The delivery of such Collateral
to the Lender together with stock powers endorsed in blank is effective
to create a valid, perfected, first priority security interest in such
Collateral and all proceeds thereof, securing the Secured Obligations.
No filing or other action will be necessary to perfect or protect such
security interest.
3.1.3 As to Pledged Shares. In the case of any Pledged Shares
constituting such Collateral, all of such Pledged Shares are duly
authorized and validly issued, fully paid, and non-assessable, and
constitute 17.80% of the issued and outstanding shares of capital stock
of each Pledged Share Issuer.
3.1.4 Authorization, Approval, etc. No authorization,
approval, or other action by, and no notice to or filing with, any
governmental authority, regulatory body or any other Person is required
either
(a) for the pledge by the Pledgor of any Collateral
pursuant to this Pledge Agreement or for the execution,
delivery, and performance of this Pledge Agreement by the
Pledgor, or
(b) for the exercise by the Lender of the voting or
other rights provided for in this Pledge Agreement, or, except
with respect to any Pledged Shares, as may be required in
connection with a disposition of such Pledged Shares by laws
affecting the offering and sale of securities generally, the
remedies in respect of the Collateral pursuant to this Pledge
Agreement.
3.1.5 Compliance with Laws. The Pledgor is in compliance with
the requirements of all applicable laws (including, without limitation,
the provisions of the Fair Labor Standards Act), rules, regulations and
orders of every governmental authority, the non-compliance with which
could materially adversely affect the business, properties, assets,
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<PAGE> 6
operations, condition (financial or otherwise) or prospects of the
Pledgor or the value of the Collateral or the worth of the Collateral
as collateral security.
ARTICLE IV
COVENANTS
SECTION 4.1 Protect Collateral; Further Assurances, etc. The Pledgor
will not sell, assign, transfer, pledge, or encumber in any other manner the
Collateral (except in favor of the Lender hereunder). The Pledgor will warrant
and defend the right and title herein granted unto the Lender in and to the
Collateral (and all right, title, and interest represented by the Collateral)
against the claims and demands of all Persons whomsoever. The Pledgor agrees
that at any time, and from time to time, at the expense of the Pledgor, the
Pledgor will promptly execute and deliver all further instruments, and take all
further action, that may be necessary or desirable, or that the Lender may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Lender to exercise
and enforce its rights and remedies hereunder with respect to any Collateral.
SECTION 4.2 Stock Powers, etc. The Pledgor agrees that all Pledged
Shares (and all other shares of capital stock constituting Collateral) delivered
by the Pledgor pursuant to this Pledge Agreement will be accompanied by duly
executed undated blank stock powers, or other equivalent instruments of transfer
acceptable to the Lender. The Pledgor will, from time to time upon the request
of the Lender, promptly deliver to the Lender such stock powers, instruments,
and similar documents, satisfactory in form and substance to the Lender, with
respect to the Collateral as the Lender may reasonably request and will, from
time to time upon the request of the Lender after the occurrence of any Event of
Default, promptly transfer any Pledged Shares or other shares of common stock
constituting Collateral into the name of any nominee designated by the Lender.
SECTION 4.3 Continuous Pledge. Subject to Section 2.4, the Pledgor
will, at all times, keep pledged to the Lender pursuant hereto all Pledged
Shares and all other shares of capital stock constituting Collateral, all
Dividends and Distributions with respect thereto, and all other Collateral and
other securities, instruments, proceeds, and rights from time to time received
by or distributable to the Pledgor in respect of any Collateral.
SECTION 4.4 Voting Rights; Dividends, etc. The Pledgor agrees:
4.4.1 After any Default shall have occurred and be continuing,
promptly upon receipt thereof by the Pledgor and without any request
therefor by the Lender, to deliver (properly endorsed where required
hereby or requested by the Lender) to the Lender all Dividends,
Distributions, all interest, all principal, all other cash payments,
and all proceeds of the Collateral, all of which shall be held by the
Lender as additional Collateral for use in accordance with Section 6.4;
and
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<PAGE> 7
4.4.2 After any Event of Default shall have occurred and be
continuing and the Lender has notified the Pledgor of the Lender's
intention to exercise its voting power under this Section 4.4.2
(a) the Lender may exercise (to the exclusion of the
Pledgor) the voting power and all other incidental rights of
ownership with respect to any Pledged Shares or other shares
of capital stock constituting Collateral and the Pledgor
hereby grants the Lender an irrevocable proxy, exercisable
under such circumstances, to vote the Pledged Shares and such
other Collateral, and
(b) promptly to deliver to the Lender such additional
proxies and other documents as may be necessary to allow the
Lender to exercise such voting power.
All Dividends, Distributions, interest, principal, cash payments, and proceeds
which may at any time and from time to time be held by the Pledgor but which the
Pledgor is then obligated to deliver to the Lender, shall, until delivery to the
Lender, be held by the Pledgor separate and apart from its other property in
trust for the Lender. The Lender agrees that unless an Event of Default shall
have occurred and be continuing and the Lender shall have given the notice
referred to in Section 4.4.2, the Pledgor shall have the exclusive voting power
with respect to any shares of capital stock (including any of the Pledged
Shares) constituting Collateral and the Lender shall, upon the written request
of the Pledgor, promptly deliver such proxies and other documents, if any, as
shall be reasonably requested by the Pledgor which are necessary to allow the
Pledgor to exercise voting power with respect to any such share of capital stock
(including any of the Pledged Shares) constituting Collateral; provided,
however, that no vote shall be cast, or consent, waiver, or ratification given,
or action taken by the Pledgor that would cause an Event of Default, impair any
Collateral or be inconsistent with or violate any provision of the Credit
Agreement or any other Loan Document (including this Pledge Agreement).
SECTION 4.5 Additional Undertakings. The Pledgor will not, without the
prior written consent of the Lender, (a) sell, assign, transfer, pledge, or
encumber in any other manner Pledgor's interest in the Pledged Share Issuer, or
(b) permit any of the assets of the Pledged Share Issuer to be sold, assigned,
transferred, pledged, or encumbered in any other manner.
ARTICLE V
THE LENDER
SECTION 5.1 Lender Appointed Attorney-in-Fact. The Pledgor hereby
irrevocably appoints the Lender the Pledgor's attorney-in-fact, with full
authority in the place and stead of the Pledgor and in the name of the Pledgor
or otherwise, from time to time in the Lender's discretion, to take any action
and to execute any instrument which the Lender may deem necessary or advisable
to accomplish the purposes of this Pledge Agreement, including without
limitation:
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<PAGE> 8
5.1.1 After the occurrence and continuance of a Default, to
ask, demand, collect, sue for, recover, compromise, receive and give
acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral.
5.1.2 To receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with Section
5.1.1 above.
5.1.3 To file any claims or take any action or institute any
proceedings which the Lender may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights
of the Lender with respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
Notwithstanding the foregoing, prior to the occurrence of an Event of Default,
the Lender agrees that it shall first request that the Pledgor perform such
action and, if the Pledgor shall not have performed such action within five (5)
days following such request, the Lender shall be entitled to take such action
pursuant hereto.
SECTION 5.2 Lender May Perform. If the Pledgor fails to perform any
agreement contained herein after being requested in writing to so perform, the
Lender may itself perform, or cause performance of, such agreement, and the
reasonable expenses of the Lender incurred in connection therewith shall be
payable by the Pledgor pursuant to Section 6.5.
SECTION 5.3 Lender Has No Duty. The powers conferred on the Lender
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty on it to exercise any such powers. Except for the reasonable
care of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, the Lender shall have no duty as to any Collateral or
responsibility for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Pledged Property, whether or not the Lender has or is deemed to have knowledge
of such matters, or (b) taking any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral.
SECTION 5.4 Reasonable Care. The Lender is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Lender shall be deemed to have exercised
reasonable care in the custody and preservation of any of the Collateral, if it
takes such action for that purpose as the Pledgor reasonably requests in writing
at times other than upon the occurrence and during the continuance of any Event
of Default, but failure of the Lender to comply with any such request at any
time shall not in itself be deemed a failure to exercise reasonable care.
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ARTICLE VI
REMEDIES
SECTION 6.1 Certain Remedies. If any Event of Default shall have
occurred and be continuing:
6.1.1 The Lender may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on
default under the U.C.C. (whether or not the U.C.C. applies to the
affected Collateral) and also may, without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels
at public or private sale, at any of the Lender's offices or elsewhere,
for cash, on credit or for future delivery, and upon such other terms
as the Lender may deem commercially reasonable. The Pledgor agrees
that, to the extent notice of sale shall be required by law, at least
ten days' prior notice to the Pledgor of the time and place of any
public sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Lender shall not be
obligated to make any sale of Collateral regardless of notice of sale
having been given. The Lender may adjourn any public or private sale
from time to time by announcement at the time and place fixed therefor,
and such sale may, without further notice, be made at the time and
place to which it was so adjourned.
6.1.2 The Lender may
(a) transfer all or any part of the Collateral into
the name of the Lender or its nominee, with or without
disclosing that such Collateral is subject to the lien and
security interest hereunder;
(b) notify the parties obligated on any of the
Collateral to make payment to the Lender of any amount due or
to become due thereunder;
(c) enforce collection of any of the Collateral by
suit or otherwise, and surrender, release or exchange all or
any part thereof, or compromise or extend or renew for any
period (whether or not longer than the original period) any
obligations of any nature of any party with respect thereto;
(d) endorse any checks, drafts, or other writings in
the Pledgor's name to allow collection of the Collateral;
(e) take control of any proceeds of the Collateral;
and
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<PAGE> 10
(f) execute (in the name, place and stead of the
Pledgor) endorsements, assignments, stock powers and other
instruments of conveyance or transfer with respect to all or
any of the Collateral.
SECTION 6.2 Securities Laws. If the Lender shall determine to exercise
its right to sell all or any of the Collateral pursuant to Section 6.1, the
Pledgor agrees that, upon request of the Lender, the Pledgor will, at its own
expense:
6.2.1 Execute and deliver, and cause each issuer of the
Collateral contemplated to be sold and the directors and officers
thereof to execute and deliver (in each case to the extent required by
law), all such instruments and documents, and do or cause to be done
all such other acts and things, as may be necessary or, in the opinion
of the Lender, advisable to register such Collateral under, or
otherwise permit the Collateral to be privately sold or transferred in
compliance with, the provisions of the Securities Act of 1933, as from
time to time amended (the "Securities Act"), and to cause the
registration statement relating thereto to become effective and to
remain effective for such period as prospectuses are required by law to
be furnished, and to make all amendments and supplements thereto and to
the related prospectus which, in the opinion of the Lender, are
necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities and
Exchange Commission applicable thereto.
6.2.2 Use its best efforts to qualify the Collateral under, or
to permit the Collateral to be privately sold or transferred in
compliance with, the state securities or "Blue Sky" laws and to obtain
all necessary governmental approvals for the sale of the Collateral, as
requested by the Lender.
6.2.3 Cause each such issuer to make available to its security
holders, as soon as practicable, an earnings statement that will
satisfy the provisions of Section 11(a) of the Securities Act.
6.2.4 Do or cause to be done all such other acts and things as
may be necessary to make such sale of the Collateral or any part
thereof valid and binding and in compliance with applicable law.
SECTION 6.3 Compliance with Restrictions. The Pledgor agrees that in
any sale of any of the Collateral whenever an Event of Default shall have
occurred and be continuing, the Lender is hereby authorized to comply with any
limitation or restriction in connection with such sale as it may be advised by
counsel is necessary in order to avoid any violation of applicable law
(including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to persons who will represent and agree that they are purchasing
for their own account for investment and not with a view to the distribution or
resale of such Collateral), or in order to obtain any required approval of the
sale or of the purchaser by any
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<PAGE> 11
governmental regulatory authority or official, and the Pledgor further agrees
that such compliance shall not result in such sale being considered or deemed
not to have been made in a commercially reasonable manner, nor shall the Lender
be liable nor accountable to the Pledgor for any discount allowed by the reason
of the fact that such Collateral is sold in compliance with any such limitation
or restriction.
SECTION 6.4 Application of Proceeds. All cash proceeds received by the
Lender in respect of any sale of, collection from, or other realization upon,
all or any part of the Collateral may, in the discretion of the Lender, be held
by the Lender as additional collateral security for, or then or at any time
thereafter be applied (after payment of any amounts payable to the Lender
pursuant to Sections 10.3 and 10.4 of the Credit Agreement and Section 6.5
hereof) in whole or in part by the Lender against, all or any part of the
Secured Obligations in such order as the Lender shall elect. Any surplus of such
cash or cash proceeds held by the Lender and remaining after payment in full of
all the Secured Obligations, and the termination of all Commitments and any
other commitments by the Lender to the Pledgor, shall be paid over to the
Pledgor or to whomsoever may be lawfully entitled to receive such surplus.
SECTION 6.5 Indemnity and Expenses. The Pledgor hereby indemnifies and
holds harmless the Lender from and against any and all claims, losses, and
liabilities arising out of or resulting from this Pledge Agreement (including
enforcement of this Pledge Agreement), except claims, losses, or liabilities
resulting from the Lender's gross negligence or wilful misconduct. Upon demand,
the Pledgor will pay to the Lender the amount of any and all reasonable
expenses, including the reasonable fees and disbursements of its counsel and of
any experts and agents, which the Lender may incur in connection with:
(a) the exercise or enforcement of any of the rights
of the Lender hereunder; or
(b) the failure by the Pledgor to perform or observe
any of the provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1 Loan Document. This Pledge Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
SECTION 7.2 Amendments, etc. No amendment to or waiver of any provision
of this Pledge Agreement nor consent to any departure by the Pledgor herefrom
shall in any event be effective unless the same shall be in writing and signed
by the Lender, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it is given.
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<PAGE> 12
SECTION 7.3 Protection of Collateral. The Lender may from time to time,
at its option, perform any act which the Pledgor agrees hereunder to perform and
which the Pledgor shall fail to perform after being requested in writing so to
perform (it being understood that no such request need be given after the
occurrence and during the continuance of an Event of Default) and the Lender may
from time to time take any other action which the Lender reasonably deems
necessary for the maintenance, preservation or protection of any of the
Collateral or of its security interest therein.
SECTION 7.4 Addresses for Notices. All notices and other communications
provided to any party hereto under this Pledge Agreement shall be in writing and
shall be hand delivered or sent by a nationally recognized overnight courier,
certified mail (return receipt requested), or telecopy to such party at its
address or telecopy number set forth on the signature pages hereof or at such
other address or telecopy number as may be designated by such party in a notice
to the other party. Without limiting any other means by which a party may be
able to provide that a notice has been received by the other party, a notice
shall be deemed to be duly received (a) if sent by hand, on the date when left
with a responsible person at the address of the recipient; (b) if sent by
certified mail, on the fifth business day after delivery to the U.S. Post
Office; (c) if sent by overnight courier, on the first business day after
delivery to such courier; or (d) if sent by telecopy, on the date of receipt by
the sender of an acknowledgment or transmission reports generated by the machine
from which the telecopy was sent indicating that the telecopy was sent in its
entirety to the recipient's telecopy number.
SECTION 7.5 Section Captions. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION 7.6 Severability. Wherever possible each provision of this
Pledge Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Pledge Agreement shall
be prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Pledge
Agreement.
SECTION 7.7 The Lender as Agent for its Affiliates. As described above,
certain Affiliates of the Lender are or may become parties to certain Hedging
Agreements with the Pledgor and/or Affiliates of the Pledgor. This Pledge
Agreement secures the obligations of the Pledgor and such Affiliates, as the
case may be, under such Hedging Agreements, and the parties hereto acknowledge
for all purposes that the Lender acts as agent on behalf of such Affiliates of
the Lender which are so entitled to share in the rights and benefits accruing to
the Lender under this Pledge Agreement.
SECTION 7.8 Governing Law, Entire Agreement, etc. THIS PLEDGE AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF ILLINOIS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE
SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
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<PAGE> 13
ILLINOIS. THIS PLEDGE AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE
ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER
HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT
THERETO.
SECTION 7.9 Non-Recourse Nature of Liability.
(a) Notwithstanding anything to the contrary contained or implied
in this Pledge Agreement, the Pledgor shall not be personally liable under any
theory for any amount due under the Credit Agreement, the Notes or such other
Loan Documents, and the Lender shall not seek a deficiency or personal judgment
against the Pledgor for payment of the Obligations evidenced by the Credit
Agreement, the Notes or such other Loan Documents. No property or assets of the
Pledgor, other than the Collateral pledged pursuant to this Pledge Agreement,
shall be sold, levied upon or otherwise used to satisfy any judgment rendered in
connection with any action brought against the Borrower or its Subsidiaries with
respect to this Pledge Agreement, the Credit Agreement, the Notes or such other
Loan Documents.
(b) Notwithstanding the provisions of Section 7.9(a) to the
contrary, nothing contained in this Pledge Agreement, the Credit Agreement or
any other Loan Document shall be construed to (i) impair or limit the rights of
the Lender arising under this Pledge Agreement, or any other Security Document
or other documents to which the Pledgor is a party thereto in its individual
capacity; (ii) impair or limit any of the Obligations of the Borrower or its
Subsidiaries under any Loan Document to which it is a party; (iii) impair or
limit the validity of the indebtedness evidenced by this Pledge Agreement, the
Credit Agreement, the Notes or the other Loan Documents or prevent the taking of
any action permitted by law against the Borrower or its Subsidiaries or the
assets of the Borrower or its Subsidiaries or the proceeds of such assets; or
(iv) prevent the commencement of any action, suit or proceeding against any
Person (or prevent the service of papers under any Person) for the purpose of
obtaining jurisdiction over the Borrower or its Subsidiaries.
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<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the day and year first above written.
ENERGY CAPITAL INVESTMENT COMPANY
PLC, an English investment company
By: /s/ GARY R. PETERSEN
---------------------------------
Name: Gary R. Petersen
Title: Director
Address: 1100 Louisiana Street
Suite 3150
Houston, Texas 77002
Facsimile No.: (713) 659-6130
Attention: Gary R. Petersen
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<PAGE> 15
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ RICHARD A. BERNARDY
-------------------------------------
Name: Richard A. Bernardy
Title: Vice President
Address: 333 Clay Street
Suite 4550
Houston, TX 77002
Facsimile No.: (713) 651-4888
Attention: Richard A. Bernardy
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<PAGE> 16
ATTACHMENT 1
to
Pledge Agreement
Pledged Shares
<TABLE>
<CAPTION>
Pledged Share Issuer Common Stock
- -------------------- -----------------------------------------------------------
Authorized Outstanding Number of Shares % of Shares
Shares Shares Pledged Pledged
---------- ----------- ---------------- -----------
<S> <C> <C> <C> <C>
Future Petroleum Corporation, 30,000,000 12,757,015 2,269,886 17.80%
a Utah corporation
</TABLE>
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<PAGE> 1
EXHIBIT 4.11
PLEDGE AGREEMENT
(STOCK)
THIS PLEDGE AGREEMENT (this "Pledge Agreement"), dated as of August
14, 1998, made by ENCAP EQUITY 1994 LIMITED PARTNERSHIP, a Texas limited
partnership (the "Pledgor"), in favor of BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, a national banking association (the "Lender").
