-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Nr+eMC4f78H2fUWc8l1igCfxaSxC7m13erraC9NNwj2xty3dBZG4oYcTx57ppyh9 7J2qVANgvjld4PAch/JI5A== 0000950134-98-007382.txt : 19980907 0000950134-98-007382.hdr.sgml : 19980907 ACCESSION NUMBER: 0000950134-98-007382 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19980904 SROS: NONE GROUP MEMBERS: ENCAP EQUITY 1994 LIMITED PARTNERSHIP GROUP MEMBERS: ENCAP INVESTMENTS LC GROUP MEMBERS: ENERGY CAPITAL INVESTMENTS SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: FUTURE PETROLEUM CORP/UT/ CENTRAL INDEX KEY: 0000051072 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 870239185 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-31203 FILM NUMBER: 98704099 BUSINESS ADDRESS: STREET 1: 2351 W NW HWY STE 2130 CITY: DALLAS STATE: TX ZIP: 75220 BUSINESS PHONE: 2143507602 MAIL ADDRESS: STREET 1: P O BOX 25253 CITY: DALLAS STATE: TX ZIP: 75225 FORMER COMPANY: FORMER CONFORMED NAME: INTERMOUNTAIN EXPLORATION CO DATE OF NAME CHANGE: 19920703 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: ENCAP EQUITY 1994 LIMITED PARTNERSHIP CENTRAL INDEX KEY: 0001065060 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: TX FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 1100 LOUISIANA STREET 2: SUITE 3150 CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7136596100 MAIL ADDRESS: STREET 1: 1100 LOUISIANA STREET 2: SUITE 3150 CITY: HOUSTON STATE: TX ZIP: 77002 SC 13D/A 1 AMENDMENT NO. 1 TO SCHEDULE 13D 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Schedule 13D/A (Amendment No. 1) Under the Securities Exchange Act of 1934* Future Petroleum Corporation (Name of Issuer) Common Stock, par value $.01 per share (Title of Class of Securities) 390 916 100 (CUSIP Number) Gary R. Petersen EnCap Investments L.C. 1100 Louisiana, Suite 3150 Houston, Texas 77002 (713) 659-6100 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) August 14, 1998 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of ss.ss. 240.13d-1(e), 240.13d-1(f) or 204.13d-1(g), check the following box. [ ] NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See ss. 240.13d-7(b) for other parties to whom copies are to be sent. *The remainder of the cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). 2 CUSIP NO. 390 916 100 SCHEDULE 13D (1) Names of Reporting Persons I.R.S. Identification Nos. of Above Persons ENERGY CAPITAL INVESTMENT COMPANY PLC - ----------------------------------------------------------------------------------------------------- (2) Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [ ] - ----------------------------------------------------------------------------------------------------- (3) SEC Use Only - ----------------------------------------------------------------------------------------------------- (4) Source of Funds (See Instructions) OO (SEE ITEM 3) - ----------------------------------------------------------------------------------------------------- (5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [ ] - ----------------------------------------------------------------------------------------------------- (6) Citizenship or Place of Organization ENERGY CAPITAL INVESTMENT COMPANY PLC IS A COMPANY FORMED UNDER THE LAWS OF THE COUNTRY OF ENGLAND - ----------------------------------------------------------------------------------------------------- Number of (7) Sole Voting Power 0 Shares Bene- ------------------------------------------------------------------------ ficially Owned by (8) Shared Voting Power 2,269,886(1) Each ------------------------------------------------------------------------ Reporting Person With (9) Sole Dispositive Power 0 ------------------------------------------------------------------------ (10) Shared Dispositive Power 2,269,886(1) - ----------------------------------------------------------------------------------------------------- (11) Aggregate Amount Beneficially Owned by Each Reporting Person 2,269,886(2) - ----------------------------------------------------------------------------------------------------- (12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ](2) - ----------------------------------------------------------------------------------------------------- (13) Percent of Class Represented by Amount in Row (11) 16.6%(3) - ----------------------------------------------------------------------------------------------------- (14) Type of Reporting Person (See Instructions) PN - -----------------------------------------------------------------------------------------------------
(1) Voting and dispositive power is shared among Energy PLC and EnCap Investments (defined in Item 2). (2) Energy PLC disclaims any beneficial ownership of EnCap LP's (defined in Item 2) shares and only claims beneficial ownership of the above-mentioned 2,269,886 shares. Please see Item 5. (3) Based on 13,696,733 shares issued and outstanding as of August 14, 1998 as reported in the Form 10-QSB of the Issuer for the quarter ended June 30, 1998. Page 2 3 CUSIP NO. 390 916 100 SCHEDULE 13D (1) Names of Reporting Persons I.R.S. Identification Nos. of Above Persons ENCAP INVESTMENTS L.C. - ----------------------------------------------------------------------------------------------------- (2) Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [ ] - ----------------------------------------------------------------------------------------------------- (3) SEC Use Only - ----------------------------------------------------------------------------------------------------- (4) Source of Funds (See Instructions) OO (SEE ITEM 3) - ----------------------------------------------------------------------------------------------------- (5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [ ] - ----------------------------------------------------------------------------------------------------- (6) Citizenship or Place of Organization ENCAP INVESTMENTS L.C. IS A LIMITED LIABILITY COMPANY ORGANIZED UNDER THE LAWS OF THE STATE OF TEXAS - ----------------------------------------------------------------------------------------------------- Number of (7) Sole Voting Power 0 Shares Bene- ------------------------------------------------------------------------ ficially Owned by (8) Shared Voting Power 4,694,859(1) Each ------------------------------------------------------------------------ Reporting Person With (9) Sole Dispositive Power 0 ---------------------------------------------------------------------- (10) Shared Dispositive Power 4,694,859(1) - ----------------------------------------------------------------------------------------------------- (11) Aggregate Amount Beneficially Owned by Each Reporting Person 4,694,859(2) - ----------------------------------------------------------------------------------------------------- (12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ](2) - ----------------------------------------------------------------------------------------------------- (13) Percent of Class Represented by Amount in Row (11) 34.3%(3) - ----------------------------------------------------------------------------------------------------- (14) Type of Reporting Person (See Instructions) OO - -----------------------------------------------------------------------------------------------------
