PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT dated November 25,
1997, is made by and among Future Petroleum Corporation, a Utah
corporation ("Buyer"), Energy Capital Investment Company PLC, an
English investment company ("Energy PLC"), EnCap Equity 1994
Limited Partnership, a Texas limited partnership ("EnCap LP"), and
Gecko Booty 1994 I Limited Partnership, a Texas limited partnership
("Gecko Booty LP").
RECITALS:
A. Reference is herein made to the following Texas limited
partnerships: BMC Development No. 1 Limited Partnership ("BMC
LP") and Future Acquisition 1995, Ltd. ("Future LP"). BMC LP and
Future LP are herein sometimes called the "Partnerships".
▇. ▇▇▇▇▇▇-▇▇▇▇▇▇ & Company, a Texas corporation ("BMC Inc."),
is the sole general partner of BMC LP. Future Petroleum Corporation,
a Texas corporation and a wholly-owned subsidiary of Buyer ("Future
Texas"), is the sole general partner of Future LP.
C. Energy PLC and EnCap LP are the limited partners of each of the
Partnerships and are herein sometimes called the "LP Sellers". The
interests of Energy PLC as a limited partner in each of the
Partnerships are herein collectively called the "Energy PLC Interests".
The interests of EnCap LP as a limited partner in each of the
Partnerships are herein collectively called the "EnCap LP Interests".
The Energy PLC Interests and the EnCap LP Interests are herein
collectively called the "Interests".
D. Geoscience Exploration CKO, Inc., a Texas corporation ("Geoex"),
is the sole general partner of Gecko Booty LP. Energy PLC and
EnCap LP are the limited partners of Gecko Booty LP. Gecko Booty
LP owns oil and gas properties situated in New Mexico and is herein
sometimes called the "Property Seller".
E. LP Sellers and Property Seller are herein sometime called "Sellers".
F. Each LP Seller desires to sell to Buyer, and Buyer desires to
purchase from each LP Seller, such LP Seller's respective Interests, on
the terms and conditions contained herein.
G. Property Seller desires to sell to Buyer, and Buyer desires to
purchase from Property Seller, Property Seller's interest in its oil and
gas properties, on the terms and conditions contained herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing Recitals and
the mutual covenants and agreements contained herein, Buyer and
Sellers do hereby agree as follows:
ARTICLE I
Definitions, References and Construction
Section 1.1. Certain Defined Terms. When used in this Agreement,
the following terms shall have the respective meanings assigned to
them in this Section 1.1 or in the section, subsections or other
subdivisions referred to below:
"Agreement" shall mean this Agreement, as hereafter changed,
amended or modified in accordance with the terms hereof.
"Assignment" shall have the meaning assigned to such term in Section
7.2(b).
"BMC Inc." shall have the meaning assigned to such term in
Paragraph B of the Recitals hereto.
"BMC LP" shall have the meaning assigned to such term in Paragraph
A of the Recitals hereto.
"Buyer" shall have the meaning assigned to such term in the
introductory paragraph to this Agreement.
"Change of Control" shall mean the occurrence of either of the
following events: (a) any person or two or more persons acting as a
group shall acquire beneficial ownership (within the meaning of Rule
13d-3 of the Commission under the Exchange Act, and including
holding proxies to vote for the election of directors other than proxies
held by Buyer's management or their designees to be voted in favor of
persons nominated by Buyer's Board of Directors) of 33% or more of
the outstanding voting securities of Buyer, measured by voting power
(including both common stock and any preferred stock or other equity
securities entitling the holders thereof to vote with the holders of
common stock in elections for directors of Buyer) or (b) one-third or
more of the directors of Buyer shall consist of persons not nominated
by Buyer's Board of Directors (not including as Board nominees any
directors which the Board is obligated to nominate pursuant to
shareholders agreements, voting trust arrangements or similar
arrangements).
"Closing" and "Closing Date" shall have the respective meanings
assigned to such terms in Section 7.1.
"Closing Costs" shall mean the reasonable third party out-of-pocket
costs and expenses incurred by Buyer and LP Sellers in connection
with the preparation, negotiation and execution of this Agreement and
all related documents, including the fees and expenses of legal counsel
to LP Sellers.
"Closing Shares" shall mean the shares of Common Stock described in
Section 2.2.
"Collateral" shall mean all property of any kind which is subject to a
Lien in favor of Sellers or which, under the terms of any Note
Document, is purported to be subject to such a Lien.
"Commission" shall mean the Securities and Exchange Commission
(or any successor body thereto).
"Common Stock" shall mean shares of common stock of Buyer, $0.01
par value per share, and any shares issued or issuable with respect
thereto by way of a stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization.
"Consolidated" refers to the consolidation of any person, in accordance
with GAAP, with its properly consolidated subsidiaries. References
herein to a person's Consolidated financial statements, financial
position, financial condition, liabilities, etc. refer to the consolidated
financial statements, financial position, financial condition, liabilities,
etc. of such person and its properly consolidated subsidiaries.
"Conveyance" shall have the meaning assigned to such term in Section
7.2(c).
"Default" shall mean an Event of Default and any default, event or
condition which would, with the giving of any requisite notices and
the passage of any requisite periods of time, constitute an Event of
Default.
"Designated Shareholders" shall mean ▇▇▇▇ ▇▇▇▇▇ and Don Wm.
▇▇▇▇▇▇▇▇.
"Effective Date" shall have the meaning assigned to such term in
Section 2.1.
"Engineering Report" shall mean the engineering report referenced in
Section 10.2(d).
"Event of Default" shall have the meaning assigned to such term in
Section 12.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and all rules and regulations promulgated under such Act.
"Fiscal Quarter" shall mean a three-month period ending on March
31, June 30, September 30 and December 31 of any year.
"Fiscal Year" shall mean the twelve-month period ending on
December 31 of any year.
"Future LP" shall have the meaning assigned to such term in
Paragraph A of the Recitals hereto.
"Future Nevada" shall mean Future Energy Corporation, a Nevada
corporation and a wholly-owned subsidiary of Buyer.
"Future Texas" shall have the meaning assigned to such term in
Paragraph B of the Recitals hereto.
"Future Warrants" shall mean Warrants No.'s 1003, 1004, 1005 and
1006 entitling Sellers to acquire 287,500 shares of Common Stock.
"GAAP" shall mean those generally accepted accounting principles
and practices which are recognized as such by the Financial
Accounting Standards Board (or any generally recognized successor)
and which, in the case of Buyer and its Consolidated subsidiaries, are
applied for all periods after the date hereof in a manner consistent with
the manner in which such principles and practices were applied to the
Initial Financial Statements.
"Gecko Booty LP" shall have the meaning assigned to such term in the
introductory paragraph to this Agreement.
"Gecko Properties" shall mean the "Subject Properties," as such term is
used in the Conveyance.
"Geoex" shall have the meaning assigned to such term in Paragraph D
of the Recitals hereto.
"Indebtedness" of any person means Liabilities in any of the following
categories: (a) Liabilities for borrowed money; (b) Liabilities
constituting an obligation to pay the deferred purchase price of
property or services; (c) Liabilities evidenced by a bond, debenture,
note or similar instrument; (d) Liabilities which would under GAAP
be shown on such person's balance sheet as a liability, and is payable
more than one year from the date of creation thereof (other than
reserves for taxes and reserves for contingent obligations);(e)
Liabilities arising under futures contracts, forward contracts, swap, cap
or collar contracts, option contracts, hedging contracts, other
derivative contracts, or similar agreements; (f) Liabilities constituting
principal under leases capitalized in accordance with GAAP; (g)
Liabilities arising under conditional sales or other title retention
agreements; (h) Liabilities owing under direct or indirect guaranties of
Liabilities of any other person or constituting obligations to purchase
or acquire or to otherwise protect or insure a creditor against loss in
respect of Liabilities of any other person (such as obligations under
working capital maintenance agreements, agreements to keep-well, or
agreements to purchase Liabilities, assets, goods, securities or
services), but excluding endorsements in the ordinary course of
business of negotiable instruments in the course of collection; (i)
Liabilities (for example, repurchase agreements) consisting of an
obligation to purchase securities or other property, if such Liabilities
arises out of or in connection with the sale of the same or similar
securities or property; (j) Liabilities with respect to letters of credit or
applications or reimbursement agreements therefor; (k) Liabilities
with respect to payments received in consideration of oil, gas, or other
minerals yet to be acquired or produced at the time of payment
(including obligations under "take-or-pay" contracts to deliver gas in
return for payments already received and the undischarged balance of
any production payment created by such person or for the creation of
which such person directly or indirectly received payment), or (l)
Liabilities with respect to other obligations to deliver goods or services
in consideration of advance payments therefor; provided, however,
that the "Indebtedness" of any person shall not include Liabilities that
were incurred by such person on ordinary trade terms to vendors,
suppliers, or other persons providing goods and services for use by
such person in the ordinary course of its business, unless and until
such Liabilities are outstanding more than 90 days past the original
invoice or billing date therefor.
"Initial Financial Statements" shall have the meaning assigned to such
term in Section 4.9.
"Interests" shall have the meaning assigned to such term in Paragraph
C of the Recitals hereto.
"Liabilities" shall mean, as to any person, all indebtedness, liabilities
and obligations of such person, whether matured or unmatured,
liquidated or unliquidated, primary or secondary, direct or absolute,
fixed or contingent, and whether or not required to be considered
pursuant to GAAP.
"Lien" shall mean, with respect to any property or assets, any right or
interest therein of a creditor to secure Liabilities owed to him or any
other arrangement with such creditor which provides for the payment
of such Liabilities out of such property or assets or which allows him
to have such Liabilities satisfied out of such property or assets prior to
the general creditors of any owner thereof, including any lien,
mortgage, security interest, pledge, deposit, production payment,
rights of a vendor under any title retention or conditional sale
agreement or lease substantially equivalent thereto, tax lien,
mechanic's or materialman's lien, or any other charge or encumbrance
for security purposes, whether arising by law or agreement or
otherwise, but excluding any right of offset which arises without
agreement in the ordinary course of business. "Lien" shall also mean
any filed financing statement, any registration of a pledge (such as
with an issuer of uncertificated securities), or any other arrangement
or action which would serve to perfect a Lien described in the
preceding sentence, regardless of whether such financing statement is
filed, such registration is made, or such arrangement or action is
undertaken before or after such Lien exists.
"LP Sellers" shall have the meaning assigned to such term in
Paragraph C of the Recitals hereto.
"Material Adverse Change" means a material and adverse change,
from the state of affairs presented in the Initial Financial Statements,
to (a) Buyer's and its Subsidiaries' Consolidated financial condition,
(b) the operations or properties of Buyer and its Subsidiaries,
considered as a whole, (c) Borrower's ability to timely pay the
Obligations, or (d) the enforceability of the material terms of any Note
Documents.
"Note Documents" shall mean the Notes, the provisions of Articles X,
XI and XII of this Agreement, and the Security Documents.