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, dated as of August 14, 1998
(together with all amendments and other modifications, if any, from time to
time thereafter made thereto, the "Credit Agreement"), between FUTURE PETROLEUM
CORPORATION, a Utah corporation (the "Borrower") and the Lender, the Lender has
extended Commitments to make Loans to, and issue Letters of Credit at the
request of, the Borrower; and
WHEREAS, the Borrower or an Affiliate (as defined in the Credit
Agreement) of the Borrower has entered into or may enter into certain Hedging
Agreements (as defined in the Credit Agreement) with the Lender or an Affiliate
of the Lender, pursuant to the terms of the Credit Agreement;
WHEREAS, as a condition precedent to the making of the initial Loan
and the issuance of Letters of Credit under the Credit Agreement, and the
Lender's or such Affiliate of the Lender's obligations under the Hedging
Agreements referred to above, the Pledgor is required to execute and deliver
this Pledge Agreement; and
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement;
NOW THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, and in order to induce the Lender to make Loans
(including the initial Loan) to, and to issue Letters of Credit at the request
of, the Borrower pursuant to the Credit Agreement, and to induce the Lender or
such Affiliate of the Lender to enter into Hedging Agreements with the Borrower
or an affiliate of the Borrower, the Pledgor agrees, for the benefit of the
Lender, as follows:
<PAGE> 2
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Terms. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
"Borrower" is defined in the first recital.
"Collateral" is defined in Section 2.1.
"Credit Agreement" is defined in the first recital.
"Distributions" means all stock dividends, liquidating dividends,
shares of stock resulting from (or in connection with the exercise of) stock
splits, reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
capital stock constituting Collateral, but shall not include Dividends.
"Dividends" means cash dividends and cash distributions with respect
to any Pledged Shares or other Pledged Property made in the ordinary course of
business and not a liquidating dividend.
"Lender" is defined in the preamble.
"Pledge Agreement" is defined in the preamble.
"Pledged Property" means all Pledged Shares, and all other pledged
shares of capital stock, all other securities, all assignments of any amounts
due or to become due with respect to the Pledged Shares, all other instruments
which are now being delivered by the Pledgor to the Lender or may from time to
time hereafter be delivered by the Pledgor to the Lender for the purpose of
pledge under this Pledge Agreement or any other Loan Document, and all proceeds
of any of the foregoing.
"Pledged Share Issuer" means each Person identified in Attachment 1
hereto as the issuer of the Pledged Shares identified opposite the name of such
Person.
"Pledged Shares" means all shares of capital stock of any Pledged
Share Issuer which are delivered by the Pledgor to the Lender as Pledged
Property hereunder.
"Pledgor" is defined in the preamble.
"Secured Obligations" is defined in Section 2.2.
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<PAGE> 3
"Securities Act" is defined in Section 6.2.
"U.C.C." means the Uniform Commercial Code as in effect in the State of
Illinois.
SECTION 1.2 Credit Agreement Definitions. Unless otherwise
defined herein or the context otherwise requires, terms used in this Pledge
Agreement, including its preamble and recitals, have the meanings provided in
the Credit Agreement.
SECTION 1.3 U.C.C. Definitions. Unless otherwise defined herein
or the context otherwise requires, terms for which meanings are provided in the
U.C.C. are used in this Pledge Agreement, including its preamble and recitals,
with such meanings.
ARTICLE II
PLEDGE
SECTION 2.1 Grant of Security Interest. The Pledgor hereby
pledges, hypothecates, assigns, charges, mortgages, delivers, and transfers to
the Lender, and hereby grants to the Lender a continuing security interest in,
all of the following property (the "Collateral"):
2.1.1 All issued and outstanding shares of capital stock of
each Pledged Share Issuer identified in Attachment 1 hereto.
2.1.2 All other Pledged Shares issued from time to time.
2.1.3 All other Pledged Property, whether now or hereafter
delivered to the Lender in connection with this Pledge Agreement.
2.1.4 All Dividends, Distributions, interest, and other
payments and rights with respect to any Pledged Property.
2.1.5 All proceeds of any of the foregoing.
SECTION 2.2 Security for Obligations. This Pledge Agreement
secures the prompt payment and performance in full of (a) all Obligations now
or hereafter existing under the Credit Agreement, the Notes and each other Loan
Document, whether for principal, interest, costs, fees, expenses, or otherwise,
including without limitation, Reimbursement Obligations, and (b) all other
obligations of the Borrower or the Pledgor to the Lender or any Affiliate of
the Lender, now or hereafter owing, howsoever created, arising or evidenced,
whether direct or indirect, primary or secondary, fixed or absolute or
contingent, joint or several, regardless of how evidenced or arising, including
without limitation all Hedging Obligations (as defined in the Credit Agreement)
arising under the Hedging Agreements, between the Borrower or any other
Affiliate or now or hereafter existing or due or to
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<PAGE> 4
become due and (c) all other obligations of the Borrower or any Affiliate of
the Borrower and the Lender or any Affiliate of the Lender, howsoever created,
arising or evidenced, whether direct or indirect, absolute or contingent or now
or hereafter existing or due or to become due (all such Obligations and other
obligations being the "Secured Obligations").
SECTION 2.3 Delivery of Pledged Property. All certificates or
instruments representing or evidencing any Collateral, including all Pledged
Shares, shall be delivered to and held by or on behalf of the Lender pursuant
hereto, shall be in suitable form for transfer by delivery, and shall be
accompanied by all necessary instruments of transfer or assignment, duly
executed in blank.
SECTION 2.4 Dividends on Pledged Shares. In the event that any
Dividend is to be paid on any Pledged Share at a time when no Default has
occurred and is continuing, such Dividend may be paid directly to the Pledgor.
If any such Default has occurred and is continuing then any such Dividend shall
be paid directly to the Lender.
SECTION 2.5 Continuing Security Interest. This Pledge Agreement
shall create a continuing security interest in the Collateral and shall
2.5.1 Remain in full force and effect until payment in full
of all Secured Obligations and the termination of the Commitments and
any other commitments of the Lender to the Pledgor,
2.5.2 Be binding upon the Pledgor and its successors,
transferees and assigns, and
2.5.3 Inure to the benefit of the Lender and its
successors, transferees, and assigns.
Without limiting the foregoing clause (c), the Lender may assign or otherwise
transfer (in whole or in part) any Note or Loan to any other Person or entity,
and such other Person or entity shall thereupon become vested with all the
rights and benefits in respect thereof granted to the Lender under any Loan
Document (including this Pledge Agreement) or otherwise, subject, however, to
any contrary provisions in such assignment or transfer, and to the provisions
of Section 10.11 of the Credit Agreement. Upon the indefeasible payment in
full of all principal and interest comprising the Secured Obligations and the
termination of the Commitments and any other commitments of the Lender to the
Pledgor, the security interest granted herein shall terminate and all rights to
the Collateral shall revert to the Pledgor. Upon any such termination, the
Lender will, at the Pledgor's sole expense, deliver to the Pledgor, without any
representations, warranties or recourse of any kind whatsoever, all
certificates and instruments representing or evidencing all Pledged Shares,
together with all other Collateral held by the Lender hereunder, and execute
and deliver to the Pledgor such documents as the Pledgor shall reasonably
request to evidence such termination.
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<PAGE> 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Warranties, etc. The Pledgor represents and warrants
unto the Lender, as at the date of each pledge and delivery hereunder
(including each pledge and delivery of Pledged Shares) by the Pledgor to the
Lender of any Collateral, as set forth in this Article.
3.1.1 Ownership, No Liens, etc. The Pledgor is the legal
and beneficial owner of, and has good and marketable title to (and has
full right and authority to pledge and assign) such Collateral, free
and clear of all liens, security interests, options, or other charges
or encumbrances, except any lien or security interest granted pursuant
hereto in favor of the Lender.
3.1.2 Valid Security Interest. The delivery of such
Collateral to the Lender together with stock powers endorsed in blank
is effective to create a valid, perfected, first priority security
interest in such Collateral and all proceeds thereof, securing the
Secured Obligations. No filing or other action will be necessary to
perfect or protect such security interest.
3.1.3 As to Pledged Shares. In the case of any Pledged
Shares constituting such Collateral, all of such Pledged Shares are
duly authorized and validly issued, fully paid, and non-assessable,
and constitute 19.01% of the issued and outstanding shares of capital
stock of each Pledged Share Issuer.
3.1.4 Authorization, Approval, etc. No authorization,
approval, or other action by, and no notice to or filing with, any
governmental authority, regulatory body or any other Person is
required either
(a) for the pledge by the Pledgor of any Collateral
pursuant to this Pledge Agreement or for the execution,
delivery, and performance of this Pledge Agreement by the
Pledgor, or
(b) for the exercise by the Lender of the voting or
other rights provided for in this Pledge Agreement, or, except
with respect to any Pledged Shares, as may be required in
connection with a disposition of such Pledged Shares by laws
affecting the offering and sale of securities generally, the
remedies in respect of the Collateral pursuant to this Pledge
Agreement.
3.1.5 Compliance with Laws. The Pledgor is in compliance
with the requirements of all applicable laws (including, without
limitation, the provisions of the Fair Labor Standards Act), rules,
regulations and orders of every governmental authority, the
non-compliance with which could materially adversely affect the
business, properties, assets,
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<PAGE> 6
operations, condition (financial or otherwise) or prospects of the
Pledgor or the value of the Collateral or the worth of the Collateral
as collateral security.
ARTICLE IV
COVENANTS
SECTION 4.1 Protect Collateral; Further Assurances, etc. The
Pledgor will not sell, assign, transfer, pledge, or encumber in any other
manner the Collateral (except in favor of the Lender hereunder). The Pledgor
will warrant and defend the right and title herein granted unto the Lender in
and to the Collateral (and all right, title, and interest represented by the
Collateral) against the claims and demands of all Persons whomsoever. The
Pledgor agrees that at any time, and from time to time, at the expense of the
Pledgor, the Pledgor will promptly execute and deliver all further instruments,
and take all further action, that may be necessary or desirable, or that the
Lender may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the Lender to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral.
SECTION 4.2 Stock Powers, etc. The Pledgor agrees that all
Pledged Shares (and all other shares of capital stock constituting Collateral)
delivered by the Pledgor pursuant to this Pledge Agreement will be accompanied
by duly executed undated blank stock powers, or other equivalent instruments of
transfer acceptable to the Lender. The Pledgor will, from time to time upon
the request of the Lender, promptly deliver to the Lender such stock powers,
instruments, and similar documents, satisfactory in form and substance to the
Lender, with respect to the Collateral as the Lender may reasonably request and
will, from time to time upon the request of the Lender after the occurrence of
any Event of Default, promptly transfer any Pledged Shares or other shares of
common stock constituting Collateral into the name of any nominee designated by
the Lender.
SECTION 4.3 Continuous Pledge. Subject to Section 2.4, the
Pledgor will, at all times, keep pledged to the Lender pursuant hereto all
Pledged Shares and all other shares of capital stock constituting Collateral,
all Dividends and Distributions with respect thereto, and all other Collateral
and other securities, instruments, proceeds, and rights from time to time
received by or distributable to the Pledgor in respect of any Collateral.
SECTION 4.4 Voting Rights; Dividends, etc. The Pledgor agrees:
4.4.1 After any Default shall have occurred and be
continuing, promptly upon receipt thereof by the Pledgor and without
any request therefor by the Lender, to deliver (properly endorsed
where required hereby or requested by the Lender) to the Lender all
Dividends, Distributions, all interest, all principal, all other cash
payments, and all proceeds of the Collateral, all of which shall be
held by the Lender as additional Collateral for use in accordance with
Section 6.4; and
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<PAGE> 7
4.4.2 After any Event of Default shall have occurred and be
continuing and the Lender has notified the Pledgor of the Lender's
intention to exercise its voting power under this Section 4.4.2
(a) the Lender may exercise (to the exclusion of the
Pledgor) the voting power and all other incidental rights of
ownership with respect to any Pledged Shares or other shares
of capital stock constituting Collateral and the Pledgor
hereby grants the Lender an irrevocable proxy, exercisable
under such circumstances, to vote the Pledged Shares and such
other Collateral, and
(b) promptly to deliver to the Lender such
additional proxies and other documents as may be necessary to
allow the Lender to exercise such voting power.
All Dividends, Distributions, interest, principal, cash payments, and proceeds
which may at any time and from time to time be held by the Pledgor but which
the Pledgor is then obligated to deliver to the Lender, shall, until delivery
to the Lender, be held by the Pledgor separate and apart from its other
property in trust for the Lender. The Lender agrees that unless an Event of
Default shall have occurred and be continuing and the Lender shall have given
the notice referred to in Section 4.4.2, the Pledgor shall have the exclusive
voting power with respect to any shares of capital stock (including any of the
Pledged Shares) constituting Collateral and the Lender shall, upon the written
request of the Pledgor, promptly deliver such proxies and other documents, if
any, as shall be reasonably requested by the Pledgor which are necessary to
allow the Pledgor to exercise voting power with respect to any such share of
capital stock (including any of the Pledged Shares) constituting Collateral;
provided, however, that no vote shall be cast, or consent, waiver, or
ratification given, or action taken by the Pledgor that would cause an Event of
Default, impair any Collateral or be inconsistent with or violate any provision
of the Credit Agreement or any other Loan Document (including this Pledge
Agreement).
SECTION 4.5 Additional Undertakings. The Pledgor will not,
without the prior written consent of the Lender, (a) sell, assign, transfer,
pledge, or encumber in any other manner Pledgor's interest in the Pledged Share
Issuer, or (b) permit any of the assets of the Pledged Share Issuer to be sold,
assigned, transferred, pledged, or encumbered in any other manner.
ARTICLE V
THE LENDER
SECTION 5.1 Lender Appointed Attorney-in-Fact. The Pledgor
hereby irrevocably appoints the Lender the Pledgor's attorney-in-fact, with
full authority in the place and stead of the Pledgor and in the name of the
Pledgor or otherwise, from time to time in the Lender's discretion, to take any
action and to execute any instrument which the Lender may deem necessary or
advisable to accomplish the purposes of this Pledge Agreement, including
without limitation:
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<PAGE> 8
5.1.1 After the occurrence and continuance of a Default, to
ask, demand, collect, sue for, recover, compromise, receive and give
acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral.
5.1.2 To receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with Section
5.1.1 above.
5.1.3 To file any claims or take any action or institute
any proceedings which the Lender may deem necessary or desirable for
the collection of any of the Collateral or otherwise to enforce the
rights of the Lender with respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
Notwithstanding the foregoing, prior to the occurrence of an Event of Default,
the Lender agrees that it shall first request that the Pledgor perform such
action and, if the Pledgor shall not have performed such action within five (5)
days following such request, the Lender shall be entitled to take such action
pursuant hereto.
SECTION 5.2 Lender May Perform. If the Pledgor fails to perform
any agreement contained herein after being requested in writing to so perform,
the Lender may itself perform, or cause performance of, such agreement, and the
reasonable expenses of the Lender incurred in connection therewith shall be
payable by the Pledgor pursuant to Section 6.5.
SECTION 5.3 Lender Has No Duty. The powers conferred on the
Lender hereunder are solely to protect its interest in the Collateral and shall
not impose any duty on it to exercise any such powers. Except for the
reasonable care of any Collateral in its possession and the accounting for
moneys actually received by it hereunder, the Lender shall have no duty as to
any Collateral or responsibility for (a) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or other matters
relative to any Pledged Property, whether or not the Lender has or is deemed to
have knowledge of such matters, or (b) taking any necessary steps to preserve
rights against prior parties or any other rights pertaining to any Collateral.
SECTION 5.4 Reasonable Care. The Lender is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Lender shall be deemed to have exercised
reasonable care in the custody and preservation of any of the Collateral, if it
takes such action for that purpose as the Pledgor reasonably requests in
writing at times other than upon the occurrence and during the continuance of
any Event of Default, but failure of the Lender to comply with any such request
at any time shall not in itself be deemed a failure to exercise reasonable
care.
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<PAGE> 9
ARTICLE VI
REMEDIES
SECTION 6.1 Certain Remedies. If any Event of Default shall have
occurred and be continuing:
6.1.1 The Lender may exercise in respect of the Collateral,
in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured
party on default under the U.C.C. (whether or not the U.C.C. applies
to the affected Collateral) and also may, without notice except as
specified below, sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any of the Lender's offices
or elsewhere, for cash, on credit or for future delivery, and upon
such other terms as the Lender may deem commercially reasonable. The
Pledgor agrees that, to the extent notice of sale shall be required by
law, at least ten days' prior notice to the Pledgor of the time and
place of any public sale or the time after which any private sale is
to be made shall constitute reasonable notification. The Lender shall
not be obligated to make any sale of Collateral regardless of notice
of sale having been given. The Lender may adjourn any public or
private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned.
6.1.2 The Lender may
(a) transfer all or any part of the Collateral into
the name of the Lender or its nominee, with or without
disclosing that such Collateral is subject to the lien and
security interest hereunder;
(b) notify the parties obligated on any of the
Collateral to make payment to the Lender of any amount due or
to become due thereunder;
(c) enforce collection of any of the Collateral by
suit or otherwise, and surrender, release or exchange all or
any part thereof, or compromise or extend or renew for any
period (whether or not longer than the original period) any
obligations of any nature of any party with respect thereto;
(d) endorse any checks, drafts, or other writings in
the Pledgor's name to allow collection of the Collateral;
(e) take control of any proceeds of the Collateral;
and
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<PAGE> 10
(f) execute (in the name, place and stead of the
Pledgor) endorsements, assignments, stock powers and other
instruments of conveyance or transfer with respect to all or
any of the Collateral.
SECTION 6.2 Securities Laws. If the Lender shall determine to
exercise its right to sell all or any of the Collateral pursuant to Section
6.1, the Pledgor agrees that, upon request of the Lender, the Pledgor will, at
its own expense:
6.2.1 Execute and deliver, and cause each issuer of the
Collateral contemplated to be sold and the directors and officers
thereof to execute and deliver (in each case to the extent required by
law), all such instruments and documents, and do or cause to be done
all such other acts and things, as may be necessary or, in the opinion
of the Lender, advisable to register such Collateral under, or
otherwise permit the Collateral to be privately sold or transferred in
compliance with, the provisions of the Securities Act of 1933, as from
time to time amended (the "Securities Act"), and to cause the
registration statement relating thereto to become effective and to
remain effective for such period as prospectuses are required by law
to be furnished, and to make all amendments and supplements thereto
and to the related prospectus which, in the opinion of the Lender, are
necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities and
Exchange Commission applicable thereto.
6.2.2 Use its best efforts to qualify the Collateral under,
or to permit the Collateral to be privately sold or transferred in
compliance with, the state securities or "Blue Sky" laws and to obtain
all necessary governmental approvals for the sale of the Collateral,
as requested by the Lender.
6.2.3 Cause each such issuer to make available to its
security holders, as soon as practicable, an earnings statement that
will satisfy the provisions of Section 11(a) of the Securities Act.
6.2.4 Do or cause to be done all such other acts and things
as may be necessary to make such sale of the Collateral or any part
thereof valid and binding and in compliance with applicable law.
SECTION 6.3 Compliance with Restrictions. The Pledgor agrees
that in any sale of any of the Collateral whenever an Event of Default shall
have occurred and be continuing, the Lender is hereby authorized to comply with
any limitation or restriction in connection with such sale as it may be advised
by counsel is necessary in order to avoid any violation of applicable law
(including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to persons who will represent and agree that they are purchasing
for their own account for investment and not with a view to the distribution or
resale of such Collateral), or in order to obtain any required approval of the
sale or of the purchaser by any
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<PAGE> 11
governmental regulatory authority or official, and the Pledgor further agrees
that such compliance shall not result in such sale being considered or deemed
not to have been made in a commercially reasonable manner, nor shall the Lender
be liable nor accountable to the Pledgor for any discount allowed by the reason
of the fact that such Collateral is sold in compliance with any such limitation
or restriction.