(1) Voting and dispositive power is shared among Energy PLC and EnCap Investments, and EnCap LP and EnCap Investments respectively (defined in Item 2). (2) EnCap Investments disclaims any beneficial ownership of EnCap LP's or Energy PLC's (defined in Item 2) shares. (3) Based on 13,696,733 shares issued and outstanding as of August 14, 1998 as reported in the Form 10-QSB of the Issuer for the quarter ended June 30, 1998. Page 3 4 CUSIP NO. 390 916 100 SCHEDULE 13D (1) Names of Reporting Persons I.R.S. Identification Nos. of Above Persons ENCAP EQUITY 1994 LIMITED PARTNERSHIP - ----------------------------------------------------------------------------------------------------- (2) Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ] (b) [ ] - ----------------------------------------------------------------------------------------------------- (3) SEC Use Only - ----------------------------------------------------------------------------------------------------- (4) Source of Funds (See Instructions) OO (SEE ITEM 3) - ----------------------------------------------------------------------------------------------------- (5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [ ] - ----------------------------------------------------------------------------------------------------- (6) Citizenship or Place of Organization ENCAP EQUITY 1994 LIMITED PARTNERSHIP IS A LIMITED PARTNERSHIP ORGANIZED UNDER THE LAWS OF THE STATE OF TEXAS - ----------------------------------------------------------------------------------------------------- Number of (7) Sole Voting Power 0 Shares Bene- ------------------------------------------------------------------------ ficially Owned by (8) Shared Voting Power 2,424,973(1) Each ------------------------------------------------------------------------ Reporting Person With (9) Sole Dispositive Power 0 ---------------------------------------------------------------------- (10) Shared Dispositive Power 2,424,973(1) - ----------------------------------------------------------------------------------------------------- (11) Aggregate Amount Beneficially Owned by Each Reporting Person 2,424,973(2) - ----------------------------------------------------------------------------------------------------- (12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ](2) - ----------------------------------------------------------------------------------------------------- (13) Percent of Class Represented by Amount in Row (11) 17.7%(3) - ----------------------------------------------------------------------------------------------------- (14) Type of Reporting Person (See Instructions) PN - -----------------------------------------------------------------------------------------------------
(1) Voting and dispositive power is shared among EnCap LP and EnCap Investments (defined in Item 2). (2) EnCap LP disclaims any beneficial ownership of Energy PLC's (defined in Item 2) shares and only claims beneficial ownership of the above-mentioned 2,424,973 shares. Please see Item 5. (3) Based on 13,696,733 shares issued and outstanding as of August 14, 1998 as reported in the Form 10-QSB of the Issuer for the quarter ended June 30, 1998. Page 4 5 ITEM 1. SECURITY AND ISSUER. No modification. ITEM 2. IDENTITY AND BACKGROUND. No modification. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. Item 3 has been amended and restated in its entirety as follows: DECEMBER 13, 1995 TRANSACTION. Future Petroleum Corporation, a Texas corporation and a wholly-owned subsidiary of Issuer ("SUB"), EnCap LP and Energy PLC entered into an Agreement of Limited Partnership dated as of December 13, 1995 (the "ORIGINAL AGREEMENT"), establishing Future Acquisition 1995, Ltd., a Texas limited partnership ("FUTURE LP"). Sub is the sole general partner of Future LP. EnCap LP and Energy PLC are limited partners of Future LP. Under the terms of the Original Agreement, (i) Sub contributed properties to Future LP, (ii) EnCap LP contributed $785,120 to Future LP, which funds were used by Future LP to acquire oil and gas properties and pay organizational costs and (iii) Energy PLC contributed $471,536 to Future LP, which funds were used by Future LP to acquire oil and gas properties and pay organizational costs. EnCap LP and Energy PLC also agreed, subject to certain limitations contained in the Original Agreement, to fund certain development costs with respect to Future LP's oil and gas properties; the Original Agreement contemplates that such amounts would not exceed $243,660 (EnCap LP) and $146,340 (Energy PLC), respectively. As additional consideration for the agreement of EnCap LP and Energy PLC to enter into the Original Agreement and provide the funds contemplated thereunder, Issuer issued the following warrants to acquire Common Stock as follows: Stock Purchase Warrant No. 1004 issued to EnCap LP and entitling EnCap LP to acquire 156,192 shares of Common Stock; and Stock Purchase Warrant No. 1003 issued to Energy PLC and entitling Energy PLC to acquire 93,808 shares of Common Stock. APRIL 18, 1996 TRANSACTION. Sub, EnCap LP and Energy PLC entered into a letter amendment to the Original Agreement dated April 18, 1996 (the "LETTER AMENDMENT"). Under the terms of the Letter Amendment, (i) EnCap LP agreed to make additional capital contributions to Future LP in the following amounts and for the following purposes: $42,453 to pay for organizational cost overruns, $13,433 to provide funds for working capital and $49,783 to pay for drilling and completion cost