"Notes" shall mean the promissory notes described in Section 2.2 and
Section 2.4.
"Obligations" shall mean all Liabilities owing Sellers under or
pursuant to the Notes or any of the Security Documents.
"Partnership Properties" shall mean the oil, gas and/or mineral leases
and related assets owned by the Partnerships.
"Partnerships" shall have the meaning assigned to such term in
Paragraph A of the Recitals hereto.
"PDP Reserves" shall mean Proved Reserves which are categorized as
both "Developed" and "Producing" in the Definitions for Oil and Gas
Reserves promulgated by the Society of Petroleum Engineers (or any
generally recognized successor) as in effect at the time in question.
"PDP Reserves to Debt Ratio" shall mean the ratio obtained by
dividing (a) the pre-income tax value of projected net revenues
attributable to the PDP Reserves of Buyer set forth in the most recent
Engineering Report ascribed to the properties subject to the Security
Documents, by (b) the outstanding unpaid principal amount of the
Notes plus all accrued but unpaid interest thereon.
"Permitted Investment" shall mean any investment, loan, advance,
guaranty or capital contribution by Buyer or any Subsidiary in any of
the following: (a) properties or assets to be used in the ordinary course
of business of Buyer and its Subsidiaries; (b) current assets arising
from the sale of goods and services in the ordinary course of business
of Buyer and its Subsidiaries; (c) investments in one or more of
Buyer's Subsidiaries or in any person that concurrently with such
investment becomes a Subsidiary; (d) any marketable obligation
maturing not later than one year after the date of acquisition therefor,
issued or guaranteed by the United States of America or by any agency
of the United States of America which has the full faith and credit of
the United States of America; (e) commercial paper which is given
the highest rating by a credit rating agency of recognized national
standing and maturing not more than 270 days from the date of
creation thereof; and (f) any demand deposit or time deposit (including
certificates of deposit and money market or sweep accounts) with a
commercial bank or trust company organized and doing business
under the laws of the United States of America or any state thereof
which has capital, surplus and undivided profits of at least
$250,000,000, provided that such deposit must be either payable on
demand or mature not more than twelve months from the date of
investment therein.
"Property Seller" shall have the meaning assigned to such term in
Paragraph D of the Recitals hereto.
"Proved Reserves" shall mean "Proved Reserves" as defined in the
Definitions for Oil and Gas Reserves promulgated by the Society of
Petroleum Engineers (or any generally recognized successor) as in
effect at the time in question.
"Proved Reserves to Debt Ratio" shall mean the ratio obtained by
dividing (a) the pre-income tax value of projected net revenues
attributable to the Proved Reserves of Buyer set forth in the most
recent Engineering Report ascribed to the properties subject to the
Security Documents, by (b) the outstanding unpaid principal amount
of the Notes plus all accrued but unpaid interest thereon.
"Restricted Payment" shall mean any Distribution (as defined below)
in respect of Buyer or any Subsidiary thereof (other than on account of
capital stock or other equity interests of a Subsidiary owned legally or
beneficially by Buyer or another Subsidiary), including any
Distribution resulting in the acquisition by Buyer of securities that
would constitute treasury stock. As used in this definition,
"Distribution" shall mean, in respect of any corporation, partnership or
other business entity (a) dividends or other distributions or payments
on capital stock or other equity interest of such corporation,
partnership or other business entity (except distributions in such stock
or other equity interest) and (b) the redemption or acquisition of such
stock or other equity interests or of warrants, rights or other options to
purchase such stock or other equity interests (except when solely in
exchange for such stock or other equity interests).
"Securities Act" shall mean the Securities Act of 1933, as amended,
and all rules and regulations under such Act.
"Security Documents" shall mean the instruments listed in Exhibit
2.1--Security Documents and all other security agreements, deeds of
trust, mortgages, chattel mortgages, pledges, guaranties, financing
statements, continuation statements, extension agreements and other
agreements or instruments now, heretofore, or hereafter delivered by
Buyer or any Subsidiary thereof to Sellers in connection with this
Agreement or any transaction contemplated hereby to secure or
guarantee the payment of any part of the Obligations or the
performance of any of Buyer's or its Subsidiary's other duties and
obligations under the Note Documents.
"Sellers" shall have the meaning assigned to such term in Paragraph E
of the Recitals hereto.
"Subsidiary" shall mean, with respect to any person, any corporation,
association, partnership, joint venture, or other business or corporate
entity, enterprise or organization which is directly or indirectly
(through one or more intermediaries) controlled by or owned fifty
percent or more by such person.
Section 1.2. References and Construction.
(a) All references in this Agreement to articles, sections, subsections
and other subdivisions refer to corresponding articles, sections,
subsections and other subdivisions of this Agreement unless expressly
provided otherwise.
(b) Titles appearing at the beginning of any of such subdivisions are
for convenience only and shall not constitute part of such subdivisions
and shall be disregarded in construing the language contained in such
subdivisions.
(c) The words "this Agreement", "this instrument", "herein", "hereof",
"hereby", "hereunder" and words of similar import refer to this
Agreement as a whole and not to any particular subdivision unless
expressly so limited.
(d) Words in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise requires. Pronouns in
masculine, feminine and neuter genders shall be construed to include
any other gender.
(e) Unless the context otherwise requires or unless otherwise provided
herein, the terms defined in this Agreement which refer to a particular
agreement, instrument or document also refer to and include all
renewals, extensions, modifications, amendments or restatements of
such agreement, instrument or document, provided that nothing
contained in this subsection shall be construed to authorize such
renewal, extension, modification, amendment or restatement.
(f) Examples shall not be construed to limit, expressly or by
implication, the matter they illustrate.
(g) The word "includes" and its derivatives means "includes, but is not
limited to" and corresponding derivative expressions.
(h) No consideration shall be given to the fact or presumption that one
party had a greater or lesser hand in drafting this Agreement.
(i) All references herein to "$" or "dollars" shall refer to U.S. Dollars.
(j) Exhibits 2.1--Security Documents, 2.2, 2.4, 2.5, 6.1(d), 6.1(e),
6.2(d), 6.2(e), 7.2(b), 7.2(c), 7.2(d) and 7.2(e) are attached hereto.
Each such Exhibit is incorporated herein by reference for all purposes
and references to this Agreement shall also include such Exhibit
unless the context in which used shall otherwise require.
ARTICLE II
Agreement to Purchase and Sell Interests and Properties
Section 2.1. Conveyance of Interests. At the Closing, and on the terms
and subject to the conditions set forth in this Agreement, each LP
Seller shall sell to Buyer, and Buyer shall purchase and accept from
the LP Seller, such LP Seller's Interests effective as of 7:00 a.m. local
time on November 1, 1997 (the "Effective Date").
Section 2.2. Purchase Price and Payment for Interests. In
consideration of the transfer by each LP Seller to Buyer of such LP
Seller's Interests, Buyer shall tender to such LP Seller an aggregate
purchase price consisting of (a) a promissory note in the principal
amount set forth opposite such LP Seller's name below and (b) the
number of shares of Common Stock set forth opposite such LP Seller's
name below:
Seller Principal Amount No.of Shares
Energy PLC $3,123,041 765,547
EnCap LP $3,301,959 809,453
Each promissory note shall be substantially in the form set forth in the
attached Exhibit 2.2 in all material respects.
Section 2.3. Conveyance of Gecko Properties. At the Closing, and on
the terms and subject to the conditions set forth in this Agreement,
Property Seller shall sell to Buyer, and Buyer shall purchase and
accept from Property Seller, the Gecko Properties effective as of the
Effective Date.
Section 2.4. Purchase Price and Payment for Gecko Properties. In
consideration of the transfer by Property Seller to Buyer of the Gecko
Properties, Buyer shall tender to Property Seller an aggregate purchase
price consisting of a promissory note in the principal amount of
$175,000, substantially in the form set forth in the attached Exhibit
2.4 in all material respects
Section 2.5. Purchase Price Allocation. Sellers and Buyer agree that
the purchase prices payable under Sections 2.2 and 2.4 shall be
allocated among LP Sellers' Interests (and the amount allocated to
each such Interest shall be allocated among the assets held by the
Partnership to which such Interest relates) and the Gecko Properties,
as set forth in Exhibit 2.5 attached hereto. Buyer shall cause each
Partnership to make an election under Section 754 of the Internal
Revenue Code (in this Section 2.5, the "Code") in its tax return for the
short period ending on the Closing Date to cause the tax bases of the
assets owned by such Partnership to be adjusted under Section 743 of
the Code to reflect the amounts allocated to such assets under the
preceding sentence. In making such allocations, it is agreed that the
Common Stock shall have a value equal to the opening bid price for
the Common Stock on the OTC Bulletin Board on the date of
execution of this Agreement and that such value will be used by Buyer
in calculating the basis adjustments under Section 743 of the Code as
provided above.
ARTICLE III
Representations and Warranties of Sellers
Each Seller hereby severally and as to itself represents and warrants to
Buyer as follows (provided, however, that it is expressly agreed the
representations and warranties contained in Sections 3.7 through 3.15 are
being made solely by LP Sellers on a several basis as to itself and
not by Property Seller):
Section 3.1. Organization and Existence. Such Seller is duly formed
and validly existing under the laws of the jurisdiction of its formation.
Section 3.2. Power and Authority. Such Seller has all requisite
power and authority to execute, deliver, and perform this Agreement
and each other agreement, instrument, or document executed or to be
executed by it in connection with the transactions contemplated hereby
to which it is a party and to consummate the transactions contemplated
hereby and thereby. The execution, delivery, and performance by such
Seller of this Agreement and each other agreement, instrument, or
document executed or to be executed by it in connection with the
transactions contemplated hereby to which it is a party, and the
consummation by it of the transactions contemplated hereby and
thereby, have been duly and validly authorized by all necessary on its
part.
Section 3.3. Valid and Binding Agreement. This Agreement has been
duly executed and delivered by such Seller and constitutes, and each
other agreement, instrument, or document executed or to be executed
by it in connection with the transactions contemplated hereby to which
it is a party has been, or when executed will be, duly executed and
delivered by it and constitutes, or when executed and delivered will
constitute, a valid and legally binding obligation of such Seller,
enforceable against it in accordance with their respective terms, except
that such enforceability may be limited by (a) applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws affecting
creditors' rights generally and (b) equitable principles which may limit
the availability of certain equitable remedies (such as specific
performance) in certain instances.
Section 3.4. Non-Contravention. Neither the execution, delivery, and
performance by such Seller of this Agreement and each other
agreement, instrument, or document executed or to be executed by it in
connection with the transactions contemplated hereby to which it is a
party nor the consummation by it of the transactions contemplated
hereby and thereby do and will (a) conflict with or result in a violation
of any provision of the partnership agreement or other governing
instruments of such Seller, (b) conflict with or result in a violation of
any provision of, or constitute (with or without the giving of notice or
the passage of time or both) a default under, or give rise (with or
without the giving of notice or the passage of time or both) to any right
of termination, cancellation, or acceleration under, any bond,
debenture, note, mortgage, indenture, lease, contract, agreement, or
other instrument or obligation to which such Seller is a party or by
which such Seller or any of its properties may be bound, (c) result in
the creation or imposition of any lien or other encumbrance upon the
properties of such Seller, or (d) violate any applicable law, rule or
regulation binding upon such Seller.