SECTION 6.4 Application of Proceeds. All cash proceeds received
by the Lender in respect of any sale of, collection from, or other realization
upon, all or any part of the Collateral may, in the discretion of the Lender,
be held by the Lender as additional collateral security for, or then or at any
time thereafter be applied (after payment of any amounts payable to the Lender
pursuant to Sections 10.3 and 10.4 of the Credit Agreement and Section 6.5
hereof) in whole or in part by the Lender against, all or any part of the
Secured Obligations in such order as the Lender shall elect. Any surplus of
such cash or cash proceeds held by the Lender and remaining after payment in
full of all the Secured Obligations, and the termination of all Commitments and
any other commitments by the Lender to the Pledgor, shall be paid over to the
Pledgor or to whomsoever may be lawfully entitled to receive such surplus.
SECTION 6.5 Indemnity and Expenses. The Pledgor hereby
indemnifies and holds harmless the Lender from and against any and all claims,
losses, and liabilities arising out of or resulting from this Pledge Agreement
(including enforcement of this Pledge Agreement), except claims, losses, or
liabilities resulting from the Lender's gross negligence or wilful misconduct.
Upon demand, the Pledgor will pay to the Lender the amount of any and all
reasonable expenses, including the reasonable fees and disbursements of its
counsel and of any experts and agents, which the Lender may incur in connection
with:
(a) the exercise or enforcement of any of the rights
of the Lender hereunder; or
(b) the failure by the Pledgor to perform or observe
any of the provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1 Loan Document. This Pledge Agreement is a Loan
Document executed pursuant to the Credit Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in
accordance with the terms and provisions thereof.
SECTION 7.2 Amendments, etc. No amendment to or waiver of any
provision of this Pledge Agreement nor consent to any departure by the Pledgor
herefrom shall in any event be effective
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<PAGE> 12
unless the same shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which it is given.
SECTION 7.3 Protection of Collateral. The Lender may from time
to time, at its option, perform any act which the Pledgor agrees hereunder to
perform and which the Pledgor shall fail to perform after being requested in
writing so to perform (it being understood that no such request need be given
after the occurrence and during the continuance of an Event of Default) and the
Lender may from time to time take any other action which the Lender reasonably
deems necessary for the maintenance, preservation or protection of any of the
Collateral or of its security interest therein.
SECTION 7.4 Addresses for Notices. All notices and other
communications provided to any party hereto under this Pledge Agreement shall
be in writing and shall be hand delivered or sent by a nationally recognized
overnight courier, certified mail (return receipt requested), or telecopy to
such party at its address or telecopy number set forth on the signature pages
hereof or at such other address or telecopy number as may be designated by such
party in a notice to the other party. Without limiting any other means by
which a party may be able to provide that a notice has been received by the
other party, a notice shall be deemed to be duly received (a) if sent by hand,
on the date when left with a responsible person at the address of the
recipient; (b) if sent by certified mail, on the fifth business day after
delivery to the U.S. Post Office; (c) if sent by overnight courier, on the
first business day after delivery to such courier; or (d) if sent by telecopy,
on the date of receipt by the sender of an acknowledgment or transmission
reports generated by the machine from which the telecopy was sent indicating
that the telecopy was sent in its entirety to the recipient's telecopy number.
SECTION 7.5 Section Captions. Section captions used in this
Pledge Agreement are for convenience of reference only, and shall not affect
the construction of this Pledge Agreement.
SECTION 7.6 Severability. Wherever possible each provision of
this Pledge Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Pledge Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Pledge Agreement.
SECTION 7.7 The Lender as Agent for its Affiliates. As described
above, certain Affiliates of the Lender are or may become parties to certain
Hedging Agreements with the Pledgor and/or Affiliates of the Pledgor. This
Pledge Agreement secures the obligations of the Pledgor and such Affiliates, as
the case may be, under such Hedging Agreements, and the parties hereto
acknowledge for all purposes that the Lender acts as agent on behalf of such
Affiliates of the Lender which are so entitled to share in the rights and
benefits accruing to the Lender under this Pledge Agreement.
SECTION 7.8 Governing Law, Entire Agreement, etc. THIS PLEDGE
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF ILLINOIS, EXCEPT TO THE EXTENT THAT
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<PAGE> 13
THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF
A JURISDICTION OTHER THAN THE STATE OF ILLINOIS. THIS PLEDGE AGREEMENT AND THE
OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES
HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR
AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO.
SECTION 7.9 Non-Recourse Nature of Liability.
(a) Notwithstanding anything to the contrary contained or
implied in this Pledge Agreement, the Pledgor shall not be personally liable
under any theory for any amount due under the Credit Agreement, the Notes or
such other Loan Documents, and the Lender shall not seek a deficiency or
personal judgment against the Pledgor for payment of the Obligations evidenced
by the Credit Agreement, the Notes or such other Loan Documents. No property or
assets of the Pledgor, other than the Collateral pledged pursuant to this Pledge
Agreement, shall be sold, levied upon or otherwise used to satisfy any judgment
rendered in connection with any action brought against the Borrower or its
Subsidiaries with respect to this Pledge Agreement, the Credit Agreement, the
Notes or such other Loan Documents.
(b) Notwithstanding the provisions of Section 7.9(a) to the
contrary, nothing contained in this Pledge Agreement, the Credit Agreement or
any other Loan Document shall be construed to (i) impair or limit the rights of
the Lender arising under this Pledge Agreement, or any other Security Document
or other documents to which the Pledgor is a party thereto in its individual
capacity; (ii) impair or limit any of the Obligations of the Borrower or its
Subsidiaries under any Loan Document to which it is a party; (iii) impair or
limit the validity of the indebtedness evidenced by this Pledge Agreement, the
Credit Agreement, the Notes or the other Loan Documents or prevent the taking of
any action permitted by law against the Borrower or its Subsidiaries or the
assets of the Borrower or its Subsidiaries or the proceeds of such assets; or
(iv) prevent the commencement of any action, suit or proceeding against any
Person (or prevent the service of papers under any Person) for the purpose of
obtaining jurisdiction over the Borrower or its Subsidiaries.
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<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the day and year first above written.
ENCAP EQUITY 1994 LIMITED
PARTNERSHIP, a Texas limited partnership
By: EnCap Investments L.C., General Partner
By: /s/ GARY R. PETERSEN
------------------------------------
Name: Gary R. Petersen
Title: Managing Director
Address: 1100 Louisiana Street
Suite 3150
Houston, Texas 77002
Facsimile No.: (713) 659-6130
Attention: Gary R. Petersen
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<PAGE> 15
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ RICHARD A. BERNARDY
------------------------------------
Name: Richard A. Bernardy
Title: Vice President
Address: 333 Clay Street
Suite 4550
Houston, TX 77002
Facsimile No.: (713) 651-4888
Attention: Richard A. Bernardy
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<PAGE> 16
ATTACHMENT 1
to
Pledge Agreement
Pledged Shares
<TABLE>
<CAPTION>
Pledged Share Issuer Common Stock
- -------------------- --------------------------------------------------------------
Authorized Outstanding Number of Shares % of Shares
Shares Shares Pledged Pledged
----------- ----------- ---------------- -----------
<S> <C> <C> <C> <C>
Future Petroleum Corporation, 30,000,000 12,757,015 2,424,973 19.01%
a Utah corporation
</TABLE>
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<PAGE> 1
EXHIBIT 4.12
MASTER SUBORDINATION AGREEMENT
THIS MASTER SUBORDINATION AGREEMENT (this "Subordination Agreement"),
dated as of August 14, 1998, is between ENCAP EQUITY 1994 LIMITED PARTNERSHIP, a
Texas limited partnership ("EnCap 1994") and ENERGY CAPITAL INVESTMENT COMPANY
PLC, an English investment company ("EnCap PLC"; together with EnCap 1994,
sometimes collectively herein called "Junior Creditor") and BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association, as agent
(together with its successors, transferees and assigns, "Senior Creditor") .
W I T N E S S E T H:
A. FUTURE PETROLEUM CORPORATION, a Utah corporation ("Borrower"),
FUTURE CAL-TEX CORPORATION, a Texas corporation ("Newco"), FUTURE ACQUISITION
1995, LTD., a Texas limited partnership ("Future 1995"), BMC DEVELOPMENT NO. 1
LIMITED PARTNERSHIP, a Texas limited partnership ("BMC") and NCI-SHAWNEE LIMITED
PARTNERSHIP, a Texas limited partnership ("Shawnee"; together with Borrower,
BMC, Future 1995 and Newco, sometimes collectively called the "Company"), is the
owner of certain oil and gas leases and other related real and personal property
interests located in various counties and states, as more fully described on
Exhibit A hereto (the "Land"), together with the buildings, structures and other
improvements located and constructed thereon, the "Real Property".
B. Borrower is indebted to Junior Creditor and GECKO BOOTY 1994 I
LIMITED PARTNERSHIP, a Texas limited partnership ("Gecko"), which indebtedness
is evidenced by (i) that certain Renewal Promissory Note executed by Borrower,
on or about May 1, 1998, in favor of EnCap 1994, in the original principal sum
of $3,714,305.88; (ii) that certain Renewal Promissory Note executed by
Borrower, on or about May 1, 1998, in favor of EnCap PLC, in the original
principal sum of $3,370,694.12; (iii) that certain Renewal Promissory Note
executed by Borrower, on or about May 1, 1998, in favor of Gecko, in the
original principal sum of $175,000 (collectively, the "Junior Note"; the
obligations of Company to Junior Creditor, howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, now or hereafter
existing, or due or to become due, are hereinafter collectively referred to as
the "Junior Obligations").
C. The Junior Obligations are secured by, among other things, those
certain mortgages and deeds of trust, covering the Real Property, more fully
described in Schedule I hereto (collectively, the "Junior Mortgages"). The
Junior Obligations are also secured by, among other things, those certain
guaranties, pledges, security agreements and other documents and instruments
more fully described in Schedule I hereto (such agreements and instruments,
together with the Junior Mortgages, herein called the "Junior Security
Documents" and the real property and personal property collateral now or
hereafter encumbered by the Junior Security Documents herein called the "Junior
Collateral").
<PAGE> 2
D. Contemporaneously with the execution and delivery of this
Subordination Agreement, Borrower has (i) paid in full all amounts due and owing
to Gecko under the Junior Note such that Gecko no longer has any right, title or
interest in the Junior Note, the Junior Security Documents or the Junior
Collateral, and (ii) paid a portion of the indebtedness to Junior Creditor
evidenced by the Junior Note, such that the amount currently outstanding under
the Junior Note is less than the original principal amount thereof.
E. Company is also indebted to Senior Creditor under that certain
Credit Agreement dated as of August 14, 1998 (as the same may be from time to
time amended, modified, supplemented or amended and restated, the "Credit
Agreement"), between Borrower and Senior Creditor.
F. It is a condition precedent to extension of credit under the Credit
Agreement that Company execute and deliver, and cause each of the Subsidiaries
of the Borrower (collectively, the "Subsidiary Guarantors") to execute and
deliver mortgages, guaranties, pledges, security agreements and other documents
and instruments more fully described in Schedule II hereto (such agreements and
instruments herein called the "Senior Security Documents" and the real property
and personal property collateral now or hereafter encumbered by the Senior
Security Documents herein called the "Senior Collateral"), in favor of Senior
Creditor to secure the payment and performance by Company of the Obligations
under the Credit Agreement.
G. It is a condition precedent to the making of the loans under the
Credit Agreement that Junior Creditor subordinate its debt and liens from
Company and the Subsidiary Guarantors, including its liens against and security
interests in the Real Property arising under the Junior Mortgages and its
security interest in the other Junior Collateral to that of Senior Creditor and
its right to payment of the Junior Obligations to the Senior Obligations.
H. Junior Creditor has duly authorized the execution, delivery and
performance of this Subordination Agreement.
I. It is in the best interests of Junior Creditor to execute this
Subordination Agreement inasmuch as Junior Creditor will derive substantial
direct and indirect benefits from the extension of credit to Company by Senior
Creditor.
NOW, THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, and in order to induce Senior Creditor to extend
credit pursuant to the Credit Agreement, Junior Creditor agrees, for the benefit
of Senior Creditor, as follows:
SECTION 1. Definitions. Capitalized terms used but not otherwise
defined herein shall have the respective meanings given to them in the Credit
Agreement. As used in this Subordination Agreement, the following terms shall
have the following respective meanings:
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<PAGE> 3
BMC is defined in Recital A.
Company is defined in Recital A.
Credit Agreement is defined in the Recital D.
Junior Collateral is defined in Recital C.
Junior Mortgages is defined in Recital C.
Junior Obligations is defined in Recital B.
Junior Note is defined in Recital B.
Junior Security Documents is defined in Recital C.
Land is defined in Recital A.
Real Property is defined in Recital A.
Senior Collateral is defined in Recital E.
Senior Creditor is defined in the preamble.
Senior Interest is defined in Section 3(b).
Senior Obligations means all Obligations to the Senior Creditor under
the Credit Agreement and the other Loan Documents (including (i) principal, (ii)
interest, including without limitation any and all interest accruing on any of
the Senior Obligations after the commencement of any proceedings referred to in
Section 4 hereof, notwithstanding any provision or rule of law which might
restrict the rights of Senior Creditor, as against the Company or anyone else,
to collect such interest, (iii) any Hedging Obligation, (iv) costs, (v) fees
(including reasonable attorneys' fees and disbursements), (vi) expenses, and
(vii) other liability or obligation arising under or in connection with the
Credit Agreement), howsoever created, arising or evidenced under such documents,
whether direct or indirect, absolute or contingent, now or hereafter existing,
or due or to become due. For the purposes of this Subordination Agreement,
Senior Obligations shall include all liabilities described in this definition,
notwithstanding any right or power of the Company or any other Person to assert
any claim or defense as to the invalidity or unenforceability of any such
liabilities, and no such claim or defense shall affect or impair the agreements
and obligations of Junior Creditor hereunder.
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<PAGE> 4
Senior Security Documents is defined in Recital E.
Subordinate Interest is defined in Section 3(b).
Subordination Agreement is defined in the preamble.
SECTION 2. Notice of Junior Obligations, etc. Junior Creditor will,
from time to time: (a) promptly notify Senior Creditor of the creation of any
Junior Obligations, and of the issuance of any promissory note or other
instrument to evidence any Junior Obligations and (b) upon request by Senior
Creditor, cause any Junior Obligations which are not then evidenced by a
promissory note or other instrument of Company to be so evidenced. Such note
shall contain the following provision:
"The indebtedness evidenced by this instrument is subordinated
to the prior payment in cash in full of the Senior Obligations (as
defined in the Master Subordination Agreement, dated as of August 14,
1998, made by and between the "Junior Creditor" therein (including the
payee named herein) and Future Petroleum Corporation, a Utah
Corporation, Future CAL-TEX Corporation, a Texas corporation, Future
Acquisition 1995, Ltd., a Texas limited partnership, BMC Development
No. 1 Limited Partnership, a Texas limited partnership, NCI Shawnee
Limited Partnership, a Texas limited partnership, Future Energy
Corporation, a Nevada corporation and Future Petroleum Corporation, a
Texas corporation, in favor of Bank of America National Trust and
Savings Association (the "Subordination Agreement") pursuant to, and to
the extent provided in, the Subordination Agreement by the maker hereof
and payee named herein in favor of Bank of America National Trust and
Savings Association and any person now or hereafter designated as its
designees, agents, successors or assigns."
SECTION 3. Subordination. Except as Senior Creditor may hereafter
otherwise expressly consent in writing,
(a) the payment of all Junior Obligations shall be postponed and
subordinated to the indefeasible payment in full of all Senior Obligations (and
the termination of all Commitments), and no payments or other distributions
whatsoever in respect of any Junior Obligations shall be made, nor shall any
property or assets of Company or any Subsidiary Guarantor be applied to the
purchase or other acquisition or to the defeasance or retirement of any Junior
Obligations; provided, that from time to time commencing on August 14, 2000,
Borrower may pay and Junior Creditor may receive and retain regularly scheduled
interest payments on the Junior Note so long as, both before and after the
making of each such interest payment, no Default shall have occurred and be
continuing, including without limitation, a Default under Section 8.2.4 of the
Credit Agreement,
(b) all mortgage or deed of trust liens and security interests under
the Junior Security Documents or otherwise, now existing or hereafter acquired
by Junior Creditor in any of the Junior Collateral or the Senior Collateral (the
"Subordinate Interest") shall be subordinated to the security
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<PAGE> 5
interest of Senior Creditor, under the Senior Security Documents or otherwise,
in the Senior Collateral (the "Senior Interest"), irrespective of the time or
order of attachment or perfection of any security interest (or any defects or
omissions in respect thereof) or the time or order of filing of any financing
statements or other documents, or any statutes, rules, law, or court decisions
to the contrary.
For the purposes of this Subordination Agreement, the Senior Obligations shall
not be deemed to have been indefeasibly paid in cash in full until the Senior
Creditor shall have received full payment of the Senior Obligations in cash,
which payment shall have been retained by the Senior Creditor for a period of
time in excess of all applicable preference or other similar periods under
applicable bankruptcy, insolvency or creditors' rights laws and all Commitments
of the Senior Creditor under the Credit Agreement shall have irrevocably
terminated.
SECTION 4. Bankruptcy, Insolvency, etc. In the event of any
dissolution, winding up, liquidation, readjustment, reorganization or other
similar proceedings relating to Company, any Subsidiary Guarantor or to any of
their creditors, as such, or to its property (whether voluntary or involuntary,
partial or complete, and whether in bankruptcy, insolvency or receivership, or
upon an assignment for the benefit of creditors, or any other marshalling of the
assets and liabilities of Company or any Subsidiary Guarantor, or any sale of
all or substantially all of the assets of Company or any Subsidiary Guarantor,
or otherwise), the Senior Obligations shall first be paid in full in cash and
all Commitments terminated before the Junior Creditor shall be entitled to
receive and to retain any payment or distribution in respect of the Junior
Obligations and, in order to implement the foregoing: (a) all payments and
distributions of any kind or character in respect of the Junior Obligations to
which Junior Creditor would be entitled if the Junior Obligations were not
subordinated, or subordinated and pledged or assigned pursuant to this
Subordination Agreement, shall be made directly to Senior Creditor; (b) Junior
Creditor shall promptly file a claim or claims, in the form required in such
proceedings, for the full outstanding amount of the Junior Obligations, and
shall cause said claim or claims to be approved and all payments and other
distributions in respect thereof to be made directly to Senior Creditor; and (c)
Junior Creditor hereby irrevocably agrees that, notwithstanding any agreement
between Junior Creditor and the Company or the Subsidiary Guarantors to the
contrary, Senior Creditor may, at its sole discretion, in the name of Junior
Creditor or otherwise, demand, sue for, collect, receive and receipt for any and
all such payments or distributions, and file, prove and vote or consent in any
such proceedings with respect to any and all claims of Junior Creditor relating
to the Junior Obligations.
SECTION 5. Payments Held in Trust. In the event that Junior Creditor
receives any payment or other distribution of any kind or character from Company
or any Subsidiary Guarantor, or from any other source whatsoever, in respect of
any of the Junior Obligations, such payment or other distribution shall be
received in trust for Senior Creditor and promptly turned over by Junior
Creditor to Senior Creditor. Junior Creditor will mark its books and records,
and cause Company to mark its books and records, so as clearly to indicate that
the Junior Obligations are subordinated in accordance with the terms of this
Subordination Agreement, and will cause to be clearly inserted in any promissory
note or other instrument which at any time evidences any of the Junior
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<PAGE> 6
Obligations the statement described in Section 1. Junior Creditor will execute
such further documents or instruments and take such further action as Senior
Creditor may reasonably from time to time request to carry out the intent of
this Subordination Agreement.