overruns; and (ii) Energy PLC agreed to make additional capital contributions to Future LP in the following amounts and for the following purposes: $25,497 to pay for organizational cost overruns, $8,067 to provide funds for working capital and $29,899 to pay for drilling and completion cost overruns. Issuer joined in the execution of the Letter Amendment and, pursuant thereto and in consideration of EnCap LP's and Energy PLC's agreement to make additional capital contributions to Future LP, agreed to issue additional warrants to acquire Common Stock as follows: Stock Purchase Warrant No. 1006 issued to EnCap LP and entitling EnCap LP to acquire 23,429 shares of Common Stock; and Page 5 6 Stock Purchase Warrant No. 1005 issued to Energy PLC and entitling Energy PLC to acquire 14,071 shares of Common Stock. JANUARY 29, 1997 TRANSACTION. Sub, EnCap LP and Energy PLC further amended the Original Agreement by entering into a First Amended and Restated Agreement of Limited Partnership of Future LP dated as of January 29, 1997 (the "AMENDED AND RESTATED AGREEMENT"). Under the terms of the Amended and Restated Agreement, each of EnCap LP and Energy PLC made additional capital contributions to Future LP in the amount of $1,171,500, which capital contributions were used by Future LP to acquire additional oil and gas properties. As additional consideration for the agreement of EnCap LP and Energy PLC to enter into the Amended and Restated Agreement and provide Future LP the additional funds described above, Issuer issued Common Stock as follows: 100,000 shares of Common Stock issued to EnCap LP; and 100,000 shares of Common Stock issued to Energy PLC. In connection therewith, Issuer, EnCap LP and Energy PLC entered into that certain Agreement of Issuer dated as of January 29, 1997, whereunder (among other things) (i) Issuer granted to EnCap LP and Energy PLC piggyback registration rights with respect to the Warrant Shares (i.e., the shares issuable upon exercise of the above referenced Stock Purchase Warrants) and the shares of Common Stock referenced above. EnCap and Energy PLC agreed not to sell any shares of the Common Stock referenced above for a specified period of time preceding and after a public offering by Issuer of Common Stock. APRIL 28, 1997 TRANSACTION. Sub, EnCap LP and Energy PLC amended the Amended and Restated Agreement by entering into an April 1997 Amendment to First Amended and Restated Agreement of Partnership of Future LP dated as of April 28, 1997 (the "APRIL 1997 AMENDMENT"). Under the terms of the April 1997 Amendment, the Limited Partners agreed to make additional capital contributions to Future LP in the aggregate amount not to exceed $493,400, of which an amount not to exceed $350,000 could be used by Future LP to make distributions to Sub and Issuer for the purpose of effecting a public offering of securities by Issuer and for other general corporate purposes. The Issuer, Sub, Future LP, Energy PLC and EnCap LP also entered into an agreement dated April 28, 1997 (the "APRIL 1997 AGREEMENT"). Under the terms of the April 1997 Agreement, Issuer issued 12,500 shares of Common Stock to each of EnCap LP and Energy PLC and agreed under certain circumstances to issue an additional 100,000 shares of Common Stock to each of EnCap LP and Energy PLC. On November 25, 1997, however, in connection with the consummation of the November 25, 1997 transaction (see below), each of Energy PLC and EnCap LP waived their rights to receive the 100,000 shares of Common Stock of the Issuer referenced in the April 1997 Agreement. Issuer granted to EnCap LP and Energy PLC piggyback registration rights with respect to the shares of Common Stock issued pursuant to the April 1997 Agreement. NOVEMBER 25, 1997 TRANSACTION. Issuer, Energy PLC, EnCap LP and Gecko Booty 1994 I Limited Partnership entered into that certain Purchase and Sale Agreement dated November 25, 1997 (the "NOVEMBER 1997 PURCHASE AGREEMENT"). Pursuant to the November 1997 Purchase Agreement, Energy PLC and EnCap LP sold limited partnership interests in BMC Development No. 1 Limited Partnership and Future LP to the Issuer, and in return Energy PLC received, in addition to a promissory note, 765,547 shares of Common Stock covered by this Schedule 13D and EnCap LP received, in addition to a promissory note, 809,453 shares of Common Stock covered by this Schedule 13D. Pursuant to a Registration Rights Agreement dated as of November 29, 1997 (the "1997 REGISTRATION RIGHTS AGREEMENT"), by and among Issuer, EnCap LP and Energy PLC, Issuer granted to EnCap LP and Energy Page 6 7 PLC certain demand and piggyback registration rights with respect to the shares of Common Stock issued pursuant to the November 1997 Purchase Agreement. As additional consideration, Energy PLC and EnCap LP delivered to the Issuer for cancellation stock warrants entitling them to purchase 107,879 and 179,621 shares, respectively of Common Stock. MAY 1, 1998 TRANSACTION. Issuer, EnCap LP, Energy PLC and NCI Enterprises, Inc. entered into that certain Purchase and Sale Agreement dated as of May 1, 1998 (the "MAY 1998 PURCHASE AGREEMENT"). Pursuant to the May 1998 Purchase Agreement, EnCap LP and Energy PLC sold limited partnership interests in NCI-Shawnee Limited Partnership to the Issuer, and in return Energy PLC received, in addition to a promissory note, 18,762 shares of Common Stock covered by this Schedule 13D and EnCap LP received, in addition to a promissory note, 31,238 shares of Common Stock covered by this Schedule 13D. Pursuant to an Amendment No. 1 to Registration Rights Agreement dated as of May 1, 1998, by and among Issuer, EnCap LP and Energy PLC, the parties amended the 1997 Registration Rights Agreement to extend demand and piggyback registration rights with respect to the shares of Common Stock issued pursuant to the May 1998 Purchase Agreement. AUGUST 14, 1998 TRANSACTION. On August 14, 1998, the Issuer acquired certain oil and gas properties located in Kern County, California (the "PROPERTIES") from a subsidiary of Bargo Energy Resources, Ltd, a Texas limited partnership ("BARGO"), pursuant to that certain Agreement and Plan of Merger dated August 14, 1998 (the "MERGER AGREEMENT"), by and among the Issuer, Future CAL-TEX Corporation, a Texas corporation and a wholly-owned subsidiary of the Issuer ("FUTURE SUB"), Bargo and SCL-CAL Company, a Texas corporation and a