Section 3.5. Approvals. No consent, approval, order, or authorization
of, or declaration, filing, or registration with, any court or
governmental agency or of any third party is required to be obtained or
made by such Seller in connection with the execution, delivery, or
performance by such Seller of this Agreement and each other
agreement, instrument, or document executed or to be executed by
such Seller in connection with the transactions contemplated hereby to
which it is a party or the consummation by it of the transactions
contemplated hereby and thereby.
Section 3.6. Pending Litigation. There are no pending suits, actions,
or other proceedings in which such Seller is a party which affect such
Seller's Interests (in the instance of a LP Seller) or the Gecko
Properties (in the instance of the Gecko Properties) or affecting the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
Section 3.7. Title to Interests. Such Seller (a) owns beneficially and of
record such Seller's Interests and (b) has the absolute right to and,
upon execution and delivery of the Assignment at Closing will, sell,
assign, and transfer the interests to Buyer free and clear of all Liens.
For purposes of this Section, the term "Lien" shall mean any
mortgage, pledge, security interest, lien, option, right, restriction on
transfer or encumbrance of any nature other than restrictions that may
be imposed by any federal or state securities laws or those that arise
under the terms of the Partnership Agreements. Except by operation
of this Agreement or the Partnership Agreements, there are no
existing options, warrants, calls, subscriptions or other rights,
agreements, commitments or claims of any nature granted or binding
upon such Seller's granting or vesting in any party any claim or
potential claim to such Seller's Interests.
Section 3.8. BMC LP.
(a) BMC LP is duly formed and validly existing as a limited
partnership under the laws of the State of Texas.
(b) BMC LP has all requisite partnership power and authority to own
its respective Partnership Properties and to conduct its respective
business as currently conducted.
(c) Such Seller is in compliance in all material respects with the terms
and provisions of the Partnership Agreement governing BMC LP.
(d) To the knowledge of such Seller (without having conducted any
independent investigation), all expenses and liabilities of BMC LP
have been, and are being, paid timely by BMC LP in all material
respects, except for an invoice received by BMC LP in the amount of
$11,500 from Price Waterhouse in connection with an audit of its
financial statements for Fiscal Year 1996.
(e) To the knowledge of such Seller (without having conducted any
independent investigation), there are no material liabilities of BMC LP
other than as disclosed in (i) BMC LP's audited balance sheet as of
December 31, 1996, and the related audited statements of income,
stockholders' equity and cash flows for the year then ended, and the
notes and schedules thereto, and (ii) BMC LP's unaudited balance
sheet as of June 30, 1997, other than liabilities which have arisen since
June 30, 1997, in the ordinary course of business.
Section 3.9. Investment Experience. Such Seller is able to bear the
economic risks of its investment in the Closing Shares, and
consequently without limiting the generality of the foregoing, it is able
to hold the Closing Shares acquired pursuant to the terms hereof for an
indefinite period of time and has a sufficient net worth to sustain a loss
of all or a portion of its investment in the Closing Shares in the event
such loss should occur. Such Seller has such knowledge and
experience in financial and business matters that it is capable of
evaluating the risks and merits of an investment in the Closing Shares.
Section 3.10. Investment Intent. Such Seller is acquiring the
Closing Shares for its own account for investment and not with view to
the distribution, resale, subdivision, or fractionalization thereof, and it
has no present plans to enter into any contract, undertaking,
agreement, or arrangement for any such distribution, resale,
subdivision, or fractionalization.
Section 3.11. Restricted Securities. Such Seller is aware that it must
bear the economic risk of its investment in the Closing Shares for an
indefinite period of time because the Closing Shares have not been
registered under the Securities Act or under the securities laws of any
state of the United States, and therefore cannot be sold unless they are
subsequently registered under the Securities Act and any applicable
state securities laws or unless an exemption from such registration is
available. Such Seller also recognizes that no U.S. federal or state
agency has passed upon the Closing Shares to be issued hereunder to
date or made any finding or determination as to the fairness of an
investment in such shares. Such Seller agrees that the Closing Shares
acquired by it hereunder shall not be sold, assigned, pledged,
hypothecated or otherwise transferred unless they are registered under
the Securities Act and applicable state securities laws or unless an
exemption from such registration is available.
Section 3.12. Legend. Such Seller acknowledges that a legend in
substantially the following form will be placed on any certificate(s)
evidencing the Closing Shares issued hereunder:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS
AND ARE "RESTRICTED SECURITIES" WITHIN THE MEANING
OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT.
THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT
COMPLYING WITH RULE 144 IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION OR OTHER COMPLIANCE WITH
THE SECURITIES ACT."
Such Seller further understands that Buyer may refuse to register
transfer of the Closing Shares issued hereunder in the absence of
compliance with Rule 144 unless it furnishes Buyer with a "no-action"
or interpretive letter from the Commission or an opinion of counsel
reasonably acceptable to Buyer stating that the transfer may be effected
without registration under the Securities Act.
Section 3.13. Accuracy of Information. All information which such
Seller has provided to Buyer or its agents or representatives
concerning its suitability to hold the Closing Shares following the
transactions contemplated hereby is complete, accurate and correct.
Section 3.14. No Solicitation. Such Seller was not any time solicited
by any leaflet, public promotional meeting, circular, newspaper or
magazine article, radio or television advertisement, or any other form
of general advertising or solicitation in connection with the offer, sale
or purchase of the Closing Shares under this Agreement.
Section 3.15. Accredited Investor. Such Seller is an "accredited
investor," as such term is defined in Regulation D promulgated
pursuant to the Securities Act.
Section 3.16. Disclaimer of Warranties. Other than those expressly
set out in this Article III, each Seller hereby expressly disclaims any
and all representations or warranties with respect to the Interests, the
Gecko Properties or the transaction contemplated hereby, and Buyer
agrees that the Interests and the Gecko Properties are being sold by
each Seller (as applicable) "where is" and "as is". Specifically as a
part of (but not in limitation of) the foregoing, Buyer acknowledges
that each Seller has not made, and each Seller hereby expressly
disclaims, any representation or warranty (express, implied, under
common law, by statute or otherwise) (a) as to the condition of the
Gecko Properties or the Partnership Properties (INCLUDING
WITHOUT LIMITATION, EACH SELLER DISCLAIMS ANY
IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, OR CONFORMITY TO
MODELS OR SAMPLES OF MATERIALS), (b) as to the compliance
by Gecko Booty or the Partnerships with applicable environmental
laws, (c) as to the status of title to Gecko Properties or the Partnership
Properties, or (d) as to the extent of oil, gas and/or other mineral
reserves, the recoverability of or the cost of recovering any of such
reserves, the value of reserves, prices (or anticipated prices) at which
production has been or will be sold and the ability to sell oil or gas
production from the Gecko Properties or the Partnership Properties.
ARTICLE IV
Representations and Warranties of Buyer
Buyer represents and warrants to the Sellers as follows:
Section 4.1. Organization and Existence. Buyer is a corporation duly
organized, legally existing and in good standing under the laws of the
State of Utah.
Section 4.2. Power and Authority. Buyer has full corporate power and
corporate authority to execute, deliver, and perform this Agreement
and each other agreement, instrument, or document executed or to be
executed by it in connection with the transactions contemplated hereby
to which it is a party and to consummate the transactions contemplated
hereby and thereby. The execution, delivery, and performance by
Buyer of this Agreement and each other agreement, instrument, or
document executed or to be executed by Buyer in connection with the
transactions contemplated hereby to which it is a party, and the
consummation by it of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary corporate action of
Buyer.
Section 4.3. Valid and Binding Agreement. This Agreement has been
duly executed and delivered by Buyer and constitutes, and each other
agreement, instrument, or document executed or to be executed by
Buyer in connection with the transactions contemplated hereby to
which it is a party has been, or when executed will be, duly executed
and delivered by Buyer and constitutes, or when executed and
delivered will constitute, a valid and legally binding obligation of
Buyer, enforceable against it in accordance with their respective terms,
except that such enforceability may be limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium, and similar laws
affecting creditors' rights generally and (b) equitable principles which
may limit the availability of certain equitable remedies (such as
specific performance) in certain instances.
Section 4.4. Non-Contravention. The execution, delivery, and
performance by Buyer of this Agreement and each other agreement,
instrument, or document executed or to be executed by Buyer in
connection with the transactions contemplated hereby to which it is a
party and the consummation by it of the transactions contemplated
hereby and thereby do not and will not (a) conflict with or result in a
violation of any provision of the charter or bylaws or other governing
instruments of Buyer, (b) conflict with or result in a violation of any
provision of, or constitute (with or without the giving of notice or the
passage of time or both) a default under, or give rise (with or without
the giving of notice or the passage of time or both) to any right of
termination, cancellation, or acceleration under, any bond, debenture,
note, mortgage, indenture, lease, contract, agreement, or other
instrument or obligation to which Buyer is a party or by which Buyer
or any of its properties may be bound, (c) except as contemplated by
this Agreement, result in the creation or imposition of any lien or
other encumbrance upon the properties of Buyer, or (d) violate any
applicable law, rule or regulation binding upon Buyer.
Section 4.5. Approvals. No consent, approval, order, or authorization
of, or declaration, filing, or registration with, any court or
governmental agency or of any third party is required to be obtained or
made by Buyer in connection with the execution, delivery, or
performance by Buyer of this Agreement and each other agreement,
instrument, or document executed or to be executed by Buyer in
connection with the transactions contemplated hereby to which it is a
party or the consummation by it of the transactions contemplated
hereby and thereby, other than compliance with any applicable
requirements of the Securities Act and any applicable state securities
laws.
Section 4.6. Pending Litigation. There are no pending suits, actions,
or other proceedings in which Buyer is a party which affect the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
Section 4.7. Knowledgeable Purchaser. Buyer is a knowledgeable
purchaser, owner and operator of oil and gas properties, has the ability
to evaluate (and in fact has evaluated) the Interests for purchase, and is
acquiring the Interests and the Gecko Properties for its own account
and not with the intent to make a distribution within the meaning of
the Securities Act of 1933 (and the rules and regulations pertaining
thereto) or a distribution thereof in violation of any other applicable
securities laws.
Section 4.8. Closing Shares. The Closing Shares have been duly
authorized for such issuance and, when issued and delivered by Buyer
in accordance with the provisions of this Agreement, will be validly
issued, fully paid, and nonassessable. The issuance of the Closing
Shares under this Agreement is not subject to any preemptive or
similar rights.