SECTION 6. Application of Payments; Limited Subrogation. All payments
and distributions received by Senior Creditor in respect of the Junior
Obligations, to the extent received in or converted into cash, may be applied by
Senior Creditor first to the payment of any and all expenses (including
attorneys' fees and legal expenses) paid or incurred by Senior Creditor in
enforcing this Subordination Agreement, or any security therefor, and any
balance thereof shall, solely as between Junior Creditor and Senior Creditor, be
applied by Senior Creditor in such order of application as Senior Creditor may
from time to time select, toward the payment of the Senior Obligations remaining
unpaid; but, as between Company, any Subsidiary Guarantor and any of their
creditors, no such payments or distributions of any kind or character shall be
deemed to be payments or distributions in respect of the Senior Obligations;
and, notwithstanding any such payments or distributions received by Senior
Creditor in respect of the Junior Obligations and so applied by Senior Creditor
toward the payment of the Senior Obligations, Junior Creditor shall be
subrogated to the then existing rights of Senior Creditor, if any, in respect of
the Senior Obligations, only at such time as this Subordination Agreement shall
have terminated and Senior Creditor shall have received indefeasible payment of
the full amount of the Senior Obligations and all Commitments shall have
terminated.
SECTION 7. Waivers by Junior Creditor. Junior Creditor hereby waives:
(a) notice of acceptance by Senior Creditor or any holder of the Senior Note of
this Subordination Agreement; (b) all notices that may be required by statute,
rule of law or otherwise, now or hereafter in effect, to preserve intact any
rights against Junior Creditor, including notice of the existence or creation or
non-payment of all or any of the Senior Obligations or the exercise of any
remedies under the Loan Documents or with respect to the Senior Collateral; (c)
all diligence in collection or protection of or realization upon the Senior
Obligations or any thereof or any security therefor, including any claim that
any Senior Creditor may not have disposed of any such security in a commercially
reasonable manner or that any Senior Creditor failed to exhaust any remedies
(including against any guarantor) or to mitigate the damages resulting from a
Senior Default; (d) any notice of any sale, transfer or other disposition by any
Person of any right under title to or interest in any Loan Document or the
Collateral; (e) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge, release or defense of a junior
creditor or that might otherwise limit exercise by any Senior Creditor of its
rights against Junior Creditor hereunder and (f) all rights and defenses arising
out of any election of remedies by any Senior Creditor, even though such
election of remedies may impair or destroy any rights of subrogation Junior
Creditor may have against the Company or any Subsidiary Guarantor by operation
of law or otherwise.
SECTION 8. Obligations of Junior Creditor. Junior Creditor will not,
without prior written consent of Senior Creditor, (a) transfer, assign, or
attempt to enforce or collect any Junior Obligations or any rights in respect
thereof, including without limitation the declaration of any default or breach
under or the acceleration of the maturity of the Junior Obligations, or any
attempt
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to liquidate, foreclose, enforce or realize on any of the Junior Collateral
(provided that nothing herein shall prevent Junior Creditor from filing proofs
of claim in any bankruptcy proceeding so long as Junior Creditor is otherwise in
compliance with its obligations in this Subordination Agreement); (b) take any
additional collateral for any Junior Obligations except for liens on and
security interests in the Senior Collateral where such liens and security
interests have been subordinated to the Senior Interest as provided in this
Subordination Agreement; (c) convert any Junior Obligations into stock of
Company or any Subsidiary Guarantor; (d) sell, assign, transfer, endorse,
pledge, encumber or otherwise dispose of any of the Junior Obligations; (e)
permit the terms of any of the Junior Obligations to be changed in such a manner
as to have an adverse effect upon the rights or interests of the Senior
Creditor; or (f) commence, or join with any other creditor in commencing, any
bankruptcy, reorganization or insolvency proceedings with respect to Company or
any Subsidiary Guarantor.
SECTION 9. Continuing Subordination; Termination. This Subordination
Agreement shall, in all respects, be a continuing agreement and shall remain in
full force and effect (notwithstanding, without limitation, the dissolution of
Junior Creditor) until the indefeasible payment in full of all of the Senior
Obligations and the termination of all Commitments. Junior Creditor agrees that
following such termination this Subordination Agreement shall be automatically
reinstated if for any reason any payment made on the Senior Obligations is
rescinded or must be otherwise restored by Senior Creditor, whether as a result
of any proceedings in bankruptcy or reorganization or otherwise.
SECTION 10. Rights of Senior Creditor. Senior Creditor may, from time
to time, whether before or after any discontinuance of this Subordination
Agreement, at its discretion and without notice to Junior Creditor, take any or
all of the following actions: (a) retain or obtain a security interest in any
property to secure any of the Senior Obligations; (b) retain or obtain the
primary or secondary obligations of any other obligor or obligors with respect
to any of the Senior Obligations; (c) extend or renew for one or more periods
(whether or not longer than the original period), alter or exchange any of the
Senior Obligations, or release or compromise any obligation of any nature of any
obligor with respect to any of the Senior Obligations; and (d) release its
security interest in, or surrender, release or permit any substitution or
exchange for all or any part of any property securing any of the Senior
Obligations, or extend or renew for one or more periods (whether or not longer
than the original period), or release, compromise, alter or exchange any
obligations of any nature of any obligor with respect to any such property.
SECTION 11. Transfer of Senior Obligations. Senior Creditor may, from
time to time, whether before or after any discontinuance of this Subordination
Agreement, without notice to Junior Creditor, assign or transfer any or all of
the Senior Obligations, or any interest therein; and, notwithstanding any such
assignment or transfer or any subsequent assignment or transfer thereof, such
Senior Obligations shall be and remain Senior Obligations for the purposes of
this Subor dination Agreement, and every immediate and successive assignee or
transferee of any of the Senior Obligations or of any interest therein shall, to
the extent of the interest of such assignee or transferee in the Senior
Obligations, be entitled to the benefits of this Subordination Agreement to the
same extent as if such assignee or transferee were the Senior Creditor;
provided, however, that, unless the
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<PAGE> 8
Senior Creditor shall otherwise consent in writing, the Senior Creditor shall
have an unimpaired right, prior and superior to that of any such assignee or
transferee, to enforce this Subordination Agreement, for the benefit of the
Senior Creditor, as to those of the Senior Obligations which the Senior Creditor
has not assigned or transferred.
SECTION 12. Transfer of Collateral. Senior Creditor may, from time to
time, whether before or after any termination of this Subordination Agreement,
without notice to Junior Creditor, dispose of, and exercise any other rights
with respect to, any or all of the Collateral, free of the Subordinate Interest;
provided, however, that Junior Creditor does not waive hereby any rights that
may not be waived under Applicable Law. Junior Creditor shall, upon any
disposition of any of the Collateral by Senior Creditor, execute and deliver any
and all releases or other documents or agreements requested by Senior Creditor
to accomplish the disposition of any of the Collateral free of the Subordinate
Interest.
SECTION 13. Miscellaneous. Neither Senior Creditor, nor any holder of
the Senior Note shall be prejudiced in its rights under this Subordination
Agreement by any act or failure to act of Company, any Subsidiary Guarantor or
Junior Creditor, or any noncompliance of Company, any Subsidiary Guarantor or
Junior Creditor with any agreement or obligation, regardless of any knowledge
thereof which Senior Creditor, or any holder of the Senior Note may have, or
with which Senior Creditor, or such holder may be charged; and no action
permitted hereunder of Senior Creditor, or any holder of the Senior Note shall
in any way affect or impair the rights of Senior Creditor, or any holder of the
Senior Note, and the obligations of Junior Creditor under this Subordination
Agreement. No delay on the part of Senior Creditor, or any holder of the Senior
Note in the exercise of any right or remedy shall operate as a waiver thereof,
and no single or partial exercise by Senior Creditor, or any holder of the
Senior Note of any right or remedy shall preclude other or further exercise
thereof, or the exercise of any other right or remedy; nor shall any
modification or waiver of any of the provisions of this Subordination Agreement
be binding upon Senior Creditor, or any holder of the Senior Note, except by the
express written consent of Senior Creditor set forth in a writing duly signed
and delivered on behalf of Senior Creditor. For the purposes of this
Subordination Agreement, Senior Obligations shall include all obligations of
Company under or in connection with the Senior Note, notwithstanding any right
or power of Company or anyone else to assert any claim or defense as to the
invalidity or unenforceability of any such obligation, and no such claim or
defense shall affect or impair the agreements and obligations of Junior Creditor
hereunder.
SECTION 14. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing (including telegraphic communication)
and, if to Senior Creditor or the Junior Creditor, respectively, addressed,
delivered or transmitted to it, at the address or facsimile number set forth
below its signature hereto or, as to either party, at such other address or
facsimile number as shall be designated by such party in a written notice to
each other party complying as to delivery with the terms of this Section 14. Any
notice, if mailed and properly addressed and sent by prepaid courier service,
shall be deemed given when received; and notice, if transmitted by facsimile,
shall be deemed given upon receipt of the confirmation of transmission.
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SECTION 15. Senior Creditor Appointed Attorney-in-Fact. Junior Creditor
hereby appoints Senior Creditor Junior Creditor's attorney-in-fact, with full
power of substitution, for the purpose of taking such action and executing
agreements, instruments and other documents in the name of Junior Creditor, or
otherwise, as Senior Creditor may deem necessary or advisable to accomplish the
purposes hereof, which appointment is coupled with an interest and is
irrevocable.
SECTION 16. Section Captions. Section captions used in this
Subordination Agreement are for convenience of reference only, and shall not
affect the construction of this Subordination Agreement.
SECTION 17. Severability. Wherever possible each provision of this
Subordination Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Subordination
Agreement shall be prohibited by or invalid under such law, such provision shall
be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Subordination Agreement.
SECTION 18. Governing Law, Entire Agreement, etc. THIS SUBORDINATION
AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO CHOICE OF LAW OR
CONFLICTS OF LAW PROVISIONS. This Subordination Agreement constitutes the entire
understanding among the parties hereto with respect to the subject matter hereof
and supersedes any prior agreements, written or oral, with respect thereto.
SECTION 19. Execution in Counterparts. This Subordination Agreement may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement.
SECTION 20. Binding Effect. This Subordination Agreement shall be
binding upon Junior Creditor, and upon the successors and assigns of Junior
Creditor; and all references herein to Company and to Junior Creditor,
respectively, shall be deemed to include any successor or successors, whether
immediate or remote, to Company and to Junior Creditor.
SECTION 21. Recorded Instruments. In order to effect the subordination
described in this Subordination Agreement, Junior Creditor and Senior Creditor
agree to execute, acknowledge and deliver such other recordable agreements and
instruments as may be reasonably necessary or desirable under the laws of the
jurisdictions in which the Junior Collateral and/or the Senior Collateral is or
may be located to give notice to third parties of this Subordination Agreement
and to otherwise implement this Subordination Agreement.
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IN WITNESS WHEREOF, this Subordination Agreement has been executed and
delivered by Junior Creditor and Senior Creditor as of the date above first
written.
ENCAP EQUITY 1994 LIMITED
PARTNERSHIP, a Texas limited partnership
By: EnCap Investments L.C., General Partner
By: /s/ GARY R. PETERSON
--------------------------------------------
Name: Gary R. Peterson
Title: Managing Director
Address: 1100 Louisiana Street
Suite 3150
Houston, TX 77002
Attention: Gary R. Peterson
Facsimile: 713-659-6130
ENERGY CAPITAL INVESTMENT COMPANY
PLC, an English investment company
By: /s GARY R. PETERSON
--------------------------------------------
Name: Gary R. Peterson
Title: Director
Address: 1100 Louisiana Street
Suite 3150
Houston, TX 77002
Attention: Gary R. Peterson
Facsimile: 713-659-6130
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BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, a national banking
association, as agent
By: /s/ RICHARD A. BERNARDY
--------------------------------------------
Name: Richard A. Bernardy
Title: Vice President
Address: 333 Clay Street
Suite 4550
Houston, TX 77002
Attention: Richard A. Bernardy
Facsimile: 713-651-4888
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<PAGE> 1
EXHIBIT 4.13
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER dated August 14, 1998, is made by and
among Bargo Energy Resources, Ltd., a Texas limited partnership ("BARGO"),
SCL-CAL Company, a Texas corporation ("SCL"), Future Petroleum Corporation, a
Utah corporation ("FUTURE"), and Future CAL-TEX Corporation, a Texas corporation
("FUTURE SUB").
WITNESSETH:
WHEREAS, (i) Bargo is the record and beneficial owner of all of the
issued and outstanding capital stock of SCL and (ii) Future is the record and
beneficial owner of all of the issued and outstanding capital stock of Future
Sub; and
WHEREAS, the parties hereto have determined that the merger of SCL into
Future Sub upon the terms and subject to the conditions set forth herein is
desirable and in their mutual best interests; and
WHEREAS, the parties hereto desire to set forth certain
representations, warranties and covenants made by each to the other as an
inducement to the consummation of the merger contemplated hereby;
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing Recitals and the
mutual covenants and agreements contained herein, Bargo, SCL, Future and Future
Sub do hereby agree as follows:
ARTICLE I
DEFINITIONS, REFERENCES AND CONSTRUCTION
SECTION 1.1. CERTAIN DEFINED TERMS. When used in this Agreement, the
following terms shall have the respective meanings assigned to them in this
Section 1.1 or in the section, subsections or other subdivisions referred to
below:
"AFFILIATE" shall mean, when used with respect to another Person, any
Person directly or indirectly controlling, controlled by or under common control
with such other Person.
"AGREEMENT" shall mean this Agreement, as hereafter changed, amended or
modified in accordance with the terms hereof.
"BARGO" shall have the meaning assigned to such term in the
introductory paragraph to this Agreement.
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<PAGE> 2
"BARGO DISCLOSURE SCHEDULE" shall mean a schedule delivered by the
Bargo Entities to Future on the date hereof which sets forth additional
information regarding the representations and warranties of the Bargo Entities
contained herein and information called for hereby.
"BARGO ENTITIES" shall mean Bargo and SCL.
"BARGO NOMINEES" shall have the meaning assigned to such term in
Section 6.11(a).
"BARGO REGISTRATION RIGHTS AGREEMENT" shall have the meaning assigned
to such term in Section 6.7.
"CLOSING" and "CLOSING DATE" shall have the respective meanings
assigned to such terms in Section 2.3.
"CLOSING OBLIGATIONS" shall mean the obligations of SCL to repay the
Sowell Indebtedness and the obligations of SCL to pay certain transaction costs
in connection with this Agreement and the acquisition of the Properties.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMISSION" shall mean the Securities and Exchange Commission (or any
successor body thereto).
"COMMONLY CONTROLLED ENTITY" shall mean any Person which is under
common control with Future within the meaning of Section 4001 of ERISA.
"CONSOLIDATED" shall refer to the consolidation of any Person, in
accordance with GAAP, with its properly consolidated subsidiaries. References
herein to a Person's Consolidated financial statements, financial position,
financial condition, liabilities, etc. refer to the consolidated financial
statements, financial position, financial condition, liabilities, etc.
of such Person and its properly consolidated subsidiaries.
"CURRENT DEBT AMOUNT" shall mean $5,800,000, which is the indebtedness
of SCL in connection with the Closing Obligations.
"DIRECTOR EFFECTIVE DATE" shall mean 10 days after the date on which
Future filed with the Commission and transmitted to its stockholders the
information required to be so filed and transmitted under Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder.
"EFFECTIVE TIME" shall have the meaning assigned to such term in
Section 2.2.
"EMISSION CREDITS" shall mean the emission credits described more
particularly in Section 1.1(f) of the MOC Agreement.
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<PAGE> 3
"EMPLOYMENT AGREEMENT" shall have the meaning assigned to such term in
Section 6.5.
"ENCAP FUND I" shall mean EnCap Equity 1994 Limited Partnership and
Energy Capital Investment Company PLC.
"ENCAP REGISTRATION RIGHTS AGREEMENT" shall have the meaning assigned
to such term in Section 6.7.
"ENVIRONMENTAL LAWS" shall mean any and all laws relating to the
environment or to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment including ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations thereunder.
"EXCHANGE ACT" shall mean the U.S. Securities Exchange Act of 1934, as
amended, and all rules and regulations under such act.
"FUTURE" shall have the meaning assigned to such term in the
introductory paragraph to this Agreement.
"FUTURE STOCK" shall mean the shares of common stock of Future, $0.01
par value per share, and any shares issued or issuable with respect thereto by
way of a stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or reorganization.
"FUTURE DISCLOSURE SCHEDULE" shall mean a schedule delivered by the
Future Entities to the Bargo Entities on the date hereof which sets forth
additional information regarding the representations and warranties of the
Future Entities contained herein and information called for hereby.
"FUTURE ENTITIES" shall mean Future and Future Sub.
"FUTURE SUB" shall have the meaning assigned to such term in the
introductory paragraph to this Agreement.
"GAAP" shall mean those generally accepted accounting principles and
practices which are recognized as such by the Financial Accounting Standards
Board (or any generally recognized successor).
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<PAGE> 4
"MATERIAL ADVERSE EFFECT" shall mean with respect to any Person, a
material adverse effect on the financial condition, results of operations,
business or prospects of such Person and its consolidated subsidiaries, taken as
a whole.
"MERGER" shall have the meaning assigned to such term in Section 2.1.
"MERGER SHARES" shall have the meaning assigned to such term in Article
III.
"MOC" shall have the meaning assigned to such term in Section 4.7.
"MOC AGREEMENT" shall have the meaning assigned to such term in Section
4.7.
"PARTNER" shall mean each general or limited partner of Bargo.
"PERSON" shall mean an individual, corporation, partnership, limited
liability company, association, joint stock company, trust or trustee thereof,
estate or executor thereof, unincorporated organization or joint venture, or any
other legally recognizable entity.
"PLAN" shall mean, at any time, any employee benefit plan which is
covered by ERISA and in respect of which Future or any Commonly Controlled
Entity is (or if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"PRICE GROUP" shall mean Carl Price, Don Wm. Reynolds, Christie Price,
Robert Price and Charles D. Laudeman.
"PRICE OPTIONS" means the options to purchase up to 250,000 shares of
Future Stock issued to Carl Price pursuant to the Employment Agreement and
Future's 1993 Stock Incentive Plan.
"PRICE REGISTRATION RIGHTS AGREEMENT" shall have the meaning assigned
to such term in Section 6.7.
"PROPERTIES" shall mean the "Assets," as such term is defined in the
MOC Agreement, exclusive of the Emission Credits.
"RETURNS" shall mean all returns, reports, estimates, declarations and
statements of any nature regarding Taxes prior to the Closing required to be
filed by the taxpayer relating to its income, properties or operations.
"SCL" shall have the meaning assigned to such term in the introductory
paragraph to this Agreement.
"SCL STOCK" shall mean the shares of common stock, par value $0.01 per
share, of SCL.
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<PAGE> 5
"SECURITIES ACT" shall mean the U.S. Securities Act of 1933, as
amended, and all rules and regulations under such Act.
"SENIOR CREDIT FACILITY" shall have the meaning assigned to such term
in Section 6.8.
"SHAREHOLDERS' AGREEMENT" shall have the meaning assigned to such term
in Section 6.10.
"SOWELL INDEBTEDNESS" shall mean that certain indebtedness of Bargo to
James E. Sowell in the original principal amount equal to $5,700,000, as secured
by the Sowell Mortgage.
"SOWELL MORTGAGE" shall mean that certain Mortgage, Deed of Trust,
Assignment of Production and Security Agreement by and between Bargo and James
E. Sowell covering the Properties.
"SUBORDINATION AGREEMENT" shall have the meaning assigned to such term
in Section 6.9.