wholly-owned subsidiary of Bargo ("BARGO SUB"). Under the Merger Agreement, Bargo Sub was merged with and into Future Sub, with Future Sub being the surviving entity. As a result of the merger, Future Sub assumed certain liabilities of Bargo Sub, including $5,800,000 in indebtedness and other obligations of Bargo Sub, and issued to Bargo (i) 4,694,859 shares of Common Stock, and (ii) a warrant to purchase 250,000 shares of Common Stock. Contemporaneously with consummating the merger under the Merger Agreement, the Issuer also entered into a $20,000,000 senior secured credit facility with a commercial bank (the "SENIOR CREDIT FACILITY"). To facilitate the Issuer obtaining the Senior Credit Facility, Energy PLC and EnCap LP agreed to subordinate and restructure certain indebtedness owed by the Issuer to them (the "ENCAP DEBT"). To effect such agreement, (i) Energy PLC and EnCap LP entered into that certain Master Subordination Agreement dated August 14, 1998 (the "MASTER SUBORDINATION AGREEMENT"), with the lender under the Senior Credit Facility and (ii) the Issuer, Energy PLC and EnCap LP entered into that certain Note Restructuring Agreement dated August 14, 1998 (the "NOTE RESTRUCTURING AGREEMENT"). Under the Note Restructuring Agreement and in consideration of Energy PLC's and EnCap LP's agreement to subordinate the EnCap Debt to the Senior Credit Facility and to restructure the EnCap Debt, the Issuer issued 1,373,077 shares of Common Stock to Energy PLC and 1,471,782 shares of Common Stock to EnCap LP. Pursuant to pledge agreements regarding such Senior Credit Facility, each of which is dated August 14, 1998 (the "PLEDGE AGREEMENTS"), Bargo, EnCap LP, Energy PLC and the Price Group (as defined below) have pledged their shares of Common Stock to secure the Issuer's borrowings under the Senior Credit Facility. If an event of default occurs under the Senior Credit Facility, the lender will have the right to vote all of the shares of Common Stock of the Issuer subject to the Pledge Agreements, and following foreclosure on the Common Stock, will have the right to sell the Common Stock as provided in the Pledge Agreement and applicable law. Contemporaneously with the execution of the Merger Agreement, the Issuer, Energy PLC and EnCap LP also entered into that certain Registration Rights Agreement (the "REGISTRATION RIGHTS AGREEMENT") dated August 14, 1998. Under the Registration Rights Agreement, Energy PLC and EnCap LP are accorded (i) after August 14, 1998, two demand registration rights, and (ii) unlimited piggyback registration rights. The Registration Rights Agreement specifically supersedes (A) the 1997 Registration Page 7 8 Rights Agreement, as amended, and (B) the registration rights accorded Energy PLC and EnCap LP under the April 1997 Agreement, it being agreed that the agreements described in (A) and (B) above are now terminated and of no force and effect. Contemporaneously with the Merger Agreement, the Issuer, Carl Price, Don Wm. Reynolds, Energy PLC, EnCap LP and Bargo executed and delivered that certain Shareholders' Agreement dated August 14, 1998 (the "SHAREHOLDERS' AGREEMENT"). Under the Shareholders' Agreement, it was agreed that the Board of Directors of the Issuer would be composed of seven members and that the Price Group (as defined below) would have three nominees to the Issuer's Board of Directors, the Bargo Group (as defined below) would have two nominees to the Issuer's Board of Directors and the EnCap Group (as defined below) would have two nominees to the Issuer's Board of Directors. Under the Shareholders' Agreement, each of the above shareholder groups has agreed to vote for the director nominees of the other shareholder groups. Further, the parties to the Shareholders' Agreement have agreed that one of the nominees of Bargo will be the Chairman of the Board of Directors of the Issuer. As used above, "PRICE GROUP" shall mean Messrs. Price and Reynolds, "BARGO GROUP" shall mean Bargo and "ENCAP GROUP" shall mean Energy PLC and EnCap LP. Also under the Shareholders' Agreement, each of the above shareholders grants to the other shareholders both "tag along rights" and a "right of first offer." The right of first offer provides that any party to the Shareholders' Agreement proposing to sell shares of Common Stock pursuant to a bona fide offer must first offer the shares to the other shareholders at the price at which such Common Stock is proposed to be sold; provided, however, that the right of first refusal shall not apply to (i) sales of Common Stock pursuant to Rule 144, (ii) pursuant to a registration statement filed with the Securities and Exchange Commission or (iii) by a shareholder to its equity owners (collectively, the "EXEMPT TRANSFERS"). The tag along rights provide that any party to the Shareholders' Agreement proposing to sell shares of Common Stock pursuant to a bona fide offer must, if requested by the other shareholders, cause the purchase, for the same purchase price and on the same terms, of a proportionate number of shares of Common Stock owned by such other shareholders; provided, however, that such tag along rights shall not apply to Exempt Transfers. The Shareholders' Agreement specifically supersedes that certain Voting Agreement dated November 25, 1997, by and among Carl Price, Don Wm. Reynolds, Energy PLC and EnCap LP. The provisions of the Shareholders' Agreement relating to voting and transfer of Common Stock may be deemed to form a group composed of the parties to the Shareholders' Agreement. Pursuant to the terms of an Agreement, dated August 14, 1998, Carl Price, EnCap LP, Energy PLC and Bargo have agreed to amend ("BY LAW AMENDMENTS") the By-Laws of the Issuer to provide that, for so long as Bargo is entitled to nominate one or more persons to the Board of Directors of the Issuer as provided in the Shareholders' Agreement, without the approval of one of the directors nominated by Bargo, the Issuer cannot take certain actions, including, without limitation, (i) incur or be liable for indebtedness other than indebtedness under the Issuer's credit facility with a commercial bank, obligations under operating leases entered into in the ordinary course of the Issuer's business, and purchase money indebtedness in an aggregate principal amount not to exceed $200,000 at any time; (ii) merge or consolidate with or into any other business