Section 4.9. SEC Filings. Buyer is current in its obligations to file all
periodic report and proxy statements with the Commission required to
be filed under the Exchange Act. Parent's Annual Report on Form-
10KSB for the year ended December 31, 1996, and Buyer's Quarterly
Report on Form-10QSB for the quarter ending September 30, 1997 (in
this Section called the "SEC Documents") do not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of circumstances then existing. The audited
Consolidated financial statements and unaudited Consolidated interim
financial statements of Buyer included in the SEC Documents (the
"Initial Financial Statements") present fairly in all material respects,
in conformity with GAAP applied on a consistent basis, the
Consolidated financial position of Buyer as of the dates thereof and its
Consolidated results of operations and changes in financial position
for the periods then ended (subject to normal year-end audit
adjustments in the case of the unaudited interim financial statements).
Since September 30, 1997, there have been no material developments,
transactions or events affecting Buyer (other than developments or
events affecting the oil and gas exploration and production industry
generally) other than as disclosed by Buyer in the SEC Documents or
to Sellers in writing. There are no material liabilities of Buyer
(contingent or otherwise), other than as disclosed in the SEC
Documents and the financial statements included therein.
ARTICLE V
Certain Covenants Regarding Information and Confidentiality
Section 5.1. Access to Information. From the date hereof until
Closing, each Seller will use its reasonable best efforts to give Buyer,
and its attorneys and other representatives, access at all reasonable
times to the books and records of each Partnership and to any contract
files, lease or other title files, production files, well files and other files
of Gecko Booty (in the instance of Property Seller) and each
Partnership (in the instance of LP Sellers) pertaining to the ownership
or operation of the Gecko Properties or the Partnership Properties (as
applicable), and each Seller will use its reasonable best efforts to
arrange for Buyer, and its attorneys and other representatives, to have
access to any such files in the respective office of Property Seller and
each Partnership (as applicable). No Seller shall be obligated to
provide Buyer with access to any records or data which such Seller
cannot provide to Buyer without, in its reasonable opinion, breaching
confidentiality agreements with other parties. Buyer recognizes and
agrees that all materials made available to it (whether pursuant to this
Section or otherwise) in connection with the transactions contemplated
hereby are made available to it as an accommodation and without
representation or warranty of any kind as to the accuracy and
completeness of such materials. From the date hereof until Closing,
Buyer will furnish each Seller and its attorneys and other
representatives such information with respect to Buyer as such Seller
shall from time to time reasonably request. Buyer shall not be
obligated to provide Sellers with access to any records or data which
Buyer cannot provide to Sellers without, in its reasonable opinion,
breaching confidentiality agreements with other parties.
Section 5.2. Confidentiality.
(a) Each Receiving Party (as defined below) agrees that all
Confidential Information (as defined below) shall be kept confidential
by the Receiving Party and shall not be disclosed by the Receiving
Party in any manner whatsoever; provided, however, that (i) any of
such Confidential Information may be disclosed to such directors,
officers, employees, and authorized representatives (including without
limitation attorneys, accountants, consultants, and financial advisors)
of the Receiving Party (collectively, for purposes of this Section,
"Receiving Party Representatives") as need to know such information
for the purpose of evaluating the transactions contemplated hereby (it
being understood that each Receiving Party Representative shall be
informed by the Receiving Party of the confidential nature of such
information and shall be required to treat such information
confidentially and that the Receiving Party and a Receiving Party
Representative shall be responsible for any breach of this Section by
such Receiving Party Representative), (ii) any disclosure of
Confidential Information may be made to the extent to which the
Disclosing Party (as defined below) consents in writing, (iii)
Confidential Information may be disclosed by the Receiving Party or
any Receiving Party Representative to the extent that, in the opinion of
counsel for the Receiving Party or such Receiving Party
Representative, the Receiving Party or such Receiving Party
Representative is legally compelled to do so, provided that, prior to
making such disclosure, the Receiving Party or such Receiving Party
Representative, as the case may be, advises and consults with the
Disclosing Party regarding such disclosure and provided further that
the Receiving Party or such Receiving Party Representative, as the
case may be, discloses only that portion of the Confidential
Information as is legally required. The Receiving Party agrees that
none of the Confidential Information will be used for any purpose
other than in connection with the transactions contemplated hereby.
The term "Confidential Information", as used herein, means all
information (irrespective of the form of communication) obtained by
or on behalf of the Receiving Party from the Disclosing Party or its
representatives pursuant to this Section and all similar information
obtained from the Disclosing Party or its representatives by or on
behalf of the Receiving Party prior to the date of this Agreement, other
than information which (A) was or becomes generally available to the
public other than as a result of disclosure by the Receiving Party or
any Receiving Party Representative, (B) was or becomes available to
the Receiving Party on a nonconfidential basis prior to disclosure to
the Receiving Party by the Disclosing Party or its representatives, or
(C) was or becomes available to the Receiving Party from a source
other than the Disclosing Party and its representatives, provided that
such source is not known by the Receiving Party (after reasonable due
inquiry) to be bound by a legal, contractual or fiduciary obligation to
the Disclosing Party. As used in this Section, the term "Receiving
Party" shall mean (x) Buyer, when the Disclosing Party is a Seller, and
(y) a Seller, when the Disclosing Party is Buyer. As used in this
Section, the term "Disclosing Party" shall mean (xx) Buyer, when the
Receiving Party is a Seller, and (yy) a Seller, when the Receiving Party
is Buyer.
(b) If this Agreement is terminated, the Receiving Party shall promptly
return at its expense, and shall cause all Receiving Party
Representatives to promptly return at the Receiving Party's or such
Receiving Party Representatives' expense, all Confidential Information
to the Disclosing Party without retaining any copies thereof, provided
that such portion of the Confidential Information as consists of notes,
compilations, analyses, reports, studies, or other documents prepared
by the Receiving Party or the Receiving Party Representatives shall be
destroyed (and the Receiving Party and each Receiving Party
Representative shall certify such destruction in writing to the
Disclosing Party if requested by the Disclosing Party).
ARTICLE VI
Conditions Precedent to the Obligations of the Parties; Termination
Rights
Section 6.1. Conditions Precedent to the Obligations of Buyer. The
obligations of Buyer under this Agreement are subject to each of the
following conditions being met:
(a) Each and every representation of each Seller under this Agreement
shall be true and accurate in all material respects as of the date when
made and shall be deemed to have been made again at and as of the
time of Closing and shall at and as of such time of Closing be true and
accurate in all respects except as to changes specifically contemplated
by this Agreement or consented to by Buyer.
(b) Each Seller shall have performed and complied in all material
respects with (or compliance therewith shall have been waived by
Buyer) each and every covenant, agreement and condition required by
this Agreement to be performed or complied with by each Seller prior
to or at the Closing.
(c) No suit, action or other proceedings shall, on the date of Closing,
be pending or threatened before any court or governmental agency
seeking to restrain, prohibit, or obtain damages or other relief in
connection with the consummation of the transactions contemplated by
this Agreement.
(d) BMC Inc. shall have executed and delivered to Future Texas an
assignment of its interest in BMC LP substantially in the form
attached hereto as Exhibit 6.1(d) in all material respects.
(e) BMC LP shall have not sold, transferred or otherwise disposed of
any of the Partnership Properties listed in the attached Exhibit 6.1(e),
except that BMC LP shall be permitted to assign to BMC Inc. the
interest of BMC LP in the ▇▇▇▇▇-▇▇▇▇▇▇ No. 1 well located in Grant
County, Oklahoma, either prior to or contemporaneously with the
Closing.
If any such condition on the obligations of Buyer under this
Agreement is not met as of the Closing Date, or in the event the
Closing does not occur on or before the Closing Date, and (in either
case) Buyer is not in breach of its obligations hereunder in the absence
of a Seller also being in breach of its obligations hereunder, this
Agreement may, at the option of Buyer, be terminated, in which case
the parties shall have no further obligations to one another hereunder
(other than the obligations under Sections 5.2 and Article XIV which
will survive such termination).
Section 6.2. Conditions Precedent to the Obligations of Sellers. The
obligations of Sellers under this Agreement are subject to the each of
the following conditions being met:
(a) Each and every representation of Buyer under this Agreement shall
be true and accurate in all material respects as of the date when made
and shall be deemed to have been made again at and as of the time of
Closing and shall at and as of such time of Closing be true and
accurate in all respects except as to changes specifically contemplated
by this Agreement or consented to by Sellers.
(b) Buyer shall have performed and complied in all material respects
with (or compliance therewith shall have been waived by Sellers) each
and every covenant, agreement and condition required by this
Agreement to be performed or complied with by Buyer prior to or at
the Closing.
(c) No suit, action or other proceedings shall, on the date of Closing,
be pending or threatened before any court or governmental agency
seeking to restrain, prohibit, or obtain damages or other relief in
connection with the consummation of the transactions contemplated by
this Agreement.
(d) Sellers shall have received an opinion of counsel reasonably
acceptable to Sellers dated the Closing Date covering the matters
described in Exhibit 6.2(d) and in a form reasonably acceptable to
Sellers.
(e) The Designated Shareholders shall have executed and delivered
that certain Voting Agreement substantially in the form attached as
Exhibit 6.2(e) in all material respects.
If any such condition on the obligations of Sellers under this
Agreement is not met as of the Closing Date, or in the event the
Closing does not occur on or before the Closing Date, and (in either
case) a Seller is not in breach of its obligations hereunder in the
absence of Buyer also being in breach of its obligations hereunder, this
Agreement may, at the option of a Seller, be terminated, in which case
the parties shall have no further obligations to one another hereunder
(other than the obligations under Section 5.2 and Article XIV which
will survive such termination).
ARTICLE VII
Closing of Transaction
Section 7.1. The Closing. The closing (herein called the "Closing")
of the transaction contemplated hereby shall take place in the offices of
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., at 1700 Texas Commerce Tower, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇, at 10:00 a.m. Central Standard Time,
on November 25, 1997, or at such other date and time as the Buyer
and Sellers may mutually agree upon (such date and time being herein
called the "Closing Date").
Section 7.2. Sellers' Closing Obligations. At the Closing:
(a) each Seller shall deliver to Buyer a certificate executed by an
authorized representative of such Seller dated the Closing Date,
certifying to Buyer that (i) such Seller has complied in all material
respects with all covenants and agreements required by this
Agreement to be performed and complied with by it on or prior to the
Closing Date and (ii) the representations and warranties made by such
Seller herein are true and correct in all material respects as if made on
and as of the Closing Date;
(b) each LP Seller shall execute and deliver that certain Assignment
of Limited Partner Interest (the "Assignment"), substantially in the
form attached hereto as Exhibit 7.2(b) in all material respects;
(c) Property Seller shall execute and deliver that certain Conveyance
(the "Conveyance"), substantially in the form attached hereto as
Exhibit 7.2(c) in all material respects;
(d) each LP Seller shall execute and deliver that certain Registration
Rights Agreement, substantially in the form attached hereto as Exhibit
7.2(d) in all material respects;
(e) LP Sellers shall execute and deliver that certain Waiver,
substantially in the form attached hereto as Exhibit 7.2(e) in all
material respects;
(f) LP Sellers shall deliver for cancellation the Future Warrants; and
(g) LP Sellers shall execute and deliver that certain Voting Agreement
in the form attached hereto as Exhibit 6.2(e) in all material respects.