"SUBSIDIARY" means the following entities which are subsidiaries of
Future: Future Petroleum Corporation, a Texas corporation; Future Energy
Corporation, a Nevada corporation; Future Acquisition 1995, Ltd., a Texas
limited partnership; BMC Development No. 1 Limited Partnership, a Texas limited
partnership; NCI-Shawnee Limited Partnership, a Texas limited partnership; and
Future Sub.
"SURVIVING CORPORATION" shall have the meaning assigned to such term in
Section 2.1.
"TAXES" shall mean any federal, state, local, foreign or other taxes
(including, without limitation, income, alternative minimum, franchise,
property, sales, use, lease, excise, premium, payroll, wage, employment or
withholding taxes), fees, duties, assessments, withholdings or governmental
charges of any kind whatsoever (including interest, penalties and additions to
tax).
"TBCA" shall have the meaning assigned to such term in Section 2.1.
"WARRANT" shall have the meaning assigned to such term in Article III.
SECTION 1.2. REFERENCES AND CONSTRUCTION.
(a) All references in this Agreement to articles, sections, subsections
and other subdivisions refer to corresponding articles, sections, subsections
and other subdivisions of this Agreement unless expressly provided otherwise.
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<PAGE> 6
(b) Titles appearing at the beginning of any of such subdivisions are
for convenience only and shall not constitute part of such subdivisions and
shall be disregarded in construing the language contained in such subdivisions.
(c) The words "this Agreement", "this instrument", "herein", "hereof",
"hereby", "hereunder" and words of similar import refer to this Agreement as a
whole and not to any particular subdivision unless expressly so limited.
(d) Words in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise requires. Pronouns in masculine,
feminine and neuter genders shall be construed to include any other gender.
(e) Unless the context otherwise requires or unless otherwise provided
herein, the terms defined in this Agreement which refer to a particular
agreement, instrument or document also refer to and include all renewals,
extensions, modifications, amendments or restatements of such agreement,
instrument or document, provided that nothing contained in this subsection shall
be construed to authorize such renewal, extension, modification, amendment or
restatement.
(f) Examples shall not be construed to limit, expressly or by
implication, the matter they illustrate.
(g) The word "or" is not intended to be exclusive and the word
"includes" and its derivatives means "includes, but is not limited to" and
corresponding derivative expressions.
(h) No consideration shall be given to the fact or presumption that one
party had a greater or lesser hand in drafting this Agreement.
(i) Unless otherwise indicated, all references herein to "$" or
"dollars" shall refer to U.S. Dollars.
(j) Exhibits III(b), 4.8, 6.5, 6.6, 6.7-1, 6.7-2, 6.7-3, 6.9, 6.10,
7.1(e) and 7.2(e) are attached hereto. Each such Exhibit is incorporated herein
by reference for all purposes and references to this Agreement shall also
include such Exhibit unless the context in which used shall otherwise require.
ARTICLE II
THE MERGER
SECTION 2.1. THE MERGER. At the Effective Time, and on the terms and
subject to the conditions set forth in this Agreement, SCL shall be merged with
and into Future Sub (the "MERGER"), Future Sub shall continue its corporate
existence under the Texas Business Corporation Act (the "TBCA") as the surviving
entity in the Merger (sometimes referred to
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herein as the "SURVIVING CORPORATION"), and the separate corporate existence of
SCL shall cease.
SECTION 2.2. EFFECTIVE TIME OF THE MERGER. Provided that the conditions
set forth in Article VII have been fulfilled or waived in accordance with this
Agreement, as soon as practicable on the Closing Date, Future Sub and SCL shall
cause the Merger to be consummated by filing with the Secretary of State of
Texas articles of merger in such form as required by, and executed in accordance
with the relevant provisions of, the TBCA. The Merger shall become effective at
the time the articles of merger are duly filed with the Secretary of State of
Texas (the "EFFECTIVE TIME").
SECTION 2.3. CLOSING. The closing of the Merger (the "CLOSING") shall
take place (i) at the offices of Thompson & Knight, P.C., located at 1700 Chase
Tower, 600 Travis, Houston, Texas 77002, 10:00 a.m., local time, on August 14,
1998, or (ii) at such other time or place or on such other date as the parties
hereto shall agree. The date on which the Closing occurs is herein referred to
as the "CLOSING DATE".
SECTION 2.4. EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in the applicable provisions of the TBCA. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the
real estate and other properties, rights, privileges, powers, and franchises of
Future Sub and SCL shall vest in the Surviving Corporation, without any transfer
or assignment having occurred, and all debts, liabilities, obligations and
duties of Future Sub and SCL shall become the debts, liabilities, obligations
and duties of the Surviving Corporation.
SECTION 2.5. CERTIFICATE OF INCORPORATION. The Articles of
Incorporation of Future Sub, as in effect immediately prior to the Effective
Time, shall be the Articles of Incorporation of the Surviving Corporation, until
thereafter amended in accordance with its terms and as provided by the TBCA.
SECTION 2.6. BYLAWS. The Bylaws of Future Sub, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving Corporation,
until thereafter amended in accordance with its terms and as provided by the
TBCA.
SECTION 2.7. DIRECTORS. The directors of Future Sub at the Effective
Time shall be the initial directors of the Surviving Corporation, each to hold
office in accordance with the Certificate of Incorporation and Bylaws of the
Surviving Corporation and until his or her successor is duly elected and
qualified in accordance with the TBCA or until his or her earlier death,
resignation or removal.
SECTION 2.8. OFFICERS. The officers of Future Sub at the Effective Time
shall be the initial officers of the Surviving Corporation, each to hold office
in accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation and until his or her successor is duly elected and qualified in
accordance with the TBCA or until his or her earlier death, resignation or
removal.
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<PAGE> 8
SECTION 2.9. TAKING OF NECESSARY ACTION. Each of the parties hereto
shall use its reasonable best efforts to take all such action as may be
necessary or appropriate in order to effectuate the Merger under the TBCA as
promptly as possible.
ARTICLE III
CONVERSION OF SECURITIES; APPROVAL OF MERGER
SECTION 3.1. CONVERSION OF SHARES. At the Effective Time, by virtue of
the Merger and without any action on the part of Bargo, SCL, Future, Future Sub
or any holder of any of the following securities:
(a) Each share of SCL Stock held in the treasury of SCL shall be
canceled and retired and no payment shall be made with respect thereto.
(b) All of the outstanding shares of SCL Stock shall be converted into
(i) 4,694,859 fully paid and non-assessable shares of Future Stock (the "MERGER
SHARES") and (ii) a warrant to purchase 250,000 shares of Future Stock, which
warrant shall be substantially in the form of that certain Stock Purchase
Warrant attached hereto as Exhibit III(b) (the "WARRANT").
SECTION 3.2. APPROVAL OF MERGER AGREEMENT AND MERGER. By execution of
this Agreement, each of Future, as the sole shareholder of Future Sub, and
Bargo, as the sole shareholder of SCL, hereby adopts, ratifies and approves the
Merger and the Merger Agreement.
SECTION 3.3. WAIVER OF DISSENTER'S RIGHTS OF APPRAISAL. Each of Future,
as the sole shareholder of Future Sub, and Bargo, as the sole shareholder of
SCL, hereby waives any dissenter's rights of appraisal or similar rights it may
have, including the rights under Section 5.11 of the TBCA.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BARGO ENTITIES
Each of the Bargo Entities represents and warrants to the Future
Entities as follows:
SECTION 4.1. ORGANIZATION AND EXISTENCE. Bargo is a limited partnership
duly formed and validly existing under the laws of the State of Texas. SCL is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas. Each Bargo Entity has the power to carry on its business
as it is now being conducted or currently proposed to be conducted. Each Bargo
Entity is duly qualified to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its
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activities make such qualification necessary, except where the failure to be so
qualified will not, alone or in the aggregate, have a Material Adverse Effect.
SECTION 4.2. POWER AND AUTHORITY. Bargo has full partnership power and
partnership authority, and SCL has full corporate power and corporate authority,
to execute, deliver, and perform this Agreement and each other agreement,
instrument, or document executed or to be executed by it in connection with the
transactions contemplated hereby to which it is a party and to consummate the
transactions contemplated hereby and thereby. The execution, delivery, and
performance by each of the Bargo Entities of this Agreement and each other
agreement, instrument, or document executed or to be executed by it in
connection with the transactions contemplated hereby to which it is a party, and
the consummation by it of the transactions contemplated hereby and thereby, have
been duly authorized by all necessary partnership action, in the instance of
Bargo, and all necessary corporate action, in the instance of SCL.
SECTION 4.3. VALID AND BINDING AGREEMENT. This Agreement has been duly
executed and delivered by each of the Bargo Entities and constitutes, and each
other agreement, instrument, or document executed or to be executed by a Bargo
Entity in connection with the transactions contemplated hereby to which it is a
party has been, or when executed will be, duly executed and delivered by such
Bargo Entity and constitutes, or when executed and delivered will constitute, a
valid and legally binding obligation of such Bargo Entity, enforceable against
it in accordance with their respective terms, except that such enforceability
may be limited by (a) applicable bankruptcy, insolvency, reorganization,
moratorium, and similar laws affecting creditors' rights generally and (b)
equitable principles which may limit the availability of certain equitable
remedies (such as specific performance) in certain instances.
SECTION 4.4. NON-CONTRAVENTION. The execution, delivery, and
performance by a Bargo Entity of this Agreement and each other agreement,
instrument, or document executed or to be executed by such Bargo Entity in
connection with the transactions contemplated hereby to which it is a party and
the consummation by it of the transactions contemplated hereby and thereby do
not and will not (a) conflict with or result in a violation of any provision of
(i) in the instance of Bargo, its partnership agreement or other governing
instruments or (ii) in the instance of SCL, its articles of incorporation,
bylaws and other governing instruments, (b) conflict with or result in a
violation of any provision of, or constitute (with or without the giving of
notice or the passage of time or both) a default under, or give rise (with or
without the giving of notice or the passage of time or both) to any right of
termination, cancellation, or acceleration under, any bond, debenture, note,
mortgage, indenture, lease, contract, agreement, or other instrument or
obligation to which such Bargo Entity is a party or by which it or any of its
properties may be bound, (c) result in the creation or imposition of any lien or
other encumbrance upon the properties of such Bargo Entity, or (d) violate any
applicable law, rule or regulation binding upon such Bargo Entity.
SECTION 4.5. APPROVALS. No consent, approval, order, or authorization
of, or declaration, filing, or registration with, any court or governmental
agency or of any third party
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is required to be obtained or made by each Bargo Entity in connection with the
execution, delivery, or performance by it of this Agreement and each other
agreement, instrument, or document executed or to be executed by it in
connection with the transactions contemplated hereby to which it is a party or
the consummation by it of the transactions contemplated hereby and thereby other
than the filing by SCL of a certificate of merger with the Secretaries of State
of Nevada and Texas in accordance with the Nevada Statute and the TBCA,
respectively.
SECTION 4.6. PENDING LITIGATION. Except as otherwise set forth in the
Bargo Disclosure Schedule, there are no pending suits, actions, or other
proceedings in which a Bargo Entity is a party which affect the Properties in
any material respect, or affecting the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby or that would, if
determined adversely to such Bargo Entity, (a) result in the impairment or loss
of SCL's title to the Properties, (b) hinder or impede the operation of all or
any portion of any Property or (c) restrain, prohibit or impose damage on a
Future Entity or a Bargo Entity with respect to the transactions contemplated
hereby.
SECTION 4.7. MARATHON AGREEMENT. Bargo has delivered to Future a true
and correct copy of that certain Purchase and Sale Agreement made and entered
into as of May 11, 1998, by and between Marathon Oil Company ("MOC") and Bargo
Operating Company, Inc., and all amendments, modifications or supplements
thereto (the "MOC AGREEMENT"). Bargo has delivered to Future true and correct
copies of all written disclosures given by MOC to Bargo or its representatives
which pertain to, or otherwise qualify, modify or limit the representations,
warranties, covenants and agreements made by MOC in the MOC Agreement. The
representations and warranties of MOC in the MOC Agreement are true and correct
in all material respects. All covenants and agreements to be performed by the
"Purchaser" under the MOC Agreement either prior to or at the closing of the
transactions contemplated by the MOC Agreement have been complied with or
performed in all material respects or otherwise waived in accordance with the
terms of the MOC Agreement.
SECTION 4.8. ASSETS AND LIABILITIES OF SCL. During its existence, SCL
has owned or otherwise held no properties or other assets (tangible or
intangible) other than (a) the rights of the "Purchaser" under the MOC
Agreement, (b) the Properties and (c) its rights under this Agreement. SCL has
no liabilities or obligations, contingent or otherwise, other than (i) the
liabilities or obligations incurred or assumed by the "Purchaser" under the
terms of the MOC Agreement, exclusive of any liabilities or obligations arising
or otherwise attributable to the Emission Credits, and (ii) the Current Debt
Amount and (iii) its liabilities and obligations under this Agreement. Attached
hereto as Exhibit 4.8 is a true, correct and complete copy of a Subscription
Agreement, and all amendments or modifications thereto, whereunder Bargo
subscribed for SCL Stock and conveyed, assigned and contributed the Properties
to SCL.
SECTION 4.9. SOWELL INDEBTEDNESS. Bargo has delivered to Future a true
and correct copy of all documents or other instruments evidencing the Sowell
Indebtedness.
SECTION 4.10. CAPITALIZATION OF SCL. The authorized capital stock of
SCL consists of 100 shares of SCL Stock. As of the date hereof, 100 shares of
SCL Stock were validly issued
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and outstanding, fully paid, and nonassessable, and Bargo is the record and
beneficial owner of such shares, free and clear of all liens or other
encumbrances. There are no bonds, debentures, notes or other indebtedness issued
or outstanding having the right to vote on any matters on which SCL's
stockholders may vote. Other than as contemplated by this Agreement, there are
no options, warrants, calls, convertible securities or other rights, agreements
or commitments presently outstanding obligating SCL to issue, deliver or sell
shares of its capital stock or debt securities, or obligating SCL to grant,
extend or enter into any such option, warrant, call or other such right,
agreement or commitment.
SECTION 4.11. ARTICLES OF INCORPORATION AND BY-LAWS; CORPORATE RECORDS.
SCL has delivered to Future true and complete copies of its Articles of
Incorporation and Bylaws, as amended or restated through the date of this
Agreement. The minute book of SCL contains reasonably complete and accurate
records of all corporate actions of the shareholders and board of directors of
SCL, including committees of the board. The stock transfer records of SCL
contain complete and accurate records of all issuances and redemptions of stock
by SCL. Neither SCL nor, to the knowledge of SCL, any of its Affiliates, is a
party to any agreement with respect to the capital stock of SCL other than this
Agreement.
SECTION 4.12. INVESTMENT EXPERIENCE. Bargo and each Partner is an
"accredited investor" as defined in Rule 501(a) of the Securities Act.
SECTION 4.13. PURCHASE FOR OWN ACCOUNT. The Merger Shares and Warrant
to be acquired by Bargo and, pursuant to Rule 145 under the Securities Act,
deemed acquired by the Partners, pursuant to this Agreement are being acquired
for their own account and with no intention of distributing or reselling the
Merger Shares, the Warrant or the shares of Future Stock issuable upon exercise
of the Warrant (the "WARRANT SHARES"), or any part thereof, in any transaction
that would be in violation of the securities laws of the United States of
America, or any state, without prejudice, however, to the rights of the Bargo
and the Partners at all times to sell or otherwise dispose of all or any part of
the Merger Shares, the Warrant or the Warrant Shares under an effective
registration statement under the Securities Act, or under an exemption from such
registration available under the Securities Act, and subject, nevertheless, to
the disposition of Bargo's and each Partner's property being at all times within
its control. If Bargo or a Partner should in the future decide to dispose of any
of the Merger Shares, the Warrant or the Warrant Shares, Bargo and each Partner
understands and agrees that it may do so only in compliance with the Securities
Act and applicable state securities laws, as then in effect, and that
stop-transfer instructions to that effect, where applicable, will be in effect
with respect to the Merger Shares, the Warrant and the Warrant Shares. Bargo and
each Partner agrees to the imprinting, so long as required by law, of a legend
on the certificates representing the Merger Shares, the Warrant and the Warrant
Shares, substantially as follows in all material respects:
[THE SECURITIES REPRESENTED BY THIS CERTIFICATE] [THIS WARRANT AND THE
SECURITIES TO BE RECEIVED UPON THE EXERCISE OF THIS WARRANT] HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS
OF ANY
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<PAGE> 12
STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION
REQUIREMENTS OF SUCH LAWS.
SECTION 4.14. NO SOLICITATION. Neither Bargo or any Partner was at any
time solicited by any leaflet, public promotional meeting, circular, newspaper
or magazine article, radio or television advertisement, or any other form of
general advertising or solicitation in connection with the offer, sale or
purchase of the Merger Shares, the Warrant or the Warrant Shares under this
Agreement.
SECTION 4.15. DISCLAIMER OF WARRANTIES. Other than those expressly set
out in this Article IV, each Bargo Entity hereby expressly disclaims any and all
representations or warranties with respect to the Properties or the transaction
contemplated hereby, and the Future Entities agree that the Properties are being
transferred "where is" and "as is". Specifically as a part of (but not in
limitation of) the foregoing, each Future Entity acknowledges that no Bargo
Entity has made, and each Bargo Entity hereby expressly disclaims, any
representation or warranty (express, implied, under common law, by statute or
otherwise) (a) except to the limited extent set forth in Section 4.7, as to the
condition of the Properties (INCLUDING WITHOUT LIMITATION, EACH BARGO ENTITY
DISCLAIMS ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS), (b) as to
the compliance by the Bargo Entities with Environmental Laws, (c) as to the
status of title to the Properties, or (d) as to the extent of oil, gas and/or
other mineral reserves, the recoverability of or the cost of recovering any of
such reserves, the value of reserves, prices (or anticipated prices) at which
production has been or will be sold and the ability to sell oil or gas
production from the Properties.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF FUTURE ENTITIES
Each of the Future Entities hereby represents and warrants to the Bargo
Entities as follows:
SECTION 5.1. ORGANIZATION AND EXISTENCE. Each Future Entity is a
corporation duly organized, legally existing and in good standing under the laws
of (a) in the instance of Future, the State of Utah, and (b) in the instance of
Future Sub, the laws of the State of Nevada. Future has the power to carry on
its business as it is now being conducted or currently proposed to be conducted.
Future is duly qualified to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities make such qualification necessary, except where the
failure to be so qualified
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<PAGE> 13
will not, alone or in the aggregate, have a Material Adverse Effect on Future
and its Subsidiaries, taken together.
SECTION 5.2. POWER AND AUTHORITY. Each Future Entity has full corporate
power and corporate authority to execute, deliver, and perform this Agreement
and each other agreement, instrument, or document executed or to be executed by
such Future Entity in connection with the transactions contemplated hereby to
which it is a party and to consummate the transactions contemplated hereby and
thereby. The execution, delivery, and performance by each Future Entity of this
Agreement (including the issuance of the Merger Shares and the Warrant) and each
other agreement, instrument, or document executed or to be executed by such
Future Entity in connection with the transactions contemplated hereby to which
it is a party, and the consummation by it of the transactions contemplated
hereby and thereby, have been duly authorized by all necessary corporate action
of such Future Entity.