entity; (iii) sell, transfer, lease, exchange, alienate or dispose of certain assets; (iv) make any expenditure or commitment or incur any obligation or enter into or engage in any transaction except in the ordinary course of business (which ordinary course of business includes the acquisition, directly or indirectly, of oil and gas properties); or (v) engage in any material transaction with any of its affiliates on terms which are less favorable to it than those which would have bigger obtainable at the time in arms-length dealing with persons other than such affiliates. ITEM 4. PURPOSE OF TRANSACTION. Item 4 has been amended and restated in its entirety as follows: Page 8 9 EnCap LP and Energy PLC hold a substantial ownership position in the Issuer in order to be able to influence the business and management of the Issuer. EnCap LP and Energy PLC, through their collective nominees on the Board of Directors, intend to actively participate in the business and management of the Issuer. Pursuant to the Merger Agreement, four of seven directors of the Issuer were designated by Bargo, EnCap LP and Energy PLC, thereby effecting a change in control of the Issuer. The parties to the Shareholders' Agreement, voting together as provided in such agreement, have the ability to control the Issuer with respect to the election of directors. Pursuant to the Note Restructuring Agreement, EnCap LP and Energy PLC have the right to approve certain transactions. Pursuant to the Bylaw Amendments, the Bargo nominees to the Board of Directors have the right to approve certain transactions. Energy PLC and EnCap LP intended to monitor and evaluate their investment in the Issuer in light of pertinent factors, including oil and gas prices, market conditions, the Issuer's performance and prospects, the trading prices of the Common Stock, conditions in the oil and gas industry and general economic conditions. Energy PLC and EnCap LP may make additional purchases of Common Stock in the future through market transactions or otherwise, maintain their current investment or dispose of some or all of the Common Stock. Except as set forth above, the reporting persons have no present plans or proposals that relate to or that would result in any of the actions specified in clauses (a) though (j) of Item 4 of Schedule 13D. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. Item 5 has been amended and restated in its entirety as follows: (a) The following describes the number of shares of Common Stock and Warrants and the percent of outstanding Common Stock owned by the reporting persons and the parties to the Shareholders' Agreement. All percentages are based on 13,696,733 shares issued and outstanding as of August 14, 1998 (subsequent to the transactions described herein) as reported in the Form 10-QSB of the Issuer for the quarter ended June 30, 1998. Amounts beneficially owned by parties to the Shareholders' Agreement are based on representations and warranties made by such persons in the Shareholders' Agreement.
Derivative Total Shares Beneficially Shares Outstanding Securities Owned ----------------- ---------- ------------------------- Name Number % Number %(2) - ----------------- --------- ----- --------- ---- Bargo ........... 4,694,859 34.3 250,000 4,944,859 35.5 EnCap PLC ....... 2,269,886 16.6 -- 2,269,886 16.6 EnCap LP. ....... 2,424,973 17.7 -- 2,424,973 17.7 EnCap Investments 4,694,859 34.3 -- 4,694,859 34.3 Mr. Price ....... 1,089,149 8.0 633,508(1) 1,722,657 12.0 Mr. Reynolds .... 753,362 5.5 -- 753,362 5.5
- ---------- (1) Includes 587,200 shares of Common Stock that may be acquired pursuant to employee stock options which may be exercised immediately. Also includes 45,788 shares of Common Stock, the maximum number of shares which Mr. Price has the right to acquire during the 60 days following August 14, 1998 under an employment agreement with the Issuer. Page 9 10 (2) In accordance with SEC regulations under Section 13(d) of the Exchange Act, the percent shown in this column for each shareholder represents the number of shares of Common Stock owned by the shareholder plus the derivative securities owned by such shareholder divided by the number of shares outstanding plus the number of derivative securities owned by such shareholder. (b) Energy PLC. Pursuant to the Investment Agreement (as defined in Item 6), Energy PLC shares the power to vote or direct the vote and to dispose or direct the disposition of 2,269,886 shares of Common Stock with EnCap Investments. In addition, all shares of Common Stock owned by Energy PLC are subject to the voting and transfer provisions of the Shareholders' Agreement. EnCap LP. Through its general partner, EnCap LP shares the power to vote or direct the vote and to dispose or direct the disposition of 2,424,973 shares of Common Stock with EnCap Investments, its general partner. In addition, all shares of Common Stock owned by EnCap LP are subject to the voting and transfer provisions of the Shareholders' Agreement. EnCap Investments. EnCap Investments shares the power to vote and direct the vote or to dispose or direct the disposition of 4,694,859 shares of Common Stock with each of Energy PLC by virtue of the Investment Agreement (as defined in Item 6) and EnCap LP as its general partner. In addition, all shares of Common Stock beneficially owned by EnCap Investments are subject to the voting and transfer provisions of the Shareholders' Agreement. EnCap Investments disclaims beneficial ownership of any shares of Common Stock owned by either EnCap LP or Energy PLC. Executive Officers and Directors. Except as otherwise described herein, to the knowledge of the EnCap Group, no executive officer or director of Energy PLC or managing director of EnCap Investments has the power to vote or direct the vote or dispose or direct the disposition of any shares of Common Stock. (c) Except as otherwise described herein or in any Exhibit filed herewith, to the knowledge of the EnCap Group, none of the persons named in response to paragraph (a) above has effected any transaction in shares of the Common Stock during the past 60 days. (d) Except as otherwise described herein, no person other than EnCap LP, EnCap Investments and Energy PLC has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares of Common Stock deemed to be beneficially owned by them. (e) It is inapplicable for the purposes herein to state the date on which a party ceased to be the owner of more than five percent (5%) of the shares of Common Stock. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SECURITIES OF THE ISSUER. Item 6 has been amended and restated in its entirety as follows: Except as otherwise described herein, there are no contracts, arrangements, understandings or relationships (legal or otherwise) between any of the individuals or entities described in Item 2 or between such persons and any other person with respect to the shares of Common Stock deemed to be beneficially owned by Energy PLC, EnCap LP and EnCap Investments. EnCap Investments, as the general partner of EnCap LP, is a party to the Agreement of Limited Partnership of EnCap LP, and is a party to that certain Investment Advisory Agreement dated February 4, Page 10 11 1994 between EnCap Investments and Energy PLC (the "INVESTMENT AGREEMENT") whereby EnCap Investments acts as an investment advisor to Energy PLC. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Item 7 has been amended and restated in its entirety as follows: Exhibit 1 - Joint Filing Agreement dated September 2, 1998 between Energy PLC, EnCap LP and EnCap Investments (filed herewith).* Exhibit 4.1 - Voting Agreement dated November 25, 1997 between B. Carl Price, Don W. Reynolds, Energy Capital Investment Company PLC and EnCap Equity 1994 Limited Partnership.** Exhibit 4.2 - Stock Purchase Warrant No. 1003 dated December 13, 1995 granted to Energy Capital Investment Company PLC.** Exhibit 4.3 - Stock Purchase Warrant No. 1005 dated April 18, 1996 granted to Energy Capital Investment Company PLC.** Exhibit 4.4 - Stock Purchase Warrant No. 1004 dated December 13, 1995 granted to EnCap Equity 1994 Limited Partnership.** Exhibit 4.5 - Stock Purchase Warrant No. 1006 dated April 18, 1996 granted to EnCap Equity 1994 Limited Partnership.** Exhibit 4.6 - Investment Advisory Agreement dated February 4, 1994.** Exhibit 4.7 - Shareholders' Agreement dated August 14, 1998 between Future Petroleum Corporation, B. Carl Price, Don Wm. Reynolds, Energy Capital Investment Company PLC, EnCap Equity 1994 Limited Partnership and Bargo Energy Resources, Ltd.* Exhibit 4.8 - Note Restructuring Agreement dated August 14, 1998 between Future Petroleum Corporation, Energy Capital Investment Company PLC and EnCap Equity 1994 Limited Partnership.* Exhibit 4.9 - Registration Rights Agreement dated August 14, 1998 between Future Petroleum Corporation, Energy Capital Investment Company PLC and EnCap Equity 1994 Limited Partnership.* Exhibit 4.10 - Pledge Agreement dated August 14, 1998 between Energy Capital Investment Company PLC and Bank of America National Trust and Savings Association.* Exhibit 4.11 - Pledge Agreement dated August 14, 1998 between EnCap Equity 1994 Limited Partnership and Bank of America National Trust and Savings Association.* Exhibit 4.12 - Master Subordination Agreement dated August 14, 1998 between Energy Capital Investment Company PLC, EnCap Equity 1994 Limited Partnership and America National Trust and Savings Association.* Exhibit 4.13 - Agreement and Plan of Merger dated August 14, 1998 between Bargo Energy Resources, Ltd, SCL-CAL Company, Future Petroleum Corporation and Future CAL-TEX.*
Page 11 12 Exhibit 4.14 - Agreement regarding Bylaws dated August 14, 1998 between B. Carl Price, Energy Capital Investment Company PLC, EnCap Equity 1994 Limited Partnership and Bargo Energy Resources, Ltd.* Exhibit 10.1 - April 1997 Agreement dated April 28, 1997 between Future Petroleum Corporation, Future Petroleum Corporation, a Texas corporation, Future Acquisition 1995, Ltd, Energy Capital Investment Company PLC and EnCap Equity 1994 Limited Partnership.** Exhibit 10.2 - Purchase and Sale Agreement dated November 25, 1997 by and among Future Petroleum Corporation, Energy Capital Investment Company PLC, EnCap Equity 1994 Limited Partnership, and Gecko Booty 1994 I Limited Partnership.** Exhibit 10.3 - First Amended and Restated Agreement of Limited Partnership of Future Acquisition 1995, Ltd. dated January 29, 1997 by and among Future Petroleum Corporation, a Texas corporation, EnCap Equity 1994 Limited Partnership and Energy Capital Investment Company PLC, as amended by the Letter Amendment dated April 18, 1996 and the First Amended and Restated Agreement of Limited Partnership dated as of April 28, 1997.** Exhibit 10.4 - Agreement of Parent dated January 29, 1997 by and among Future Petroleum Corporation, Future Acquisition 1995, Ltd., Energy Capital Investment Company PLC and EnCap Equity 1994 Limited Partnership.**
* Filed herewith. ** Incorporated by reference to the same titled exhibit to the reporting persons' Schedule 13D, dated June 29, 1998. Page 12 13 SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: September 2, 1998 ENERGY CAPITAL INVESTMENT COMPANY PLC By: /s/ Gary R. Petersen ---------------------------------- Gary R. Petersen Director Date: September 2, 1998 ENCAP EQUITY 1994 LIMITED PARTNERSHIP By: EnCap Investments L.C., General Partner /s/ Gary R. Petersen -------------------------------------- Gary R. Petersen Managing Director Date: September 2, 1998 ENCAP INVESTMENTS L.C. /s/ Gary R. Petersen -------------------------------------- Gary R. Petersen Managing Director Page 13 14 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- Exhibit 1 - Joint Filing Agreement dated September 2, 1998 between Energy PLC, EnCap LP and EnCap Investments (filed herewith).* Exhibit 4.1 - Voting Agreement dated November 25, 1997 between B. Carl Price, Don W. Reynolds, Energy Capital Investment Company PLC and EnCap Equity 1994 Limited Partnership.** Exhibit 4.2 - Stock Purchase Warrant No. 1003 dated December 13, 1995 granted to Energy Capital Investment Company PLC.** Exhibit 4.3 - Stock Purchase Warrant No. 1005 dated April 18, 1996 granted to Energy Capital Investment Company PLC.** Exhibit 4.4 - Stock Purchase Warrant No. 1004 dated December 13, 1995 granted to EnCap Equity 1994 Limited Partnership.** Exhibit 4.5 - Stock Purchase Warrant No. 1006 dated April 18, 1996 granted to EnCap Equity 1994 Limited Partnership.** Exhibit 4.6 - Investment Advisory Agreement dated February 4, 1994.** Exhibit 4.7 - Shareholders' Agreement dated August 14, 1998 between Future Petroleum Corporation, B. Carl Price, Don Wm. Reynolds, Energy Capital Investment Company PLC, EnCap Equity 1994 Limited Partnership and Bargo Energy Resources, Ltd.