Section 7.3. Buyer's Closing Obligations. At the Closing, Buyer shall:
(a) deliver to Sellers a certificate of existence and good standing with
respect to Buyer issued by appropriate public officials of the State of
Utah and dated no earlier than three business days prior to the Closing
Date;
(b) deliver to Sellers a certificate of existence and good standing with
respect to Future Texas issued by appropriate public officials of the
State of Texas and dated no earlier than three business days prior to
the Closing Date;
(c) deliver to Sellers a certificate of existence and good standing with
respect to Future Nevada issued by appropriate public officials of the
State of Nevada and dated no earlier than three business days prior to
the Closing Date;
(d) deliver to Sellers a certificate executed by an authorized officer of
Buyer dated the Closing Date, certifying to Sellers that (i) Buyer has
complied in all material respects with all covenants and agreements
required by this Agreement to be performed and complied with by it
on or prior to the Closing Date and (ii) the representations and
warranties made by Buyer herein are true and correct in all material
respects as if made on and as of the Closing Date;
(e) deliver to Sellers an "Omnibus Certificate" of the Secretary and
President of each of Buyer, Future Texas and Future Nevada, which
shall contain the names and signatures of the officers of Buyer, Future
Texas and Future Nevada, respectively, authorized to execute this
Agreement, the Security Documents and the Note Documents to which
entity is a party and which shall certify to the truth, correctness and
completeness of the following exhibits attached thereto: (i) a copy of
the resolutions duly adopted by the Board of Directors of Buyer, Future
Texas and Future Nevada (as applicable), with respect to the
execution, delivery and performance of this Agreement, the Security
Documents and the Note Documents to which such entity is a party;
(ii) a copy of the charter documents of Buyer, Future Texas and Future
Nevada (as applicable); and (iii) a copy of the bylaws of Buyer, Future
Texas and Future Nevada (as applicable);
(f) execute and deliver to Sellers the Notes;
(g) issue and deliver to LP Sellers the Closing Shares;
(h) execute and deliver (or cause to be executed and delivered) to
Sellers each Security Document listed in the attached 2.1--Security
Documents and any collateral to be delivered at Closing thereunder;
and
(i) execute and deliver that certain Registration Rights Agreement
substantially in the form attached hereto as Exhibit 7.2(d) in all
material respects.
Section 7.4. Delivery of Files. Within 30 days after the Closing, (i)
LP Sellers shall deliver (or cause to be delivered) to Buyer the limited
partnership files, records and other materials for BMC LP and (ii)
Property Seller shall deliver to Buyer the files, records and other
materials relating to the Gecko Properties. Notwithstanding the
foregoing, to the extent such files or other materials include items
which cannot be provided to Buyer without, in the reasonable opinion
of Sellers, breaching confidentiality agreements with other parties,
Sellers shall have no obligation to furnish (or cause to be furnished)
such items; provided, that if requested by Buyer, Sellers shall identify
any such agreement and use their reasonable best efforts to obtain an
amendment or waiver of such agreement to permit such materials to be
delivered to Buyer. Sellers may retain copies of all or any parts of the
files or other materials so furnished, and all costs of copying such files
shall be borne by Sellers. So long as such files or other materials so
delivered by Sellers to Buyer are maintained by Buyer, Buyer shall
permit Sellers and their representatives to have access to the same; for
a period of three years after Closing Buyer shall advise Sellers before it
destroys any such files, records or other materials (and will, if
requested by Sellers, deliver to Sellers any files or other materials it
intends to destroy).
Section 7.5. Agreement Regarding Execution and Delivery. Buyer, for
itself and on behalf of the Partnerships, hereby acknowledges and
agrees that (a) the consummation of the transactions contemplated
hereunder, including without limitation the extension of credit under
the Notes, the guarantee by the Partnerships of the Notes, and the
granting of liens and security interests by Buyer and the Partnerships
to secure the Notes and such guarantee, are intended to be
simultaneous for all intents and purposes, and (b) Buyer and each
Partnership shall be deemed to have executed and delivered each Note
Document (including each Security Document), immediately prior to
or simultaneously with the extension of credit under the Notes.
ARTICLE VIII
Certain Agreements Regarding Partnership Costs and Expenses and
Other Matters
Section 8.1. Partnership Costs and Expenses.
(a) With respect to BMC LP, it is specifically agreed by and between
Buyer and LP Sellers as follows: (i) Buyer shall be entitled to receive
all cash distributions attributable to the Interests therein made by BMC
LP on or after the Effective Date (regardless of whether such
distributions are attributable to revenues arising prior to the Effective
Date); and (ii) except as provided below in this subsection (a), Buyer
shall be obligated to bear all costs and expenses of BMC LP unpaid on
or incurred after the Effective Date and attributable to the Interests
therein; provided, however, that Buyer shall have no liability for, and
LP Sellers agree to bear and pay the following costs and expenses: (A)
the reasonable costs and expenses incurred by BMC LP in connection
with the preparation and filing of a federal income tax return covering
the short tax year commencing January 1, 1997 and ending the
Closing Date; and (B) any fees and expenses of the independent public
accountants of BMC LP unpaid as of the Closing Date.
(b) With respect to Future LP, it is specifically acknowledged and
agreed by and between Buyer and LP Sellers as follows: (i) LP Sellers
shall be entitled to receive from Future LP all distributions reflected in
the schedule received in October 1997 with respect to August 1997
production save for and except an amount equal to one-half of the
Closing Costs; (ii) LP Sellers have previously paid their allocable
share of the costs and expenses of Future LP for September 1997 and
shall not be reimbursed by Future LP for such amounts; (iii) Future LP
shall be entitled to retain all net cash flow attributable to production of
Future LP commencing September 1997; and (iv) Future Texas and
Future Nevada shall be responsible for and shall bear all costs of
Future LP commencing October 1, 1997 and LP Sellers shall have no
responsibility to make capital contributions with respect thereto.
(c) Buyer and LP Sellers agree that on or before 90 days after Closing,
they shall meet at a time and place mutually agreeable and review the
status of cash amounts received or paid under subsections (a) and (b)
above for the purpose of reconciling such and other amounts with the
terms and provisions of such subsections and to make any necessary
payments to each other as a result of such reconciliation.
Section 8.2. Production Proceeds. Notwithstanding that, by the terms
of the various Security Documents, Future Texas and the Partnerships
are and will be assigning to Sellers all of the "Production Proceeds" (as
defined therein) accruing to the property covered thereby, so long as
no Default has occurred Future Texas and the Partnerships may
continue to receive from the purchasers of production all such
Production Proceeds, subject, however, to the Liens created under the
Security Documents, which Liens are hereby affirmed and ratified.
Upon the occurrence of a Default, Sellers may exercise all rights and
remedies granted under the Security Documents, including the right to
obtain possession of all Production Proceeds then held by Future Texas
and the Partnerships or to receive directly from the purchasers of
production all other Production Proceeds. In no case shall any failure,
whether purposed or inadvertent, by Sellers to collect directly any such
Production Proceeds constitute in any way a waiver, remission or
release of any of their rights under the Security Documents, nor shall
any release of any Production Proceeds by Sellers to Future Texas or
the Partnerships constitute a waiver, remission, or release of any other
Production Proceeds or of any rights of Sellers to collect other
Production Proceeds thereafter.
ARTICLE IX
Agreement Regarding Specified Breach
(a) The representations and warranties of LP Sellers contained in
Sections 3.8(d) and (e) shall survive the Closing until the one-year
anniversary of the Closing Date (in this Article IX called the "Survival
Date").
(b) Subject to the terms and conditions of this Article IX, each LP
Seller severally (and not jointly and severally) agrees to indemnify and
hold harmless Buyer from and against any and all claims, actions,
liabilities, damages, costs and expenses (including court costs and
attorneys' fees) (in this Article IX, "Damages") incurred by Buyer by
reason of or resulting from a breach by such Seller of its
representations and warranties contained in Sections 3.8(d) and (e).
(c) No Seller shall have any indemnification obligation under this
Article IX unless before the Survival Date it shall have received from
Buyer written notice of the claim for or in respect of which
indemnification is sought (in this Article IX, the "Notice"). The
Notice shall set forth with reasonable specificity (i) the basis under this
Article, and the facts that otherwise form the basis, of such claim and
(ii) the estimate of the amount of the Damages and a calculation or
explanation of how such amount was arrived.
(d) Any amounts due and owing Buyer by a LP Seller hereunder shall
be satisfied solely by the transfer and assignment by such LP Seller to
Buyer of the number of Closing Shares determined by the following
formula: A = B/C, where "A" is the number of Closing Shares, where
"B" is such LP Seller's several share of the Damages, and where "C" is
the Average Price. Such transfer and assignment shall be made by a
LP Seller within 20 days of the date on which it receives the Notice,
unless such LP Seller in good faith disputes the claim set forth in the
Notice, in which event such transfer and assignment shall be made
within 20 days of the date on which such dispute is resolved (provided
such dispute is resolved in favor of Buyer). As used in this subsection
(d), the term "Average Price" shall equal the average of the last
reported sales prices for the Common Stock for the 15 consecutive
Trading Days (as defined below) immediately preceding the date of the
Notice (or the date on which the dispute is resolved, if applicable and
provided the dispute is resolved in favor of Buyer). The last reported
sales price for each day shall be the last reported sale price of the
Common Stock on such date on the exchange where it is primarily
traded, or, if the Common Stock is not traded on an exchange, the
Common Stock shall be valued at the last reported sale price on such
date on the NASDAQ National Market System, or, if the Common
Stock is not reported on the NASDAQ National Market System or any
similar system of automated dissemination of quotations of securities
prices, the Common Stock shall be valued at the closing bid price (or
average of bid prices) last quoted on such date as reported by an
established quotation service for over-the-counter securities. As used
above, the term "Trading Days" shall mean (i) if the Common Stock is
listed or admitted for trading on any generally recognized U.S.
securities exchange, days on which such securities exchange is open
for business and (ii) if the Common Stock is quoted on the NASDAQ
National Market System or any similar system of automated
dissemination of quotations of securities prices, days on which trades
may be made on such system.
(e) Notwithstanding anything to the contrary herein, no
indemnification shall be required to be made by Sellers pursuant to
this Article IX except to the extent that the aggregate amount of the
Damages exceeds $10,000.
(f) Notwithstanding anything to the contrary herein, the maximum
aggregate number of Closing Shares Sellers shall collectively be
obligated to transfer and assign to Buyer hereunder shall be 150,000.