SECTION 5.3. VALID AND BINDING AGREEMENT. This Agreement has been duly
executed and delivered by each Future Entity and constitutes, and each other
agreement, instrument, or document executed or to be executed by such Future
Entity connection with the transactions contemplated hereby to which it is a
party has been, or when executed will be, duly executed and delivered by such
Future Entity and constitutes, or when executed and delivered will constitute, a
valid and legally binding obligation of such Future Entity, enforceable against
it in accordance with their respective terms, except that such enforceability
may be limited by (a) applicable bankruptcy, insolvency, reorganization,
moratorium, and similar laws affecting creditors' rights generally and (b)
equitable principles which may limit the availability of certain equitable
remedies (such as specific performance) in certain instances.
SECTION 5.4. NON-CONTRAVENTION. The execution, delivery, and
performance by each Future Entity of this Agreement and each other agreement,
instrument, or document executed or to be executed by such Future Entity in
connection with the transactions contemplated hereby to which it is a party and
the consummation by it of the transactions contemplated hereby and thereby do
not and will not (a) conflict with or result in a violation of any provision of
the charter or bylaws or other governing instruments of such Future Entity, (b)
conflict with or result in a violation of any provision of, or constitute (with
or without the giving of notice or the passage of time or both) a default under,
or give rise (with or without the giving of notice or the passage of time or
both) to any right of termination, cancellation, or acceleration under, any
bond, debenture, note, mortgage, indenture, lease, contract, agreement, or other
instrument or obligation to which such Future Entity is a party or by which such
Future Entity or any of its properties may be bound, (c) result in the creation
or imposition of any lien or other encumbrance upon the properties of such
Future Entity, or (d) violate any applicable law, rule or regulation binding
upon such Future Entity.
SECTION 5.5. APPROVALS. No consent, approval, order, or authorization
of, or declaration, filing, or registration with, any court or governmental
agency or of any third party is required to be obtained or made by a Future
Entity in connection the execution, delivery, or performance by such Future
Entity of this Agreement (including the issuance of the Merger Shares and the
Warrant as contemplated hereby) and each other agreement, instrument, or
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<PAGE> 14
document executed or to be executed by such Future Entity in connection with the
transactions contemplated hereby to which it is a party or the consummation by
it of the transactions contemplated hereby and thereby, other than (i) the
filing by Future Sub of a certificate of merger with the Secretaries of State of
Nevada and Texas in accordance with the Nevada Statute and the TBCA,
respectively, and (ii) compliance with any applicable requirements of the
Securities Act and any applicable state securities laws.
SECTION 5.6. PENDING LITIGATION. There are no pending suits, actions,
or other proceedings to which Future or its Subsidiaries is a party or, to the
knowledge of Future, threatened to be made a party which, if decided adversely
to Future or its Subsidiaries, could have a Material Adverse Effect.
SECTION 5.7. CAPITALIZATION.
(a) The authorized capital stock of Future consists of 30,000,000
shares of Future Stock, and 200,000 shares of Preferred Stock, par value $.01
per share (in this Section, the "PREFERRED STOCK"). As of August 11, 1998,
6,157,015 shares of Future Stock were validly issued and outstanding, fully
paid, and nonassessable, and no shares of Preferred Stock were issued and
outstanding and there have been no changes in such numbers through the date of
this Agreement. As of the date of this Agreement, there are no bonds,
debentures, notes or other indebtedness issued or outstanding having the right
to vote on any matters on which Future's stockholders may vote. As of the date
of this Agreement, other than as set forth in the Future Disclosure Schedule,
there are no options, warrants, calls, convertible securities or other rights,
agreements or commitments presently outstanding obligating Future to issue,
deliver or sell shares of its capital stock or debt securities, or obligating
Future to grant, extend or enter into any such option, warrant, call or other
such right, agreement or commitment, and, except for exercises thereof, there
have been no changes in the number of such securities through the date of this
Agreement; provided, that it is contemplated Future will issue to EnCap Fund I
up to 2,844,859 shares of Future Stock at Closing in connection with EnCap Fund
I's agreement to enter into the Subordination Agreement. All of the Merger
Shares to be issued in accordance with this Agreement will be, when so issued,
duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights and shall be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever. Future has duly
reserved for issuance pursuant to the exercise of the Warrant, the Warrant
Shares.
(b) The authorized capital stock of Future Sub consists of 1,000,000
shares of common stock, par value $0.01 per share ("FUTURE SUB STOCK"). As of
the date hereof, 1,000 shares of Future Sub Stock were validly issued and
outstanding, fully paid, and nonassessable, and Future is the record and
beneficial owner of such shares, free and clear of all liens or other
encumbrances. There are no bonds, debentures, notes or other indebtedness issued
or outstanding having the right to vote on any matters on which Future Sub's
stockholders may vote. Other than as contemplated by this Agreement, there are
no options, warrants, calls, convertible securities or other rights, agreements
or commitments presently outstanding obligating Future Sub to issue, deliver or
sell shares of its capital stock or debt securities, or
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<PAGE> 15
obligating Future Sub to grant, extend or enter into any such option, warrant,
call or other such right, agreement or commitment.
SECTION 5.8. SUBSIDIARIES. Each Subsidiary is a corporation,
partnership or other entity (as indicated on the Future Disclosure Schedule)
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has the corporate or similar power to carry on
its business as it is now being conducted or currently proposed to be conducted.
Each Subsidiary is duly qualified to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary except
where the failure to be so qualified, when taken together with all such
failures, has not had, and would not reasonably be expected to have, a Material
Adverse effect on Future and its Subsidiaries, taken together. The Future
Disclosure Schedule sets forth, with respect to each Subsidiary, its name and
jurisdiction of organization and, with respect to each Subsidiary that is not
wholly-owned, the number of issued and outstanding shares of capital stock or
share capital and the number of shares of capital stock or share capital owned
by Future or a Subsidiary. All the outstanding shares of capital stock or share
capital of each Subsidiary are validly issued, fully paid and nonassessable,
and, except as otherwise set forth in the Future Disclosure Schedule, those
owned by Future or by a Subsidiary of Future are owned free and clear of any
liens, claims or encumbrances. There are no existing options, warrants, calls,
convertible securities or other rights, agreements or commitments of any
character relating to the issued or unissued capital stock or other securities
of any of the Subsidiaries of Future. Future does not directly or indirectly own
any interest in any other corporation, partnership, joint venture or other
business association or entity or have any obligation, commitment or undertaking
to acquire any such interest other than joint ventures of the type customarily
entered into in the oil and gas industry.
SECTION 5.9. PERMITS. Each of Future and its Subsidiaries has all
permits, approvals, licenses and franchises from governmental authorities
required to conduct its business as now being conducted, except for such
permits, approvals, licenses and franchises the absence of which would not,
individually or in the aggregate, have a Material Adverse Effect.
SECTION 5.10. KNOWLEDGEABLE PURCHASER. Each Future Entity is a
knowledgeable purchaser, owner and operator of oil and gas properties, has the
ability to evaluate (and in fact has evaluated) the Properties for purchase, and
is acquiring the Properties for its own account and not with the intent to make
a distribution within the meaning of the Securities Act of 1933 (and the rules
and regulations pertaining thereto) or a distribution thereof in violation of
any other applicable securities laws.
SECTION 5.11. CERTIFICATES FOR MERGER SHARES. The certificates
delivered to Bargo at the Closing representing the Merger Shares will conform to
the requirements of the Utah Business Corporation Act.
SECTION 5.12. SEC FILINGS. Except as otherwise disclosed to Bargo,
Future is current in its obligations to file all periodic reports and proxy
statements with the Commission required
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to be filed under the Exchange Act. Future's Annual Report on Form-10KSB for the
year ended December 31, 1997, Future's Form 8-K/A filed on February 27, 1998,
and Future's Quarterly Report on Form-10QSB for the quarter ending March 31,
1998 (collectively, the "SEC DOCUMENTS") are all of the documents the Future was
required to file with the Commission since January 1, 1998. As of their
respective dates, the SEC Documents complied as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations of the
Commission thereunder applicable to such SEC Documents. The SEC Documents do not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of circumstances then existing. The audited Consolidated
financial statements and unaudited Consolidated interim financial statements of
Future included in the SEC Documents comply as to form in all material respects
with applicable accounting requirements and with the published rules and
regulations of the Commission with respect thereto; present fairly in all
material respects, in conformity with GAAP applied on a consistent basis, the
Consolidated financial position of Future as of the dates thereof and its
Consolidated results of operations and changes in financial position for the
periods then ended (subject to normal year-end adjustments in the case of the
unaudited interim financial statements and the fact that certain information and
notes have been condensed or omitted in accordance with the Exchange Act and the
rules promulgated thereunder); and are in all material respects in accordance
with the books of account and records of Future and its subsidiaries. There are
no material liabilities of Future (contingent or otherwise), other than as
disclosed in the SEC Documents and the financial statements included therein.
SECTION 5.13. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the SEC Documents filed prior to the date of this Agreement or in the Future
Disclosure Schedule, since December 31, 1997, Future and its Subsidiaries have
operated their respective businesses in the ordinary course of business
consistent with past practice and there has not been (a) any transaction,
commitment, dispute or other event or condition (financial or otherwise) of any
character (whether or not in the ordinary course of business) which, alone or in
the aggregate, has had, or would reasonably be expected to have, a Material
Adverse Effect; (b) any damage, destruction or loss, whether or not covered by
insurance, which has had, or would reasonably be expected to have, a Material
Adverse Effect; (c) any declaration, setting aside or payment of any dividend or
distribution (whether in cash, stock or property) with respect to the capital
stock of the Future Entities or any Subsidiary (other than dividends or
distributions between Future and its wholly-owned Subsidiaries); (d) any
material change in Future's accounting principles, practices or methods; (e) any
repurchase or redemption with respect to Future's capital stock; (f) any stock
split, combination or reclassification of any of Future's capital stock or the
issuance or authorization of any issuance of any other securities in respect of,
in lieu of or in substitution for, shares of Future's capital stock; (g) any
grant of or any amendment of the terms of any option to purchase shares of
capital stock of Future; or (h) any agreement (whether or not in writing),
arrangement or understanding to do any of the foregoing.
SECTION 5.14. SECTION 61-6-2 OF UTAH CODE. The Utah Control Shares
Acquisition Act will not apply to acquisitions from time to time, in the open
market and otherwise, by Bargo and the Partners, of the shares of Future.
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SECTION 5.15. ARTICLES OF INCORPORATION AND BY-LAWS; CORPORATE RECORDS.
Future and Future Sub have delivered to Bargo true and complete copies of their
respective Certificate or Articles of Incorporation and Bylaws, as amended or
restated through the date of this Agreement. The minute books of each of Future
and its Subsidiaries contain reasonably complete and accurate records of all
corporate actions of the equity owners of the various entities and of the boards
of directors or other governing bodies, including committees of such boards or
governing bodies. The stock transfer records of Future are maintained by its
transfer agent and registrar and, to the knowledge of Future, contain complete
and accurate records of all issuances and redemptions of stock by Future. The
stock transfer records of Future Sub contain complete and accurate records of
all issuances and redemptions of stock by Future Sub. Except as set forth in the
Future Disclosure Schedule, neither Future nor, to the knowledge of Future, any
of its Affiliates, is a party to any agreement with respect to the capital stock
of Future other than this Agreement.
SECTION 5.16. CONTRACTS.
(a) The Future Disclosure Schedule sets forth, as of the date hereof, a
list of all of the following material contracts and other agreements to which
any of Future or its Subsidiaries is a party or by which any of them or any
material portion of their properties or assets are bound or subject (other than
those set forth in any other portion of the Future Disclosure Schedule):
(i) contracts, severance agreements and other agreements with
any current or former officer, director, employee, consultant, agent or
other representative;
(ii) contracts and other agreements with any labor union or
association representing any employee of the Future or its
Subsidiaries;
(iii) contracts, agreements or other agreements relating to
Future and its Subsidiaries between any of the Future or its
Subsidiaries, on the one hand, and any stockholder or any of his, her
or its Affiliates on the other hand;
(iv) joint venture agreements;
(v) contracts and other agreements under which any of Future
or its Subsidiaries agrees to indemnify any party;
(vi) contracts and other agreements relating to the borrowing
of money; or
(vii) any other material contract or other agreement whether
or not made in the ordinary course of business.
There have been delivered or made available to Bargo true and complete copies of
all such contracts and other agreements described above that are referenced in
the Future Disclosure Schedule.
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(b) All contracts, agreements and understandings of the type described
above and referenced in the Future Disclosure Schedule are valid and binding and
are in full force and effect and enforceable in accordance with their respective
terms other than contracts, agreements or understandings which are by their
terms no longer in force or effect. Except as set forth in the Future Disclosure
Schedule, (i) no approval or consent of, or notice to, any Person is needed in
order that such contract, agreement or understanding shall continue in full
force and effect in accordance with its terms without penalty, acceleration or
rights of early termination following the consummation of the transactions
contemplated by this Agreement, and (ii) none of the Future or its Subsidiaries
is in violation or breach of or default under any such contract, agreement or
understanding nor, to the knowledge of Future, is any other party to any such
contract, agreement or understanding.
SECTION 5.17. OIL AND GAS PROPERTIES.
(a) Each of Future and its Subsidiaries has good and defensible title
to all of its material oil and gas properties and assets, free and clear of all
liens other than as disclosed in the Future Disclosure Schedule; provided, that
no representation or warranty is made with respect to any oil, gas or mineral
property or interest to which no proved oil or gas reserves are properly
attributed. All proceeds from the sale of each Future's and its Subsidiaries'
share of the hydrocarbons being produced from its oil and gas properties are
currently being paid in full to the Future or its Subsidiaries by the purchasers
thereof on a timely basis and none of such proceeds are currently being held in
suspense by such purchaser or any other party.
(b) Future has delivered to Bargo a copy of the reserve report (in this
Section, the "RESERVE REPORT") dated as of August 1, 1998, prepared by T.J.
Smith & Company, Inc, independent reserve engineers (in this Section, the
"RESERVE ENGINEERS"), relating to the oil and gas reserves of Future and its
Subsidiaries. The factual information underlying the estimates of the reserves
of Future and its subsidiaries, which was supplied by Future to the Reserve
Engineers for the purpose of preparing the Reserve Report, including, without
limitation, production, volumes, sales prices for production, contractual
pricing provisions under oil or gas sales or marketing contracts under hedging
arrangements, costs of operations and development, and working interest and net
revenue information relating to Future's and its Subsidiaries' ownership
interests in properties, was true and correct in all material respects on the
date of such Reserve Report; the estimates of future capital expenditures and
other future exploration and development costs supplied to the Reserve Engineers
were prepared in good faith and with a reasonable basis; the information
provided to the Reserve Engineers for purposes of preparing the Reserve Report
was prepared in accordance with customary industry practices; the Reserve
Engineers were, as of the date of the Reserve Report prepared by it, and are, as
of the date hereof, independent petroleum engineers with respect to Future and
its Subsidiaries; other than normal production of the reserves and intervening
oil and gas price fluctuations, Future is not as of the date hereof and as of
the date of Closing will not be, aware of any facts or circumstances that would
result in a materially adverse change in the reserves in the aggregate, or the
aggregate present value of future net cash flows therefrom, as described in the
Reserve Report; estimates of such reserves and the present value of the future
net cash
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flows therefrom in the Reserve Report comply in all material respects to the
applicable requirements of Regulation S-X and Industry Guide 2 under the
Securities Act.
SECTION 5.18. ENVIRONMENTAL AND SAFETY MATTERS. Except as set forth in
the Future Disclosure Schedule and except for such of the following as would
not, individually or in the aggregate, have a Material Adverse Effect with
respect to Future and its Subsidiaries: (a) each of Future and its Subsidiaries
is in compliance with all applicable Environmental Laws; (b) neither Future nor
any of its Subsidiaries has received a notice, report or information regarding
any liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise), or any corrective, investigatory or remedial obligations, arising
under applicable Environmental Laws with respect to its past or present
operations or properties; (c) Future or a Subsidiary has obtained, and is and
has been in compliance with all terms and conditions of, all permits, licenses
and other authorizations required pursuant to Environmental Laws for its
occupation of the real property owned by Future and its Subsidiaries (in this
Section, an "OWNED PROPERTY") the property leased by the Future and its
Subsidiaries (in this Section, a "LEASED PROPERTY") and the other assets and
operations of the Future and its Subsidiaries and the conduct of their business;
and (d) neither Future nor its Subsidiaries has any contingent liability which
is material to Future and its Subsidiaries as a whole in connection with the
release of any hazardous materials into the environment in violation of any
Environmental Law. Future has made available to Bargo true, complete and correct
copies of all environmental reports, analyses, tests or monitoring in the
possession of the Future during the past two years pertaining to any Owned
Property or Leased Property.
SECTION 5.19. TAX MATTERS. Each of the following is true with respect
to each of Future and its Subsidiaries to the extent applicable to such member:
(a) all Returns have been or will be timely filed by Future and its
Subsidiaries when due in accordance with all applicable laws; all Taxes shown on
the Returns have been or will be timely paid when due; the Returns have been
properly completed in compliance with all applicable laws and regulations and
completely and accurately reflect the facts regarding the income, expenses,
properties, business and operations required to be shown thereon; the Returns
are not subject to penalties under Section 6662 of the Code (or any
corresponding provision of state, local or foreign tax law);
(b) except as set forth in the Future Disclosure Schedule, Future and
its Subsidiaries has paid all Taxes required to be paid by it (whether or not
shown on a Return) or for which it could be liable (provided that it shall not
be considered a breach of this representation if it is ultimately determined
that additional tax payments are due but such assessment is based on an
adjustment to a return or position, if such member has a reasonable basis for
the position taken with respect to such Taxes), whether to taxing authorities or
to other persons under tax allocation agreements or otherwise, and the charges,
accruals, and reserves for Taxes due, or accrued but not yet due, relating to
its income, properties, transactions or operations as reflected on its books
(including,
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without limitation, the balance sheet included in Future's Form 10-QSB for the
quarter ended March 31, 1998) are adequate to cover such Taxes;
(c) there are no agreements or consents currently in effect for the
extension or waiver of the time (i) to file any Return or (ii) for assessment or
collection of any taxes relating to the income, properties or operations of
Future or its Subsidiaries, nor has Future and its Subsidiaries been requested
to enter into any such agreement or consent;
(d) there are no liens for Taxes (other than for current Taxes not yet
due and payable) upon the assets of Future or its Subsidiaries; and
(e) to the knowledge of Future, each of Future and its Subsidiaries has
complied in all material respects with all applicable tax laws.
SECTION 5.20. ERISA. Future does not maintain nor has it maintained any
Plan. Future does not currently contribute to or have any obligation to
contribute to or otherwise have any liability with respect to any Plan.
SECTION 5.21 FUTURE'S ASSETS. The assets of Future and of its
subsidiaries consist solely of (i) reserves of oil, rights to reserves of oil
and associated exploration and production assets with a fair market value not
exceeding $500 million and (ii) other assets with a fair market value not
exceeding $15 million. For purposes of this Section 5.21, the term "ASSOCIATED
EXPLORATION AND PRODUCTION ASSETS" shall have the meaning ascribed thereto in
Section 802.3 of the Rules promulgated pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976.
SECTION 5.22. NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Article V, neither Future,
Future Sub nor any other Person makes any other express or implied
representation or warranty on behalf of Future or Future Sub.
ARTICLE VI
CERTAIN COVENANTS
SECTION 6.1. ACCESS TO INFORMATION.