* Exhibit 4.8 - Note Restructuring Agreement dated August 14, 1998 between Future Petroleum Corporation, Energy Capital Investment Company PLC and EnCap Equity 1994 Limited Partnership.* Exhibit 4.9 - Registration Rights Agreement dated August 14, 1998 between Future Petroleum Corporation, Energy Capital Investment Company PLC and EnCap Equity 1994 Limited Partnership.* Exhibit 4.10 - Pledge Agreement dated August 14, 1998 between Energy Capital Investment Company PLC and Bank of America National Trust and Savings Association.* Exhibit 4.11 - Pledge Agreement dated August 14, 1998 between EnCap Equity 1994 Limited Partnership and Bank of America National Trust and Savings Association.* Exhibit 4.12 - Master Subordination Agreement dated August 14, 1998 between Energy Capital Investment Company PLC, EnCap Equity 1994 Limited Partnership and America National Trust and Savings Association.* Exhibit 4.13 - Agreement and Plan of Merger dated August 14, 1998 between Bargo Energy Resources, Ltd, SCL-CAL Company, Future Petroleum Corporation and Future CAL-TEX.* Exhibit 4.14 - Agreement regarding Bylaws dated August 14, 1998 between B. Carl Price, Energy Capital Investment Company PLC, EnCap Equity 1994 Limited Partnership and Bargo Energy Resources, Ltd.*
EX-1 2 UNDERWRITING AGREEMENT 1 EXHIBIT 1 AGREEMENT The undersigned reporting persons hereby agree that the statements filed pursuant to this Schedule 13D/A dated September 2, 1998, to which this Agreement is filed as an exhibit, are filed on behalf of each of them. Date: September 2, 1998 ENERGY CAPITAL INVESTMENT COMPANY PLC By: /s/ Gary R. Petersen ---------------------------------- Gary R. Petersen Director Date: September 2, 1998 ENCAP EQUITY 1994 LIMITED PARTNERSHIP /s/ Gary R. Petersen --------------------------------------- Gary R. Petersen Managing Director Date: September 2, 1998 ENCAP INVESTMENTS L.C. /s/ Gary R. Petersen --------------------------------------- Gary R. Petersen Managing Director EX-4.7 3 SHAREHOLDERS' AGREEMENT 1 EXHIBIT 4.7 SHAREHOLDERS' AGREEMENT THIS SHAREHOLDERS' AGREEMENT (this "Agreement") is made and entered into this 14th day of August, 1998, by and among Future Petroleum Corporation, a Utah corporation ("Future"), B. Carl Price, a Texas resident ("Price"), Don Wm. Reynolds, a Texas resident ("Reynolds"), Energy Capital Investment Company PLC, an English investment company ("Energy PLC"), EnCap Equity 1994 Limited Partnership, a Texas limited partnership ("EnCap LP"), and Bargo Energy Resources, Ltd., a Texas limited partnership ("Bargo"). RECITALS: A. Price, Reynolds, Energy PLC and EnCap LP are currently shareholders in Future. B. As of even date herewith, Bargo is being issued shares of common stock of Future, $0.01 par value per share ("Common Stock"), in connection with the consummation of a merger of a wholly-owned subsidiary of Bargo into and with a wholly-owned subsidiary of Future pursuant to that certain Agreement and Plan of Merger dated as of August 14, 1998, by and among Bargo, SCL-Cal Company, a Texas corporation, Future and Future CAL-TEX Corporation, a Texas corporation. C. As of even date herewith, Energy PLC and EnCap LP are being issued additional shares of Common Stock in consideration of their agreement to subordinate certain indebtedness owed to them by Future to a new senior credit facility. D. The parties hereto deem it in the mutual best interests to make the agreements contained herein. AGREEMENT: NOW, THEREFORE, for and in consideration of the foregoing Recitals and the mutual agreements contained herein, the sufficiency of which is hereby acknowledged and confirmed, the parties hereto, intending to be legally bound hereby, agree as follows: SECTION 1. DEFINITIONS. (a) The following defined terms shall have the respective meanings assigned to them below: (i) "Affiliate" shall mean, with respect to any person, any person directly or indirectly controlling, controlled by or under common control with, such other person. For purposes of this definition, the term "control," when used with respect to any person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" shall meanings correlative to the foregoing. 2 (ii) "Bargo Group" shall mean Bargo and any transferee of a member of the Bargo Group that executes or is required to execute an Addendum Agreement. (iii) "Designated Nominee" shall mean a person designated by a Subject Shareholder as a nominee for election to Future's Board of Directors. (iv) "EnCap Group" shall mean Energy PLC, EnCap LP and any transferee of a member of the EnCap Group that executes or is required to execute an Addendum Agreement. (v) "Market Price" of the Common Stock means the average closing prices of the Common Stock for the ten trading days preceding an Offering Notice under Section 4(b) over the principal securities exchange in which the Common Stock is traded or, if not traded on an exchange, the average closing price for ten trading days preceding such Offering Notice as reported on the NASDAQ NMS, or if not traded on an exchange or the NASDAQ NMS, the average of the closing bid and asked prices of the Common Stock for such ten day period. (vi) "Other Shareholder" shall mean, when used with respect to a Subject Shareholder, the other Subject Shareholders. (vii) "Price Group" shall mean Price, Reynolds and any transferee of a member of the Price Group that executes is required to execute an Addendum Agreement. (viii) "Purchase Price" means, for purposes of Section 4, an amount stated in dollars equal to the total value of a bona fide written offer from a person to purchase shares of Common Stock from a Shareholder determined as follows: (i) cash payable at closing shall be valued at the amount thereof, (ii) a security trading on a public market and for which published trading prices are readily available shall be valued at its closing sales price (or if a sales price is not available, at the average of its closing bid and asked prices) on the last business day preceding the date of the first Offering Notice with respect to such offer, and (iii) a security not described in clause (ii) or other property, including cash payable in one or more installments after closing, shall be valued at its fair market value on the last business day preceding the date of the first Offering Notice with respect to such offer as determined at the option of the Selling Shareholder (as