ARTICLE X
Certain Post-Closing Affirmative Covenants
To induce Sellers to enter into this Agreement, Buyer warrants,
covenants and agrees that until the full and final payment of the
Obligations, unless the LP Sellers have previously otherwise agreed:
Section 10.1. Payment and Performance. Buyer will pay all amounts
due under the Notes in accordance with the terms thereof and will
observe, perform and comply with every covenant, term and condition
expressed or implied in this Agreement. Buyer will cause each of its
Subsidiaries to observe, perform and comply with every such term,
covenant and condition.
Section 10.2. Books, Financial Statements and Reports. Buyer and
each of its Subsidiaries will at all times maintain full and accurate
books of account and records. Buyer will maintain and will cause its
Subsidiaries to maintain a standard system of accounting, will
maintain its Fiscal Year, and will furnish the following statements and
reports to each LP Seller at Buyer's expense:
(a) As soon as available, and in any event within ninety-five (95) days
after the end of each Fiscal Year, complete Consolidated financial
statements of Buyer together with all notes thereto, prepared in
reasonable detail in accordance with GAAP, together with an
unqualified opinion, based on an audit using generally accepted
auditing standards, by independent certified public accountants
selected by Buyer and acceptable to the Sellers, stating that such
Consolidated financial statements have been so prepared. These
financial statements shall contain a Consolidated balance sheet as of
the end of such Fiscal Year and Consolidated statements of earnings,
of cash flows, and of changes in owners' equity for such Fiscal Year,
each setting forth in comparative form the corresponding figures for
the preceding Fiscal Year.
(b) As soon as available, and in any event within fifty (50) days after
the end of each Fiscal Quarter, Buyer's Consolidated balance sheet as
of the end of such Fiscal Quarter and Consolidated statements of
Buyer's earnings and cash flows for the period from the beginning of
the then current Fiscal Year to the end of such Fiscal Quarter, all in
reasonable detail and prepared in accordance with GAAP, subject to
changes resulting from normal year-end adjustments. In addition
Buyer will, together with each such set of financial statements and
each set of financial statements furnished under subsection (a) of this
section, furnish a certificate in a form reasonably acceptable to LP
Sellers signed by the chief financial officer of Buyer stating that such
financial statements are accurate and complete (subject to normal year-
end adjustments) and stating that no Default exists at the end of such
Fiscal Quarter or at the time of such certificate or specifying the nature
and period of existence of any such Default.
(c) Promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent by Buyer to its
stockholders and all registration statements, periodic reports and other
statements and schedules filed by Buyer with any securities exchange,
the Commission or any similar governmental authority.
(d) Annually within 115 days after the end of each Fiscal Year
beginning with the Fiscal Year ending December 31, 1997, a report
containing (i) an estimation of the oil and gas reserves, classified by
appropriate categories, as of the end of the preceding Fiscal Year
attributable to the interest of the Buyer therein, (ii) a projection of the
rate of production of and net income from such reserves with respect to
such interest, (iii) a calculation of the present worth of such net
income discounted at a rate of 10%, and (iv) a schedule or complete
description of all assumptions, estimates and projections made or used
in the preparation of such report. Each such report shall be prepared
by an independent petroleum engineer acceptable to Sellers in
accordance with customary and generally accepted standards and
practices for petroleum engineers, and shall be based on (1) prices
used by Houston Energy Banks, as reported by Madison Energy
Advisors, Inc., escalated at a rate not to exceed 3% per annum, (2)
lease operating expenses and production taxes derived from and
consistent with those actually incurred by Buyer, escalated at the same
rate, if any, being applied to prices, and (3) such other assumptions as
shall be reasonably acceptable to Sellers.
(e) Promptly, such other information with respect to the business and
operations of Buyer and its Subsidiaries, as LP Sellers may reasonably
request.
.
Section 10.3. Notice of Material Events and Change of Address.
Buyer will promptly notify each LP Seller in writing, stating that such
notice is being given pursuant to this Agreement, of:
(a) the occurrence of any Material Adverse Change,
(b) the occurrence of any Default,
(c) the acceleration of the maturity of any indebtedness owed by Buyer
or any Subsidiary thereof or of any default by any Buyer or any such
Subsidiary under any indenture, mortgage, agreement, contract or
other instrument to which any of them is a party or by which any of
them or any of their properties is bound, if such acceleration or default
could cause a Material Adverse Change,
(d) any claim of $100,000 or more, any notice of potential liability
under any environmental laws which might exceed such amount, or
any other material adverse claim asserted against Buyer or any
Subsidiary thereof or with respect to Buyer or any of such Subsidiary's
properties, and
(e) the filing of any suit or proceeding against Buyer or any
Subsidiary thereof in which an adverse decision could cause a Material
Adverse Change.
Upon the occurrence of any of the foregoing Buyer and any Subsidiary
thereof will take all necessary or appropriate steps to remedy promptly
any such Material Adverse Change, Default, acceleration or default, to
protect against any such adverse claim, to defend any such suit or
proceeding, and to resolve all controversies on account of any of the
foregoing. Buyer will also notify LP Sellers in writing at least twenty
business days prior to the date that Buyer or any Subsidiary thereof
changes its name or the location of its chief executive office or
principal place of business or the place where it keeps its books and
records concerning the Collateral, furnishing with such notice any
necessary financing statement amendments or requesting LP Sellers to
prepare the same.
Section 10.4. Maintenance of Properties. Buyer and each of its
Subsidiaries will maintain, preserve, protect, and keep all Collateral
and all other property used or useful in the conduct of its business in
good condition and in compliance with all applicable laws, and will
from time to time make all repairs, renewals and replacements needed
to enable the business and operations carried on in connection
therewith to be promptly and advantageously conducted at all times.
Section 10.5. Maintenance of Existence and Qualifications. Buyer and
each of its Subsidiaries will maintain and preserve its existence and
its rights and franchises in full force and effect and will qualify to do
business in all states or jurisdictions where required by applicable law,
except where the failure so to qualify will not cause a Material
Adverse Change.
Section 10.6. Payment of Trade Liabilities, Taxes, etc. Buyer and each
of its Subsidiaries will (a) timely file all required tax returns; (b)
timely pay all taxes, assessments, and other governmental charges or
levies imposed upon it or upon its income, profits or property; (c) pay
when due all Liabilities owed by it on ordinary trade terms to vendors,
suppliers and other persons providing goods and services used by it in
the ordinary course of its business; (d) pay and discharge when due all
other Liabilities now or hereafter owed by it; and (e) maintain
appropriate accruals and reserves for all of the foregoing in accordance
with GAAP. Buyer and each of its Subsidiaries may, however, delay
paying or discharging any of the foregoing so long as it is in good
faith contesting the validity thereof by appropriate proceedings and has
set aside on its books adequate reserves therefor.
Section 10.7. Insurance. Buyer and each of its Subsidiaries will keep
or cause to be kept insured by financially sound and reputable insurers
its properties in such forms and amounts and against such risks as are
customary for persons engaged in the same or similar business of
owning and operating similar properties. Upon demand by LP Sellers
any insurance policies covering Collateral shall be endorsed (a) to
provide for payment of losses to Sellers as its interests may appear and
(b) to provide that such policies may not be canceled or reduced or
affected in any material manner for any reason without fifteen
days prior notice to LP Sellers
Section 10.8. Compliance with Agreements and Law. Buyer and each
of its Subsidiaries will perform all material obligations it is required
to perform under the terms of each indenture, mortgage, deed of trust,
security agreement, lease, franchise, agreement, contract or other
instrument or obligation to which it is a party or by which it or any of
its properties is bound. Buyer and each of its Subsidiaries will conduct
its business and affairs in compliance with all laws applicable thereto.
Section 10.9. Agreement to Deliver Security Documents. Buyer agrees
to deliver and to cause each of its Subsidiaries to deliver, to further
secure the Notes whenever requested by LP Sellers in their sole and
absolute discretion, deeds of trust, mortgages, chattel mortgages,
security agreements, financing statements and other Security
Documents in form and substance satisfactory to Sellers for the
purpose of granting, confirming, and perfecting first and prior liens or
security interests in any real or personal property now owned or
hereafter acquired by Buyer and any such Subsidiary.
Section 10.10. Perfection and Protection of Security Interests and
Liens. Buyer will from time to time deliver, and will cause each of its
Subsidiaries from time to time to deliver, to LP Sellers any financing
statements, continuation statements, extension agreements and other
documents, properly completed and executed (and acknowledged when
required) by Buyer or any such Subsidiary in form and substance
satisfactory to LP Sellers, which LP Sellers request for the purpose of
perfecting, confirming, or protecting any Liens or other rights in
Collateral securing any Obligations.
Section 10.11. Election of LP Sellers' Nominee to Board of Directors.
(a) Within 30 days from the date hereof, Buyer will cause a vacancy to
occur on its Board of Directors and will appoint to fill such vacancy
the Sellers' Nominee. As used in this Section, the "LP Sellers'
Nominee" shall mean a person designated by LP Sellers, subject to the
consent of Buyer (which consent shall not be unreasonably withheld).
(b) Commencing on the date hereof and ending when LP Sellers or its
Affiliates (as defined below) either (i) during the period of time the
Notes are outstanding, no longer beneficially own at least 2% of all
Voting Securities (as defined below), or (ii) after the Notes have been
paid in full, no longer own beneficially at least 10% of all Voting
Securities, Buyer (A) will nominate or cause to be nominated for
election to Buyer's Board of Directors the LP Sellers' Nominee and (B)
will use its reasonable best efforts to cause the LP Sellers' Nominee to
be elected to Buyer's Board of Directors.
(c) In the event of the death, incapacity, resignation or removal of the
LP Sellers' Nominee preventing his or her serving on Buyer's Board of
Directors, Buyer will appoint another LP Sellers' Nominee to fill the
vacancy created thereby.
(d) As used in this Section, (i) the term "Affiliate" shall mean, with
respect to any person, a person directly or indirectly controlling,
controlled by or under common control with, such other person, and
(ii) "Voting Securities" shall mean Common Stock and any other
securities of Buyer entitled to vote generally for the election of
directors of Buyer.
ARTICLE XI
Certain Post-Closing Negative Covenants
To induce Sellers to enter into this Agreement, Buyer warrants,
covenants and agrees that until the full and final payment of the
Obligations, unless LP Sellers have previously otherwise agreed:
Section 11.1. Indebtedness. Neither Buyer nor any Subsidiary thereof
will in any manner owe or be liable for Indebtedness except:
(a) the Obligations.
(b) obligations under operating leases entered into in the ordinary
course of Buyer's or its Subsidiaries' business in arm's length
transactions at competitive market rates under competitive terms and
conditions in all respects.
(c) Indebtedness owed by Buyer or any Subsidiary thereof which is
subordinated to the Obligations upon terms and conditions satisfactory
to LP Sellers in their sole and absolute discretion.
