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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, Xxxxx 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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"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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"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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"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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"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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"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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"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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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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(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 Xxxxx, Xxxxx & Xxxxxxx 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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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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"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 Xxx Xxxxxxxxx.
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 Xxx Xxxxxxxxx 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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(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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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.
0000 Xxxxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxxxx or Xxxxx Xxxxxxx
Fax No.: 000-000-0000
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If to Future: 0000 Xxxx Xxxxxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxx
Fax No.: 000-000-0000
and shall be considered delivered on the date of receipt. Either 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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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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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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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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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/ XXXX XXXXX
---------------------------------
Name: Xxxx Xxxxx
Title: President
ENERGY CAPITAL INVESTMENT
COMPANY PLC
By: /s/ XXXX X. XXXXXXXX
---------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Director
ENCAP EQUITY 1994 LIMITED PARTNERSHIP
By: ENCAP INVESTMENTS L.C., General Partner
By: /s/ XXXX X. XXXXXXXX
---------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Managing Director
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