(a) From the date hereof until Closing, each Bargo Entity will use its
reasonable best efforts to give Future, and its attorneys and other
representatives, access at all reasonable times (i) to the Properties and to any
contract files, lease or other title files, production files, well files and
other files of the Bargo Entities pertaining to the ownership of the Properties,
and (ii) the books and records of SCL, and each Bargo Entity will use its
reasonable best efforts to arrange for Future, and its
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attorneys and other representatives, to have access to any such files or records
in the office of Bargo. Each Bargo Entity shall not be obligated to provide
Future with access to any records or data which such Bargo Entity cannot provide
to Future without, in its reasonable opinion, breaching confidentiality
agreements with other parties. Future recognizes and agrees that all materials
made available to it (whether pursuant to this Section or otherwise) in
connection with the Properties are made available to it as an accommodation and
without representation or warranty of any kind as to the accuracy and
completeness of such materials.
(b) From the date hereof until Closing, Future shall afford to Bargo
and to the officers, employees, accountants, counsel, financial advisors and
other representatives of Bargo, reasonable access during normal business hours
to the premises, books and records of Future and the Subsidiaries and will
furnish to the Bargo (i) a copy of each report, schedule, registration statement
and other documents filed by it during such period pursuant to the requirements
of federal or state securities laws, and (ii) such other information with
respect to its business and properties as Bargo reasonably requests. Future
shall not be obligated to provide Bargo with access to any records or data which
Future cannot provide to Bargo without, in its reasonable opinion, breaching
confidentiality agreements with other parties. Bargo recognizes and agrees that
all materials made available to it (whether pursuant to this Section or
otherwise) are made available to it as an accommodation and without
representation or warranty of any kind as to the accuracy and completeness of
such materials.
SECTION 6.2. CONFIDENTIALITY.
(a) Each Receiving Party (as defined below) agrees that all
Confidential Information (as defined below) shall be kept confidential by the
Receiving Party and shall not be disclosed by the Receiving Party in any manner
whatsoever; provided, however, that (i) any of such Confidential Information may
be disclosed to such directors, officers, employees, and authorized
representatives (including without limitation attorneys, accountants,
consultants, and financial advisors) of the Receiving Party (collectively, for
purposes of this Section, "RECEIVING PARTY REPRESENTATIVES") as need to know
such information for the purpose of evaluating the transactions contemplated
hereby (it being understood that each Receiving Party Representative shall be
informed by the Receiving Party of the confidential nature of such information
and shall be required to treat such information confidentially and that the
Receiving Party and a Receiving Party Representative shall be responsible for
any breach of this Section by such Receiving Party Representative), (ii) any
disclosure of Confidential Information may be made to the extent to which the
Disclosing Party (as defined below) consents in writing, (iii) Confidential
Information may be disclosed by the Receiving Party or any Receiving Party
Representative to the extent that, in the opinion of counsel for the Receiving
Party or such Receiving Party Representative, the Receiving Party or such
Receiving Party Representative is legally compelled to do so, provided that,
prior to making such disclosure, the Receiving Party or such Receiving Party
Representative, as the case may be, advises and consults with the Disclosing
Party regarding such
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disclosure and provided further that the Receiving Party or such Receiving Party
Representative, as the case may be, discloses only that portion of the
Confidential Information as is legally required. The Receiving Party agrees that
none of the Confidential Information will be used for any purpose other than in
connection with the transactions contemplated hereby. The term "CONFIDENTIAL
INFORMATION", as used herein, means all information (irrespective of the form of
communication) obtained by or on behalf of the Receiving Party from the
Disclosing Party or its representatives pursuant to this Section and all similar
information obtained from the Disclosing Party or its representatives by or on
behalf of the Receiving Party prior to the date of this Agreement, other than
information which (A) was or becomes generally available to the public other
than as a result of disclosure by the Receiving Party or any Receiving Party
Representative, (B) was or becomes available to the Receiving Party on a
nonconfidential basis prior to disclosure to the Receiving Party by the
Disclosing Party or its representatives, or (C) was or becomes available to the
Receiving Party from a source other than the Disclosing Party and its
representatives, provided that such source is not known by the Receiving Party
(after reasonable due inquiry) to be bound by a legal, contractual or fiduciary
obligation to the Disclosing Party. As used in this Section, the term "RECEIVING
PARTY" shall mean (x) a Future Entity, when the Disclosing Party is a Bargo
Entity, and (y) a Bargo Entity, when the Disclosing Party is a Future Entity. As
used in this Section, the term "DISCLOSING PARTY" shall mean (xx) a Future
Entity, when the Receiving Party is a Bargo Entity , and (yy) a Bargo Entity,
when the Receiving Party is a Future Entity.
(b) If this Agreement is terminated, the Receiving Party shall promptly
return at its expense, and shall cause all Receiving Party Representatives to
promptly return at the Receiving Party's expense, all Confidential Information
to the Disclosing Party without retaining any copies thereof, provided that such
portion of the Confidential Information as consists of notes, compilations,
analyses, reports, studies, or other documents prepared by the Receiving Party
or the Receiving Party Representatives shall be destroyed (and the Receiving
Party and each Receiving Party Representative shall certify such destruction in
writing to the Disclosing Party if requested by the Disclosing Party).
SECTION 6.3. CONDUCT OF OPERATIONS ON THE PROPERTIES PRIOR TO THE
EFFECTIVE TIME. From the date hereof until the Effective Time, SCL will continue
its actions as a non-operator of the Properties in the ordinary course of
business and will not sell or otherwise dispose of (or release) any portion of
the Properties, without Future's written approval. SCL may make sales or other
dispositions of oil, gas and other minerals in the ordinary course of business
after production (but, in doing so, will not enter into any new marketing
arrangements unless the same terminate, or can be terminated, (in either case
without penalty or other detriment) upon 31 days written notice or less). SCL
will not, without Future's consent, propose the drilling of any additional
wells, or propose the deepening, plugging back, reworking or abandoning of any
existing wells, or propose the conducting of any other operations which require
consent under the applicable operating agreement except, in SCL's sole
discretion, necessary to prevent
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termination or forfeiture of any oil and gas lease. SCL will advise Future of
any such proposals made by other parties, and will consult with Future
concerning such proposals, and will respond in the manner as required by Future;
provided that, if the period for responding to such a proposal extends beyond
the Effective Time, SCL will not respond to such proposal unless the Closing
does not occur prior to the next to last day allowed to respond (in which case
SCL shall respond in the manner required by Future). SCL will not modify any
lease or other material agreement included in or relating to the Properties or
enter into any new material agreement relating to the Properties without
Future's consent, other than production sales contracts, or other marketing
related agreements, which terminate, or can be terminated, (in each case without
penalty or other detriment) upon 31 days written notice or less.
SECTION 6.4. CONDUCT OF FUTURE'S BUSINESS PRIOR TO THE DIRECTOR
EFFECTIVE DATE. During the period from the date of this Agreement to the
Director Effective Date, Future and its Subsidiaries shall each use its
reasonable best efforts to preserve the goodwill of suppliers, general partners,
customers and others having business relations with them and to do nothing
knowingly to impair their ability to keep and preserve their businesses as it
exists on the date of this Agreement. Without limiting the generality of the
foregoing, during the period from the date of this Agreement to the Director
Effective Date, Future and its Subsidiaries shall not, without the prior written
consent of Bargo:
(a) declare, set aside, increase or pay any dividend
(including any stock dividends), or declare or make any distribution
on, or directly or indirectly combine, redeem, reclassify, purchase, or
otherwise acquire, any shares of its capital stock or authorize the
creation or issuance of, or, other than the Price Options or as
contemplated hereby, issue, deliver or sell any additional shares of
its capital stock or any securities or obligations convertible into or
exchangeable for its capital stock or effect any stock split or reverse
stock split or other recapitalization.
(b) amend its Certificate of Incorporation or By-laws
otherwise than as contemplated by this Agreement;
(c) pledge or otherwise encumber any shares of its capital
stock, any other voting securities or any securities convertible into,
or any rights, warrants or options to acquire, any such shares, or any
other voting securities or convertible securities;
(d) sell, assign, mortgage, pledge, encumber or otherwise
transfer any oil and gas property or other material asset (including
sales of oil or gas to be produced in the future) owned by Future or a
Subsidiary, other than sales of oil and gas in the ordinary course of
business; enter into any material swap, hedge or similar agreement
covering a material amount of its future production;
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<PAGE> 24
(e) merge, consolidate or enter into a share exchange with
another entity other than as contemplated by this Agreement, or
liquidate;
(f) borrow amounts except amounts under the Senior Credit
Facility necessary (i) to pay the Closing Obligations, (ii) to make the
payment to EnCap Fund I and Gecko Booty 1994 I Limited Partnership
provided by Section 2.1 of the Note Restructuring Agreement and (iii)
to pay transaction costs incurred by it in connection with this
Agreement, the Credit Facility and the Note Restructuring Agreement and
the respective transactions contemplated thereby;
(g) commit or omit to do any act which act or omission would
cause a breach of any covenant contained in this Agreement or would
cause any representation or warranty contained in this Agreement to
become untrue, as if each such representation and warranty were
continuously made from and after the date hereof;
(h) violate any applicable law, statute, rule, governmental
regulation or order in any material respect;
(i) fail to maintain its books, accounts and records in the
usual manner on a basis consistent with that heretofore employed;
(j) fail to pay, or to make adequate provision in all material
respects for the payment of, all Taxes, interest payments and penalties
due and payable (for all periods up to the date of Closing, including
that portion of its fiscal year to and including the date of Closing)
to any city, parish, county, state, the United States, foreign or any
other taxing authority, except those being contested in good faith by
appropriate proceedings and for which sufficient reserves have been
established, or make any elections with respect to taxes;
(k) make any material Tax election that is inconsistent with
any corresponding election made on a prior return or settle or
compromise any income Tax liability for an amount materially in excess
of the liability therefor that is reflected on the Future's
consolidated financial statements included in its Form 10-KSB for the
fiscal year ended December 31, 1997;
(l) other than the Price Options or the Employment Agreement,
(1) increase the compensation or fringe benefits of any present or
former director, officer or employee of any member of the Future or its
Subsidiaries (except for increases in salary or wages in the ordinary
course of business consistent with past practice), (2) grant any
severance or termination pay to any present or former director, officer
or employee of any of the Future or its Subsidiaries , (3) loan or
advance any money or other property to any present or former director,
officer or employee of any of the Company or its Subsidiaries or (4)
establish, adopt, enter into, amend or terminate any Plan or any plan,
agreement,
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program, policy, trust, fund or other arrangement that would be a Plan
if it were in existence as of the date of this Agreement; or
(m) authorize any of, or agree or commit to do any of, the
foregoing actions.
SECTION 6.5. EMPLOYMENT AGREEMENT. Future and Carl Price shall enter
into an employment agreement at (and subject to the occurrence of) the Closing
in substantially the form of the agreement attached hereto as Exhibit 6.5 in all
material respects (the "EMPLOYMENT AGREEMENT").
SECTION 6.6. BYLAWS. Future shall amend its Bylaws at (and subject to
the occurrence of) the Closing in substantially the form attached hereto as
Exhibit 6.6 in all material respects.
SECTION 6.7. REGISTRATION RIGHTS AGREEMENTS. Future and Bargo shall
enter into a registration rights agreement at (and subject to the occurrence of)
the Closing in substantially the form of the agreement attached hereto as
Exhibit 6.7-1 in all material respects (the "BARGO REGISTRATION RIGHTS
AGREEMENT"). Future and Bargo shall use their reasonable best efforts to cause
EnCap Fund I to enter into a registration rights agreement at (and subject to
the occurrence of) the Closing in substantially the form of the agreement
attached hereto as Exhibit 6.7-2 in all material respects (the "ENCAP
REGISTRATION RIGHTS AGREEMENT"). Future and Bargo shall use their reasonable
best efforts to cause the members of the Price Group to enter into a
registration rights agreement at (and subject to the occurrence of) the Closing
in substantially the form of the agreement attached hereto as Exhibit 6.7-3 in
all material respects (the "PRICE REGISTRATION RIGHTS AGREEMENT").
SECTION 6.8. CREDIT FACILITY. Future shall use its reasonable best
efforts to obtain, and have in place at or prior to Closing, a senior credit
facility of not less than $20,000,000 and with an initial borrowing base of at
least $10,000,000 (the "SENIOR CREDIT FACILITY").
SECTION 6.9. SUBORDINATION AGREEMENT. Future shall use its reasonable
best efforts to cause EnCap Fund I to execute and deliver on or prior to the
Closing that certain Master Subordination Agreement in substantially the form of
the agreement attached hereto as Exhibit 6.9 (the "SUBORDINATION AGREEMENT").
SECTION 6.10. SHAREHOLDERS' AGREEMENT. Future and Bargo shall enter
into a shareholders' agreement at (and subject to the occurrence of) the Closing
in substantially the form of the agreement attached hereto as Exhibit 6.10 (the
"SHAREHOLDERS' AGREEMENT") and shall use their reasonable best efforts to cause
EnCap Fund I and the other parties listed therein to execute and deliver such
agreement.
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SECTION 6.11. DIRECTORS.
(a) Future shall cause (i) Robert Price and Don Wm. Reynolds, Jr. to
resign as directors of Future effective at the Director Effective Date, (ii) the
appointment of Tim J. Goff and Thomas D. Barrow (the "BARGO NOMINEES"), and Gary
R. Petersen and D. Martin Phillips as directors of Future effective immediately
at the Director Effective Date and (iii) the appointment of Tim J. Goff as
Chairman of the Board of Directors of Future effective immediately at the
Director Effective Date.
(b) Future shall promptly take all actions required pursuant to Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order to
fulfill its obligations under this Section 6.11 and shall promptly distribute to
its stockholders an Information Statement pursuant to Section 14(f) providing
such information with respect to Bargo and its officers and directors as is
required under Section 14(f) and Rule 14f-1 to fulfill such obligations. Bargo
shall supply to Future and be solely responsible for any information with
respect to Bargo and the Bargo Nominees required by such Section 14(f) and Rule
14f-1. Future represents to Bargo that the Information Statement will comply as
to form with all requirements of the Exchange Act and the rules and regulations
thereunder, and will not, on the date filed with the Commission and on the
Closing Date and the Effective Time, contain an untrue statement of a material
fact or omit to state a material fact which, in light of the facts set forth
therein, is misleading; provided that Future is not representing as to the
accuracy of any statement provided by Bargo in writing to Future for use in the
Information Statement. Bargo represents to Future that all information provided
by Future in writing to Bargo for inclusion in the Information Statement will
not, on the date filed with the Commission and on the Closing Date and at the
Effective Time, contain an untrue statement of a material fact or omit to state
a material fact which, in light of the facts set forth therein, is misleading.
SECTION 6.12. PAYMENT OF THE CLOSING OBLIGATIONS. Immediately following
the Closing, Future shall cause the Surviving Corporation to pay (a) the Sowell
Indebtedness and use its best efforts to cause the execution and filing of
proper releases of the Sowell Mortgage and (b) the difference between the
Current Debt Amount and the Sowell Indebtedness to Bargo in immediately
available funds by wire transfer to an account specified by Bargo in writing
prior to Closing.
SECTION 6.13. CERTAIN AFFIRMATIVE POST-CLOSING COVENANTS. Subject to
the occurrence of the Closing, the covenants and agreements contained in
Sections 6.2 through Section 6.8 of that certain Note Restructuring Agreement of
even date herewith by and between Future and Fund I shall be incorporated herein
and Future shall be deemed to have made such covenants and agreements with
Bargo.
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ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES; TERMINATION RIGHTS
SECTION 7.1. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF FUTURE
ENTITIES. The obligations of the Future Entities to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment on or prior
to the Closing Date of each of the following conditions (which may be waived by
the Future Entities in writing):
(a) Each and every representation of the Bargo Entities under this
Agreement shall be true and accurate as of the date when made and shall be
deemed to have been made again at and as of the time of the Effective Time and
the Closing and shall at and as of the Effective Time and such time of Closing
be true and accurate in all respects except as to changes specifically
contemplated by this Agreement or consented to by Future.
(b) The Bargo Entities shall have performed and complied in all
material respects with (or compliance therewith shall have been waived by
Future) each and every covenant, agreement and condition required by this
Agreement to be performed or complied with by them prior to or at the Closing.
(c) Future shall have received a certificate executed by the general
partner of Bargo, dated the Closing Date, representing and certifying that the
conditions set forth in subsections (a) and (b) have been fulfilled.
(d) No suit, action or other proceedings shall, on the date of Closing,
be pending or threatened before any court or governmental agency seeking to
restrain, prohibit, or obtain damages or other relief in connection with the
consummation of the transactions contemplated by this Agreement.
(e) The Future Entities shall have received an opinion of counsel or
counsels reasonably acceptable to Future dated the Closing Date covering the
matters described in Exhibit 7.1(e) and in a form reasonably acceptable to
Future.
(f) Future shall have, on or before the Closing, entered into the
Senior Credit Facility on terms and conditions acceptable to Future.
(g) Future shall have, on or before the Closing, entered into the
Subordination Agreement with EnCap Fund I.
(h) EnCap Fund I, Bargo, Carl Price and Don Reynolds shall have
executed and delivered the Shareholders' Agreement.
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(i) Future shall have received (i) a copy of the resolutions of the
partners of Bargo authorizing the execution, delivery and performance by Bargo
of this Agreement and each other agreement, instrument or document executed or
to be executed by Bargo in connection with this Agreement or the transactions
contemplated hereby to which it is a party and (ii) a copy of the resolutions of
the board of directors and the sole shareholder of SCL authorizing the
execution, delivery and performance by SCL of this Agreement and each other
agreement, instrument or document executed or to be executed by SCL in
connection with this Agreement or the transactions contemplated hereby to which
it is a party.
(j) EnCap Fund I shall have executed and delivered the EnCap
Registration Rights Agreement.
(k) Bargo shall have executed and delivered the Bargo Registrations
Rights Agreement.
(l) Carl Price shall have executed and delivered the Employment
Agreement.
(m) At least Carl Price shall have executed and delivered the Price
Registration Rights Agreement.
(n) Bargo shall have delivered its shares of SCL Stock for
cancellation.
If any such condition on the obligations of the Future Entities under this
Agreement is not met as of the Closing Date, or in the event the Closing does
not occur on or before the Closing Date, and (in either case) the Future
Entities are not in breach of their obligations hereunder in the absence of the
Bargo Entities also being in breach of their obligations hereunder, this
Agreement may, at the option of the Future Entities, be terminated, in which
case the parties shall have no further obligations to one another hereunder
(other than the obligations under Sections 6.2 and 11.4 and Article X which will
survive such termination).
SECTION 7.2. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BARGO
ENTITIES. The obligations of the Bargo Entities to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment on or prior
to the Closing Date of each of the following conditions (which may be waived by
the Bargo Entities in writing):
(a) Each and every representation of the Future Entities under this
Agreement shall be true and accurate as of the date when made and shall be
deemed to have been made again at and as of the Effective Time and the time of
Closing and shall at and as of the Effective Time and such time of Closing be
true and accurate in all respects except as to changes specifically contemplated
by this Agreement or consented to by Bargo.
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(b) The Future Entities shall have performed and complied in all
material respects with (or compliance therewith shall have been waived by Bargo)
each and every covenant, agreement and condition required by this Agreement to
be performed or complied with by the Future Entities prior to or at the Closing.
(c) Bargo shall have received a certificate executed by the president
of Future, dated the Closing Date, representing and certifying that the
conditions set forth in subsections (a) and (b) have been fulfilled.
(d) No suit, action or other proceedings shall, on the date of Closing,
be pending or threatened before any court or governmental agency seeking to
restrain, prohibit, or obtain damages or other relief in connection with the
consummation of the transactions contemplated by this Agreement.
(e) The Bargo Entities shall have received an opinion of counsel or
counsels reasonably acceptable to Bargo dated the Closing Date covering the
matters described in Exhibit 7.2(e) and in a form reasonably acceptable to
Bargo.