(d) purchase money Indebtedness in an aggregate principal amount not
to exceed $200,000 at any time, provided that the original principal
amount of any such Indebtedness shall not be in excess of the purchase
price of the asset acquired thereby and such Indebtedness shall be
secured only by the acquired asset.
(e) Indebtedness in the principal amount of approximately $20,000
owed Bank One Texas on a workover rig.
(f) Indebtedness in the principal amount of approximately $20,000
owed ▇▇▇ ▇▇▇▇▇▇▇▇▇.
Section 11.2. Limitation on Liens. Neither Buyer nor any Subsidiary
thereof will create, assume or permit to exist any Lien upon any of the
properties or assets which it now owns or hereafter acquires, except, to
the extent not otherwise forbidden by the Security Documents the following:
(a) Liens which secure Obligations only.
(b) Statutory Liens for taxes, statutory mechanics' and materialmen's
Liens incurred in the ordinary course of business, and other similar
Liens incurred in the ordinary course of business, provided such Liens
do not secure Indebtedness and secure only Indebtedness which is not
delinquent or for which adequate reserves have been set aside.
(c) Liens securing Indebtedness described in Section 11.1(d).
(d) Existing Lien in favor of ▇▇▇ ▇▇▇▇▇▇▇▇▇ covering properties
located in Wichita County, Texas.
(e) Existing Lien in favor of Bank One Texas on the Indebtedness
described in Section 11.1 (e).
Section 11.3. Limitation on Mergers. Except as expressly provided
in this Section neither Buyer nor any Subsidiary thereof will merge or
consolidate with or into any other business entity. Any Subsidiary of Buyer
may, however, be merged into or consolidated with either
Buyer or another Subsidiary which is wholly-owned by Buyer, so long
as Buyer or the Subsidiary wholly-owned by Buyer is the surviving
business entity. Buyer will not issue any securities other than shares
of its common stock or any options or warrants giving the holders
thereof only the right to acquire such shares. No Subsidiary of Buyer
will issue any additional shares of its capital stock or other securities
or any options, warrants or other rights to acquire such additional
shares or other securities except to Buyer. No Subsidiary of Buyer
which is a partnership will allow any diminution of Buyer's interest
(direct or indirect) therein.
Section 11.4. Limitation on Sales of Property. Neither Buyer nor any
Subsidiary thereof will sell, transfer, lease, exchange, alienate or
dispose of any Collateral except, to the extent not otherwise forbidden
under the Security Documents:
(a) equipment which is worthless or obsolete or which is replaced by
equipment of equal suitability and value.
(b) inventory (including oil and gas sold as produced and seismic
data) which is sold in the ordinary course of business on ordinary trade
terms.
(c) other property which is sold for fair consideration not in the
aggregate in excess of $500,000 in any Fiscal Year (commencing with
Fiscal Year 1998), provided that the net proceeds attributable to any
such sales shall be used by Buyer to prepay the Notes.
Section 11.5. Limitation on Investments and New Businesses. Neither
Buyer nor any Subsidiary thereof will make any expenditure or
commitment or incur any obligation or enter into or engage in any
transaction except in the ordinary course of business (which ordinary
course of business includes the acquisition, directly or indirectly, of oil
and gas properties), engage directly or indirectly in any business or
conduct any operations except in connection with or incidental to its
present businesses and operations, make any acquisitions of or capital
contributions to or other investments in any person, other than
Permitted Investments, or make any significant acquisitions or
investments in any properties other than oil and gas properties.
Section 11.6. Transactions with Affiliates. Neither Buyer nor any of
its Subsidiaries will engage in any material transaction with any of its
Affiliates on terms which are less favorable to it than those which
would have been obtainable at the time in arm's-length dealing with
persons other than such Affiliates, provided that such restriction shall
not apply to transactions among Buyer and its wholly-owned
Subsidiaries.
Section 11.7. Restricted Payments. Buyer will not, and will not permit
any of its Subsidiaries to, declare or make, or incur any liability to
declare or make, any Restricted Payment.
ARTICLE XII
Post-Closing Events of Default and Remedies
Section 12.1. Events of Default. Each of the following constitutes an
"Event of Default" for purposes of the Notes and this Agreement:
(a) a default in the payment of principal of any Note when and as the
same shall become due and payable;
(b) a default in the payment of any interest upon any Note when such
interest becomes due and payable and continuance of such default for a
period of 5 business days;
(c) a default in the performance or observation of any covenant,
agreement or condition contained in either Article X or Article XI,
which default is not remedied within 30 days after the earlier of (i) the
day on which Buyer first obtains knowledge of such default or (ii) the
day on which written notice thereof is given to Buyer by the holder of
any Note;
(d) the Proved Reserves to Debt Ratio is less than 1.6 to 1, which
default is not remedied within 30 days after the day on which written
notice thereof is given to Buyer by the holder of any Note;
(e) the PDP Reserves to Debt Ratio is less than 1.1 to 1, which default
is not remedied within 30 days after the day on which written notice
thereof is given to Buyer by the holder of any Note;
(f) any "default" or "event of default" occurs under any Note
Document which defines either such term, and the same is not
remedied within the applicable period of grace (if any) provided in
such Note Document;
(g) any representation or warranty previously, presently or hereafter
made in writing by or on behalf of Buyer or any Subsidiary thereof in
connection with this Agreement or any Note Document shall prove to
have been false or incorrect in any material respect on any date on or
as of which made, which default is not remedied within 30 days after
the earlier of (i) the day on which Buyer first obtains knowledge of
such default or (ii) the day on which written notice thereof is given to
Buyer by the holder of any Note;
(h) Buyer or any Subsidiary thereof fails to pay any portion, when such
portion is due, of any of its Indebtedness in excess of $100,000, or
breaches or defaults in the performance of any agreement or
instrument by which any such Indebtedness is issued, evidenced,
governed, or secured, and any such failure, breach or default continues
beyond any applicable period of grace provided therefor;
(i) Buyer or any Subsidiary thereof:
(i) suffers the entry against it of a judgment, decree or order for relief
by a tribunal of competent jurisdiction in an involuntary proceeding
commenced under any applicable bankruptcy, insolvency or other
similar Law of any jurisdiction now or hereafter in effect, including
the federal Bankruptcy Code, as from time to time amended, or has
any such proceeding commenced against it which remains
undismissed for a period of thirty days; or
(ii) commences a voluntary case under any applicable bankruptcy,
insolvency or similar Law now or hereafter in effect, including the
federal Bankruptcy Code, as from time to time amended; or applies for
or consents to the entry of an order for relief in an involuntary case
under any such Law; or makes a general assignment for the benefit of
creditors; or fails generally to pay (or admits in writing its inability to
pay) its debts as such debts become due; or takes corporate or other
action to authorize any of the foregoing; or
(iii) suffers the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official
of all or a substantial part of its assets or of any part of the Collateral
in a proceeding brought against or initiated by it, and such
appointment or taking possession is neither made ineffective nor
discharged within thirty days after the making thereof, or such
appointment or taking possession is at any time consented to,
requested by, or acquiesced to by it; or
(iv) suffers the entry against it of a final judgment for the payment of
money in excess of $100,000 (not covered by insurance satisfactory to
Sellers in their discretion), unless the same is discharged within thirty
days after the date of entry thereof or an appeal or appropriate
proceeding for review thereof is taken within such period and a stay of
execution pending such appeal is obtained; or
(v) suffers a writ or warrant of attachment or any similar process to be
issued by any tribunal against all or any substantial part of its assets or
any part of the Collateral, and such writ or warrant of attachment or
any similar process is not stayed or released within thirty days after the
entry or levy thereof or after any stay is vacated or set aside; and
(j) Any Change in Control occurs; and
(k) Any Material Adverse Change occurs.
Upon the occurrence of an Event of Default described in subsection
(i)(i), (i)(ii) or (i)(iii) of this section with respect to Buyer or a
Subsidiary thereof, all of the Obligations shall thereupon be
immediately due and payable, without demand, presentment, notice of
demand or of dishonor and nonpayment, protest, notice of protest,
notice of intention to accelerate, declaration or notice of acceleration,
or any other notice or declaration of any kind, all of which are hereby
expressly waived by Buyer and each such Subsidiary. Upon the
occurrence of an Event of Default described in subsection (a) or
subsection (b), any Seller may during its continuance, by written
notice to Buyer declare the Note held by it to be due and payable,
whereupon such Note shall forewith mature and become due and
payable. Upon the occurrence of any other Event of Default, the
Majority of Sellers may at any time during its continuance, declare all
of the Notes to be due and payable, whereupon all of the Notes shall
forewith mature and become due and payable. As used in the
immediately preceding sentence, the term "Majority of the Sellers"
shall mean those Seller(s) who hold 51% in aggregate principal
amount of the Notes at the time outstanding, exclusive of any Notes
held by Buyer or any Subsidiary.
Section 12.2. Remedies. If any Default shall occur and be continuing,
each Seller may protect and enforce its rights under the Note
Documents by any appropriate proceedings, including proceedings for
specific performance of any covenant or agreement contained in any
Note Document, and each Seller may enforce the payment of any
Obligations due it or enforce any other legal or equitable right which it
may have; provided, that if (i) an Event of Default has occurred under
Section 12.1(a) or Section 12.1(b) and (ii) for a period of not less than
three months, the outstanding aggregate amount of principal and
interest payments with respect to which Buyer is in Default equals or
exceeds $200,000, Buyer agrees that upon demand from LP Sellers it
will immediately (A) cause the size of Buyer's Board of Directors to be
increased in number such that, after such increase and the terms of
this proviso, the LP Sellers' Nominee plus the persons designated
pursuant to clause (B) below will constitute a majority in number of
Buyer's Board of Directors and (B) appoint to fill such vacancies
persons designated by LP Sellers; further, Buyer agrees that the
persons so selected to serve on Buyer's Board of Directors shall remain
in office for a period of at least six months subsequent to Buyer curing
the above Event of Default and any other outstanding Defaults. All
rights, remedies and powers conferred upon Sellers under the Note
Documents shall be deemed cumulative and not exclusive of any other
rights, remedies or powers available under the Note Documents or at
law or in equity.
ARTICLE XIII
Notices
All notices and other communications required under this Agreement
shall (unless otherwise specifically provided herein) be in writing and
be delivered personally, by recognized commercial courier or delivery
service (which provides a receipt), by telecopier (with receipt
acknowledged), or by registered or certified mail (postage prepaid), at
the following addresses:
If to Sellers: Energy Capital Investment Company PLC
Encap Equity 1994 Limited Partnership
% EnCap Investments L.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
1700 Texas Commerce Tower
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
Gecko Booty 1994 I Limited Partnership
% ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
If to Buyer: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
and shall be considered delivered on the date of receipt. Either Buyer
or a Seller may specify as its proper address any other post office
address within the continental limits of the United States by giving
notice to the other party, in the manner provided in this Article, at
least ten (10) days prior to the effective date of such change of address.
ARTICLE XIV
Commissions
Each Seller severally agrees to indemnify and hold harmless Buyer
from and against any and all claims, obligations, actions, liabilities,
losses, damages, costs or expenses (including court costs and attorneys
fees) of any kind or character arising out of or resulting from any
agreement, arrangement or understanding alleged to have been made
by, or on behalf of, such Seller with any broker or finder in connection
with this Agreement or the transactions contemplated hereby. Buyer
agrees to indemnify and hold harmless Sellers from and against any
and all claims, obligations, actions, liabilities, losses, damages, costs
or expenses (including court costs and attorneys fees) of any kind or
character arising out of or resulting from any agreement, arrangement
or understanding alleged to have been made by, or on behalf of, Buyer
with any broker or finder in connection with this Agreement or the
transactions contemplated hereby.
ARTICLE XV
Miscellaneous Matters
Section 15.1. Survival of Provisions. All representations and
warranties made herein by Buyer and Sellers shall be continuing and
shall be true and correct on and as of the date of Closing with the same
force and effect as if made at that time, and (except as provided in
Article IX) all of such representations and warranties shall survive the
Closing and the delivery of the Assignments. The provisions of, and
the obligations of the parties under, Article VIII (to the extent the
same are, by mutual agreement, not performed at Closing), and
Articles IX through XV inclusive shall survive the Closing and the
delivery of the Assignments.
Section 15.2. Further Assurances. From time to time after the
Closing, at the request of any party hereto and without further
consideration, each Seller, on the one hand, and Buyer, on the other
hand, shall execute and deliver to the requesting party such
instruments and documents and take such other action (but without
incurring any material financial obligation) as such requesting party
may reasonably request in order to consummate more fully and
effectively the transactions contemplated hereby.
Section 15.3. Binding Effect; Successors and Assigns. The
Agreement shall be binding on the parties hereto and their respective
successors and permitted assigns. Buyer, on the one hand, or a Seller,
on the other hand, shall have the right to assign its rights under this
Agreement, without the prior written consent of Sellers or Buyer (as
applicable) first having been obtained.
Section 15.4. Expenses. LP Sellers, on the one hand, and Buyer, on
the other hand, shall each bear and pay one-half of all Closing Costs.
Section 15.5. Entire Agreement. This Agreement contains the entire
understanding of the parties hereto with respect to subject matter
hereof and supersedes all prior agreements, understandings,
negotiations, and discussions among the parties with respect to such
subject matter. Time is of the essence in this Agreement.
Section 15.6. Public Statements. Sellers and Buyer shall consult with
each other with regard to all publicity and other releases at or prior to
Closing concerning this Agreement and the transactions contemplated
hereby and, except as required by applicable law or the applicable
rules or regulations of any governmental body or stock exchange,
neither Buyer, on the one hand, nor a Seller, on the other hand, shall
issue any publicity or other release without furnishing the other a copy
of such publicity or release no less than one business day prior to
release.
Section 15.7. Injunctive Relief. The parties hereto acknowledge and
agree that irreparable damage would occur in the event any of the
provisions of this Agreement (including Section 5.2) were not
performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to
an injunction or injunctions to prevent breaches of the provisions of
this Agreement, and shall be entitled to enforce specifically the
provisions of this Agreement, in any court of the United States or any
state thereof having jurisdiction, in addition to any other remedy to
which the parties may be entitled under this Agreement or at law or in
equity.
Section 15.8. Deceptive Trade Practices. To the extent applicable to
the transaction contemplated hereby or any portion thereof, Buyer can
and does expressly waive the provisions of the Texas Deceptive Trade
Practices-Consumer Protection Act, Section 17.41 et seq., Texas
Business & Commerce Code, other than Section 17.555, which is not
waived, and all other consumer protection laws of the State of Texas,
or any other state, applicable to this transaction that may be waived by
the parties. In connection with such waiver, Buyer represents to Sellers
that they (a) are in the business of seeking or acquiring by purchase or
lease, goods or services for commercial or business use, (b) have
knowledge and experience in financial and business matters that
enable them to evaluate the merits and risks of the transactions
contemplated hereby and (c) are not in a significantly disparate
bargaining position.
Section 15.9. Amendments. This Agreement may be amended,
modified, supplemented, restated or discharged (and provisions hereof
may be waived) only by an instrument in writing signed by Buyer and
LP Sellers, provided that no amendment, modification, supplement,
restatement, discharge or waiver shall be made which materially and
adversely affects Property Seller without the written consent of
Property Seller.
Section 15.10. Severability. If any provision of this Agreement is
held to be unenforceable, this Agreement shall be considered divisible
and such provision shall be deemed inoperative to the extent it is
deemed unenforceable, and in all other respects this Agreement shall
remain in full force and effect; provided, however, that if any such
provision may be made enforceable by limitation thereof, then such
provision shall be deemed to be so limited and shall be enforceable to
the maximum extent permitted by applicable law.
Section 15.11. No Waiver. The failure of any party hereto to insist
upon strict performance of a covenant hereunder or of any obligation
hereunder, irrespective of the length of time for which such failure
continues, shall not be a waiver of such party's right to demand strict
compliance in the future. No consent or waiver, express or implied, to
or of any breach or default in the performance of any obligation
hereunder shall constitute a consent or waiver to or of any other breach
or default in the performance of the same or any other obligation
hereunder.
Section 15.12. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Texas.
Section 15.13. Counterparts. This Agreement may be executed in
counterparts, all of which are identical and all of which constitute one
and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, this Agreement is executed by the parties
hereto on the date set forth above.
"SELLERS":
ENERGY CAPITAL INVESTMENT COMPANY PLC
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Director
ENCAP EQUITY 1994 LIMITED PARTNERSHIP
By: ENCAP INVESTMENTS L.C., General Partner
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Managing Director
GECKO BOOTY 1994 I LIMITED PARTNERSHIP
By: GEOSCIENCE EXPLORATION CKO, INC., General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman of the Board
"BUYER":
FUTURE PETROLEUM CORPORATION, a Utah Corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇
Name: ▇▇▇▇ ▇▇▇▇▇
Title: President
TABLE OF CONTENTS
Page
RECITALS: 1
ARTICLE I Definitions, References and Construction 2
Section 1.1. Certain Defined Terms 2
Section 1.2. References and Construction 8
ARTICLE II Agreement to Purchase and Sell Interests and Properties 9
Section 2.1. Conveyance of Interests 9
Section 2.2. Purchase Price and Payment for Interests 9
Section 2.3. Conveyance of Gecko Properties 9
Section 2.4. Purchase Price and Payment for Gecko Properties 9
Section 2.5. Purchase Price Allocation 9
ARTICLE III Representations and Warranties of Sellers 10
Section 3.1. Organization and Existence 10
Section 3.2. Power and Authority 10
Section 3.3. Valid and Binding Agreement 10
Section 3.4. Non-Contravention 11
Section 3.5. Approvals 11
Section 3.6. Pending Litigation 11
Section 3.7. Title to Interests 11
Section 3.8. BMC LP 11
Section 3.9. Investment Experience 12
Section 3.10. Investment Intent 12
Section 3.11. Restricted Securities 12
Section 3.12. Legend 13
Section 3.13. Accuracy of Information. 13
Section 3.14. No Solicitation 13
Section 3.15. Accredited Investor 13
Section 3.16. Disclaimer of Warranties 13
ARTICLE IV Representations and Warranties of Buyer 14
Section 4.1. Organization and Existence 14
Section 4.2. Power and Authority 14
Section 4.3. Valid and Binding Agreement 14
Section 4.4. Non-Contravention 14
Section 4.5. Approvals 15
Section 4.6. Pending Litigation 15
Section 4.7. Knowledgeable Purchaser 15
Section 4.8. Closing Shares. 15
Section 4.9. SEC Filings 15
ARTICLE V Certain Covenants Regarding Information and
Confidentiality 16
Section 5.1. Access to Information 16
Section 5.2. Confidentiality 16
ARTICLE VI Conditions Precedent to the Obligations of the Parties;
Termination Rights 17
Section 6.1. Conditions Precedent to the Obligations of Buyer 17
Section 6.2. Conditions Precedent to the Obligations of Sellers 18
ARTICLE VII Closing of Transaction 19
Section 7.1. The Closing 19
Section 7.2. Sellers' Closing Obligations 19
Section 7.3. Buyer's Closing Obligations 20
Section 7.4. Delivery of Files 21
Section 7.5. Agreement Regarding Execution and Delivery 21
ARTICLE VIII Certain Agreements Regarding Partnership Costs and
Expenses and Other Matters 22
Section 8.1. Partnership Costs and Expenses 22
Section 8.2. Production Proceeds 22
ARTICLE IX Agreement Regarding Specified Breach 23
ARTICLE X Certain Post-Closing Affirmative Covenants 24
Section 10.1. Payment and Performance 24
Section 10.2. Books, Financial Statements and Reports 24
Section 10.3. Notice of Material Events and Change of Address 26
Section 10.4. Maintenance of Properties 26
Section 10.5. Maintenance of Existence and Qualifications 26
Section 10.6. Payment of Trade Liabilities, Taxes, etc. 27
Section 10.7. Insurance 27
Section 10.8. Compliance with Agreements and Law 27
Section 10.9. Agreement to Deliver Security Documents 27
Section 10.10. Perfection and Protection of Security Interests and
Liens 27
Section 10.11. Election of LP Sellers' Nominee to Board of Directors 28
ARTICLE XI Certain Post-Closing Negative Covenants 28
Section 11.1. Indebtedness 28
Section 11.2. Limitation on Liens 29
Section 11.3. Limitation on Mergers 29
Section 11.4. Limitation on Sales of Property 30
Section 11.5. Limitation on Investments and New Businesses 30
Section 11.6. Transactions with Affiliates 30
Section 11.7. Restricted Payments 30
ARTICLE XII Post-Closing Events of Default and Remedies 30
Section 12.1. Events of Default 30
Section 12.2. Remedies 33
ARTICLE XIII Notices 33
ARTICLE XIV Commissions 34
ARTICLE XV Miscellaneous Matters 35
Section 15.1. Survival of Provisions 35
Section 15.2. Further Assurances 35
Section 15.3. Binding Effect; Successors and Assigns 35
Section 15.4. Expenses 35
Section 15.5. Entire Agreement 35
Section 15.6. Public Statements 35
Section 15.7. Injunctive Relief 36
Section 15.8. Deceptive Trade Practices 36
Section 15.9. Amendments 36
Section 15.10. Severability 36
Section 15.11. No Waiver. 36
Section 15.12. Governing Law. 36
Section 15.13. Counterparts 37
PURCHASE AND SALE AGREEMENT
Dated November 25, 1997
By and Among
Future Petroleum Corporation, a Utah Corporation;
Energy Capital Investment Company PLC,
an English investment company;
EnCap Equity 1994 Limited Partnership,
a Texas limited partnership; and
Gecko Booty 1994 I Limited Partnership,
a Texas limited partnership