(f) Future shall have, on or before the Closing, entered into the
Senior Credit facility on terms and conditions acceptable to Bargo.
(g) Future and EnCap Fund I shall have, on or before the Closing,
entered into the Subordination Agreement.
(h) Future shall have received the resignations of Robert Price and Don
Wm. Reynolds, Jr. as directors of Future, such resignations to be effective at
the Director Effective Date.
(i) Tim J. Goff, Gary R. Petersen, D. Martin Phillips and Thomas D.
Barrow shall have been appointed to the Board of Directors of Future, such
appointment to be effective immediately at the Director Effective Date.
(j) Tim J. Goff shall have been elected as Chairman of the Board of
Directors of Future, such election to be effective immediately at the Effective
Time.
(k) EnCap Fund I, Future, Carl Price and Don Reynolds shall have
executed and delivered the Shareholders' Agreement.
(l) Future shall have executed and delivered the Bargo Registration
Rights Agreement.
(m) Future and EnCap Fund I shall have executed and delivered the EnCap
Registration Rights Agreement.
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(n) Future and Carl Price shall have executed and delivered the
Employment Agreement.
(o) Bargo shall have received (i) a copy of the resolutions of the
Board of Directors of Future authorizing the execution, delivery and performance
by Future of this Agreement and each other agreement, instrument or document
executed or to be executed by Future in connection with this Agreement or the
transactions contemplated hereby to which it is a party and (ii) a copy of the
resolutions of the Board of Directors and sole shareholder of Future Sub
authorizing the execution, delivery and performance by Future Sub of this
Agreement and each other agreement, instrument or document executed or to be
executed by Future Sub in connection with this Agreement or the transactions
contemplated hereby to which it is a party .
(p) Bargo shall have received (i) a certificate or certificates
evidencing the Merger Shares and (ii) the Warrant.
(q) At least Carl Price shall have executed and delivered the Price
Registration Rights Agreement.
(r) Future shall have adopted the amendment to the Bylaws as
contemplated by Section 6.6.
If any such condition on the obligations of the Bargo Entities under this
Agreement is not met as of the Closing Date, or in the event the Closing does
not occur on or before the Closing Date, and (in either case) the Bargo Entities
are not in breach of their obligations hereunder in the absence of the Future
Entities also being in breach of their obligations hereunder, this Agreement
may, at the option of the Bargo Entities, be terminated, in which case the
parties shall have no further obligations to one another hereunder (other than
the obligations under Sections 6.2 and 11.4 and Article X which will survive
such termination).
ARTICLE VIII
CERTAIN ACCOUNTING ADJUSTMENTS.
SECTION 8.1. ADJUSTMENTS. Notwithstanding that for state law purposes
the Merger shall be effective as of the Effective Time, the parties hereto agree
that for purposes of this Article VIII the Properties will be deemed to have
been conveyed and transferred by SCL to Future Sub as of August 1, 1998 (the
"EFFECTIVE DATE") and that appropriate accounting adjustments shall be made
between the Future Entities and the Bargo Entities so that (a) all expenses
(including, without limitation, all drilling costs, all capital expenditures,
and all overhead charges under applicable operating agreements, and all other
overhead charges actually charged by third parties) which are incurred in the
operation of the Properties after the Effective Date will be borne by
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Future Sub, and all proceeds (net of applicable production, severance, and
similar taxes) from sale of oil, gas and/or other minerals produced from the Oil
and Gas Properties after the Effective Date will be received by Future Sub, and
(b) all expenses which are incurred in the operation of the Properties before
the Effective Date will be borne by the Bargo Entities and all proceeds (net of
applicable production, severance, and similar taxes) from the sale of oil, gas
and/or other minerals produced therefrom before the Effective Date will be
received by the Bargo Entities. It is agreed that, in making such adjustments:
(i) oil which was produced from the Oil and Gas Properties and which was, on the
Effective Date, stored in tanks located on the Oil and Gas Properties (or
located elsewhere but used to store oil produced from the Oil and Gas Properties
prior to delivery to oil purchasers) and above pipeline connections shall be
deemed to have been produced before the Effective Date (it is recognized that
such tanks were not gauged on the Effective Date for the purposes of this
Agreement and that determination of the volume of such oil in storage will be
based on the best available data, which may include estimates), and (ii) ad
valorem taxes assessed with respect to a period which the Effective Date splits
shall be prorated based on the number of days in such period which fall on each
side of the Effective Date (with the day on which the Effective Date falls being
counted in the period after the Effective Date), and (iii) no consideration
shall be given to the local, state or federal income tax liabilities of any
party.
SECTION 8.2. CLOSING AND POST-CLOSING ACCOUNTING SETTLEMENTS.
(a) At or before Closing, the parties shall determine, based upon the
best information reasonably available to them, the amount of the adjustments
provided for in Section 8.1. If the amount of adjustments so determined which
would result in a credit to Future Sub exceed the amount of adjustments so
determined which would result in a credit to the Bargo Entities, Future Sub
shall be entitled to receive a cash payment from Bargo by the amount of such
excess, and, if the converse is true, Bargo shall be entitled to receive a cash
payment from Future by the amount of such excess. If no adjustment of the type
contemplated under this subsection (a) is made at or before Closing and Bargo
should thereafter receive any net proceeds attributable to oil or gas produced
after the Effective Date, Bargo shall promptly remit such net proceeds to
Future.
(b) On or before 90 days after Closing, Future and Bargo shall review
any additional information which may then be available pertaining to the
adjustments provided for in Section 8.1, shall determine if any additional
adjustments (whether the same be made to account for expenses or revenues not
considered in making the adjustments made at Closing, or to correct errors made
in such adjustments) should be made beyond those made at Closing, and shall make
any such adjustments in the manner provided in subsection (a) above. Following
such additional adjustments, no further adjustments shall be made under this
Article VIII with respect to the matters contemplated by this Article.
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<PAGE> 32
ARTICLE IX
NOTICES
All notices and other communications required under this Agreement
shall (unless otherwise specifically provided herein) be in writing and be
delivered personally, by recognized commercial courier or delivery service
(which provides a receipt), by telecopier (with receipt acknowledged), or by
registered or certified mail (postage prepaid), at the following addresses:
If to any Bargo Entity: c/o Bargo Energy Resources, Ltd.
700 Louisiana, Suite 3700
Houston, Texas 77002
Attention: Tim J. Goff
Fax No.:713-236-9799
If to any Future Entity: c/o Future Petroleum Corporation
2351 West Northwest Highway
Suite 2130
Dallas, Texas 75220
Attention: Carl Price
Fax No.: 214-350-8382
and shall be considered delivered on the date of receipt. Either a Future
Entity, on the one hand, or a Bargo Entity, on the other hand, may specify as
its proper address any other post office address within the continental limits
of the United States by giving notice to the other, in the manner provided in
this Article, at least ten (10) days prior to the effective date of such change
of address.
A copy of any notice and other communication given by either a Future
Entity or a Bargo Entity hereunder shall be sent to EnCap Investments L.C. as
follows:
EnCap Investments, L.C.
1100 Louisiana, Suite 3150
Houston, Texas 77002
Attention: Gary R. Petersen or Colin Nisbeth
Fax No.: 713-659-6130
ARTICLE X
COMMISSIONS
Bargo agrees to indemnify and hold harmless the Future Entities from
and against any and all claims, obligations, actions, liabilities, losses,
damages, costs or expenses (including court costs and attorneys fees) of any
kind or character arising out
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<PAGE> 33
of or resulting from any agreement, arrangement or understanding alleged to have
been made by, or on behalf of, any Bargo Entity with any broker or finder in
connection with this Agreement or the transactions contemplated hereby. Future
agrees to indemnify and hold harmless Bargo from and against any and all claims,
obligations, actions, liabilities, losses, damages, costs or expenses (including
court costs and attorneys fees) of any kind or character arising out of or
resulting from any agreement, arrangement or understanding alleged to have been
made by, or on behalf of, any Future Entity with any broker or finder in
connection with this Agreement or the transactions contemplated hereby.
ARTICLE XI
MISCELLANEOUS MATTERS
SECTION 11.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made herein by the Future Entities and the Bargo
Entities shall be continuing and shall be true and correct on and as of the date
of Closing and shall survive the Closing.
SECTION 11.2. FURTHER ASSURANCES. From time to time after the Closing,
at the request of any party hereto and without further consideration, Bargo, on
the one hand, and the Future Entities, on the other hand, shall execute and
deliver to the requesting party such instruments and documents and take such
other action (but without incurring any material financial obligation) as such
requesting party may reasonably request in order to consummate more fully and
effectively the transactions contemplated hereby.
SECTION 11.3. BINDING EFFECT; SUCCESSORS AND ASSIGNS; NO THIRD PARTY
BENEFIT. The Agreement shall be binding on the parties hereto and their
respective successors and permitted assigns. No party hereto shall have the
right to assign its rights under this Agreement without the prior written
consent of the other party first having been obtained. Notwithstanding anything
contained in this Agreement to the contrary, nothing in this Agreement, either
express or implied, is intended to confer on any person other than the parties
hereto or their respective successors and permitted assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
SECTION 11.4. EXPENSES. Each party shall bear and pay all expenses
incurred by it in connection with the transactions contemplated by this
Agreement.
SECTION 11.5. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties hereto with respect to subject matter hereof and
supersedes all prior agreements, understandings, negotiations, and discussions
among the parties with respect to such subject matter. Time is of the essence in
this Agreement.
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<PAGE> 34
SECTION 11.6. PUBLIC STATEMENTS. The Bargo Entities, on the one hand,
and the Future Entities, on the other hand, shall consult with each other with
regard to all publicity and other releases at or prior to Closing concerning
this Agreement and the transactions contemplated hereby and, except as required
by applicable law or the applicable rules or regulations of any governmental
body or stock exchange, neither the Bargo Entities, on the one hand, nor the
Future Entities, on the other hand, shall issue any publicity or other release
without the prior consent of the other.
SECTION 11.7. INJUNCTIVE RELIEF. The parties hereto acknowledge and
agree that irreparable damage would occur in the event any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of the provisions
of this Agreement, and shall be entitled to enforce specifically the provisions
of this Agreement, in any court of the United States or any state thereof having
jurisdiction, in addition to any other remedy to which the parties may be
entitled under this Agreement or at law or in equity.
SECTION 11.8. DECEPTIVE TRADE PRACTICES. To the extent applicable to
the transaction contemplated hereby or any portion thereof, FUTURE CAN AND DOES
EXPRESSLY WAIVE THE PROVISIONS OF THE TEXAS DECEPTIVE TRADE PRACTICES-CONSUMER
PROTECTION ACT, SECTION 17.41 ET SEQ., TEXAS BUSINESS & COMMERCE CODE, OTHER
THAN SECTION 17.555, WHICH IS NOT WAIVED, AND ALL OTHER CONSUMER PROTECTION LAWS
OF THE STATE OF TEXAS, OR ANY OTHER STATE, APPLICABLE TO THIS TRANSACTION THAT
MAY BE WAIVED BY THE PARTIES. IN CONNECTION WITH SUCH WAIVER, FUTURE HEREBY
REPRESENTS TO THE BARGO ENTITIES THAT IT (a) IS IN THE BUSINESS OF SEEKING OR
ACQUIRING BY PURCHASE OR LEASE, GOODS OR SERVICES FOR COMMERCIAL OR BUSINESS
USE, (b) HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT
ENABLES IT TO EVALUATE THE MERITS AND RISKS OF THE TRANSACTIONS CONTEMPLATED
HEREBY, (c) IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION AND (d) HAS
ASSETS OF $5,000,000 OR MORE ACCORDING TO ITS MOST RECENT FINANCIAL STATEMENTS.
SECTION 11.9. AMENDMENTS. This Agreement may be amended, modified,
supplemented, restated or discharged (and provisions hereof may be waived) only
by an instrument in writing signed by the parties hereto.
SECTION 11.10. INDEMNIFICATION. Bargo agrees to indemnify, defend and
hold harmless Future from and against any losses, expenses, claims, damages or
liabilities resulting form the failure of the Merger to qualify as a tax-free
reorganization under Section 368(a)(2)(D) of the Code, including taxes, interest
and attorneys' fees relating thereto.
SECTION 11.11. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
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<PAGE> 35
SECTION 11.12. COUNTERPARTS. This Agreement may be executed in
counterparts, all of which are identical and all of which constitute one and the
same instrument. It shall not be necessary for the Future Entities and the Bargo
Entities to sign the same counterpart.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 36
IN WITNESS WHEREOF, this Agreement is executed by the parties hereto on
the date set forth above.
BARGO ENERGY RESOURCES, LTD.
By: BARGO OPERATING COMPANY, INC.,
General Partner
By: /s/ TIM J. GOFF
----------------------------------
Tim J. Goff, President
SCL-CAL COMPANY
By: /s/ TIM J. GOFF
-----------------------------------
Tim J. Goff, President
FUTURE PETROLEUM CORPORATION
By: /s/ CARL PRICE
-----------------------------------
Carl Price, President
FUTURE CAL-TEX CORPORATION
By: /s/ CARL PRICE
-----------------------------------
Carl Price, President
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<PAGE> 1
EXHIBIT 4.14
THIS AGREEMENT is made and entered into as of this 14th day of August,
1998, by and among Carl Price, Bargo Energy Resources, Ltd., EnCap Equity 1994
Limited Partnership and Energy Capital Investment Company PLC.
WHEREAS, the undersigned are shareholders of Future Petroleum
Corporation, a Utah corporation ("Future"); and
WHEREAS, the undersigned deem it in their mutual best interests to
enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants contained herein, the undersigned do hereby agree that, in
their capacities as shareholders of Future, the undersigned will cause the Board
of Directors to adopt an amendment to the Bylaws of Future substantially in the
form of the instrument attached hereto as Exhibit A.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the above date.
/s/ CARL PRICE
-----------------------------------------------
Carl Price
BARGO ENERGY RESOURCES, LTD.
By: Bargo Operating Company
By: /s/ TIM J. GOFF
--------------------------------------------
Tim J. Goff, President
ENCAP EQUITY 1994 LIMITED PARTNERSHIP
By: EnCap Investments, L.C.
By: /s/ GARY R. PETERSEN
--------------------------------------------
Gary R. Petersen, Managing Director
ENERGY CAPITAL INVESTMENT COMPANY PLC
By: /s/ GARY R. PETERSEN
--------------------------------------------
Gary R. Petersen, Director
<PAGE> 2
Section [ ]. For so long as the Bargo Group is entitled to nominate one
or more persons to the Board of Directors of the Company as provided in the
Shareholders' Agreement, dated August 14, 1998, among the Company, Bargo Energy
Resources, Ltd., a Texas limited partnership ("Bargo"), and certain other
shareholders of the Company ("Shareholders' Agreement"), without the approval of
one of the directors nominated by the Bargo Group (which shall be in addition to
any other corporate action required by the Articles of Incorporation, these
By-Laws or by applicable law):
(a) The Company will not, and will not permit any Subsidiary thereof,
in any manner to owe or be liable for Indebtedness except:
(i) the Obligations;
(ii) the Senior Credit Facility;
(iii) obligations under operating leases entered into in the
ordinary course of the Company's or its Subsidiaries' business in arm's length
transactions at competitive market rates under competitive terms and conditions
in all respects;
(iv) Indebtedness owed by the Company or any Subsidiary thereof
which is subordinated to the Obligations upon terms and conditions satisfactory
to ECIC and EnCap LP in their sole and absolute discretion;
(v) 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;
(vi) Indebtedness in the principal amount of approximately $20,000
owed to Bank One Texas on a workover rig; and
(vii) Indebtedness in the principal amount of approximately $20,000
owed to Sam Henderson.
(b) The Company will not, and will not permit its Subsidiaries to,
merge or consolidate with or into any other business entity. Any Subsidiary of
the Company may, however, be merged into or consolidated with either the Company
or another Subsidiary which is wholly-owned by the Company, so long as the
Company or the Subsidiary wholly-owned by the Company is the surviving business
entity. The Company 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 the Company 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 the Company. No Subsidiary of the Company which is a partnership will
allow any diminution of the Company's interest (direct or indirect) therein.
<PAGE> 3
(c) The Company will not, and will not permit any Subsidiary to, sell,
transfer, lease, exchange, alienate or dispose of any Collateral except:
(i) equipment which is worthless or obsolete or which is replaced
by equipment of equal suitability and value;
(ii) 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
(iii) 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)
(d) The Company will not, and will not permit Subsidiary to, 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.
(e) The Company will not, and will not permit any of its Subsidiaries
to, 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 arms-length dealing with persons other than such Affiliates, provided that
such restriction shall not apply to transactions among the Company and its
wholly-owned Subsidiaries.
(f) The Company 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.
(g) The Company will not amend, whether by amendment, supplement or
renewal, the terms of the Note Documents as they relate to the amortization of
Indebtedness under such Note Documents, the principal amount of Indebtedness
under such Note Documents or the interest or premium payable with respect to
such Indebtedness.
Section [ ]. As used in this Article [ ] of the By-Laws, the following
terms shall have the meanings set forth 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.
"Amended Security Documents" has the meaning set forth in the Renewal
Note Agreement.
"Bargo Group" has the meaning set forth in the Shareholders' Agreement.
<PAGE> 4
"Collateral" has the meaning set forth in the Renewal Note Agreement.
"ECIC" means Energy Capital Investment Company PLC, an English
investment company.
"EnCap LP" means EnCap Equity 1994 Limited Partnership, a Texas limited
partnership.
"Fiscal Year" means the 12 month period ending December 31 of any year.
"Further Renewal Notes" shall have the meaning set forth in the Renewal
Note Agreement.
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the Financial Accounting Standards
Board (or generally recognized successor) and which, in the case of the Company
and its consolidated subsidiaries, are applied for periods after the date hereof
in a manner consistent with the manner in which such principles were applied
prior to the date hereof.
"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 arise 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.
<PAGE> 5
"Liabilities" shall mean, as to any person, all indebtedness,
liabilities and obligations of such person, whether mature 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.
"Note Documents" shall mean the Renewal Note Agreement, the Further
Renewal Notes and the Amended Security Documents as defined in the Renewal Note
Agreement, and all other agreements, certificates, documents, commitments and
writings at any time delivered in connection herewith or therewith.
"Obligations" shall mean all Liabilities owing ECIC and EnCap LP under
or pursuant to the Renewal Note Agreement, the Further Renewal Notes or any of
the other Note Documents.
"Permitted Investment" shall mean any investment, loan, advance,
guaranty or capital contribution by the Company or any Subsidiary in any of the
following: (a) properties or assets to be used in the ordinary course of
business of the Company and its Subsidiaries; (b) current assets arising from
the sale of goods and services in the ordinary course of business of the Company
and its Subsidiaries; (c) investments in one or more of the Company'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 Untied 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.
"Renewal Note Agreement" shall mean that certain Note Restructuring
Agreement, dated August 14, 1998, among the Company, ECIC, EnCap LP and Gecko
Booty 1994 Limited Partnership, a Texas limited partnership, as such agreement
may be amended from time to time.
"Restricted Payment" shall mean any Distribution (as defined below) in
respect of the Company or any Subsidiary thereof (other than on account of
capital stock or other equity interests of a Subsidiary owned legally or
beneficially by the Company or another Subsidiary), including any Distribution
resulting in the acquisition by the Company 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).
<PAGE> 6
"Senior Credit Facility" has the meaning set forth in the Renewal Note
Agreement.
"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 [ ]. The Utah Control Shares Acquisition Act, section 61-6-1.
et seq, Utah Code Annotated, and any amendatory, replacement or successor
statute of like tenor or purpose, shall not apply to control share acquisitions
of shares of the Corporation.