defined in Section 4) either (a) by a qualified independent third party appraiser (the expense of which shall be paid by the Company) or (b) in good faith by the Board of Directors of the Company (excluding any member of the Board who is a director, officer or shareholder of the Selling Shareholder or who has the right to purchase Common Stock under this Agreement) but only if all of such Board members agree to accept the assignment to make such determination. (ix) "Shareholders" shall mean Bargo, Energy PLC, EnCap LP, Price, Reynolds and any person who executes or is required to execute an Addendum Agreement (attached hereto as Exhibit "A") with respect to the Common Stock. - 2 - 3 (x) "Subject Shareholder" shall mean either the (i) Price Group, (ii) EnCap Group or (iii) Bargo Group. (xi) "Total Voting Power" shall mean the aggregate number of votes which may be cast by holders of outstanding Voting Securities. (xii) "Voting Securities" shall mean Common Stock and any other securities of Future entitled to vote generally for the election of directors of Future. SECTION 2. AGREEMENT REGARDING BOARD REPRESENTATION. (a) The Price Group shall have three Designated Nominees, the EnCap Group shall have two Designated Nominees and the Bargo Group shall have two Designated Nominees. (b) Each Shareholder agrees (i) to use its reasonable best efforts to cause Future's Board of Directors to be composed of seven members, (ii) to use its reasonable best efforts to cause Future to nominate or cause to be nominated to the Future Board of Directors the Designated Nominees of the Other Shareholders and (iii) to vote or cause to be voted all Voting Securities beneficially owned by such Shareholder in favor of the election of the Designated Nominees of the Other Shareholders to Future's Board of Directors. For purposes of this Agreement, "beneficial ownership" or "beneficially own" shall be determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended. (c) In the event of the death, incapacity, resignation or removal of a Subject Shareholder's Designated Nominee preventing his or her serving on Future's Board of Directors, each Shareholder will promptly cause the election or appointment of another Designated Nominee of such Subject Shareholder to fill the vacancy created thereby. (d) Each Shareholder agrees to cause a designee of the Bargo Group to be elected Chairman of the Board of Directors of Future. Tim J. Goff shall serve as the Bargo Group's initial designee. In the event Mr Goff no longer serves as the Bargo Group's designee, the Bargo Group agrees that all of its subsequent replacement designees as Chairman of the Board of Directors shall be subject to the prior approval of a majority of the Board of Directors of Future, which approval shall not be unreasonably withheld, and if a replacement designee is not so approved, the Bargo Group shall designate another designee acceptable to Future's Board of Directors. SECTION 3. TAG ALONG RIGHTS. (a) If any Shareholder (for purposes of this Section 3, a "Selling Shareholder") proposes to sell, dispose of or otherwise transfer any shares (whether currently owned or hereafter acquired) of Common Stock (the shares of Common Stock proposed to be transferred being called the "Subject Shares") other than pursuant to an Exempt Transfer (as defined below), the Selling Shareholder shall refrain from effecting such transaction unless, prior to the consummation thereof, the Shareholders other than the Selling Shareholder (the "Tag Along Shareholders"), shall have been afforded the opportunity to join in such sale on the basis hereinafter described. Each of the Shareholders agrees - 3 - 4 not to transfer any shares of Common Stock indirectly in a manner that would be inconsistent with the essential intent of this Section 3. (b) Not less than 30 nor more than 120 days prior to the consummation of any proposed sale, disposition or transfer of the Subject Shares, the Selling Shareholder shall notify, or cause to be notified, each Tag Along Shareholder in writing of each such proposed transfer. Such notice ("Sale Notice") shall set forth: (i) the name of the transferor (the "Proposed Purchaser") and the number of Subject Shares proposed to be transferred, (ii) the name and address of the Proposed Purchaser, (iii) the proposed amount and form of consideration and terms and conditions of payment offered by such Proposed Purchaser and (iv) that the Proposed Purchaser has been informed of the tag along right provided for in this Section 3 and has agreed to purchase shares of Common Stock owned by such Tag Along Shareholder in accordance with the terms hereof. The tag along right may be exercised by any Tag Along Shareholder by delivery of a written notice to the Selling Shareholder proposing to sell the Subject Shares (the "Tag-Along Notice") within 30 days following its receipt of the notice specified above. The Tag-Along Notice shall state the amount of shares of Common Stock (the "Tag-Along Shares") that such Tag-Along Shareholder proposes to include in such transfer to the Proposed Purchaser. If no Tag-Along Notice is received during the 30-day period referred to above (or if such Notices do not cover all the Subject Shares proposed to be transferred), the Selling Shareholder shall have the right, for a 90-day period after the expiration of the 30-day period referred to above, to transfer the-Subject Shares specified in the Tag-Along Notice (or the remaining Subject Shares) on terms and conditions no more favorable than those stated in the Tag- Along Notice and in accordance with the provisions of this Section 3. (c) In the event that the number of shares of Common Stock that the Selling and Tag Along Shareholders propose to sell is greater than the number of shares of Common Stock that the Proposed Purchaser proposes to buy, each such Shareholder (a "Participating Shareholder") shall be permitted to sell the total number of shares of Common Stock that the Proposed Purchaser agrees to purchase multiplied by the Pro Rata Percentage (as defined) attributable to such Participating Shareholder, unless otherwise agreed by all of the Participating Shareholders. The Pro Rata Percentage shall mean a percentage equal to X divided by Y, where "X" is equal to the number of issued and outstanding shares of Common Stock currently held by such Participating Shareholder, and where "Y" is equal to the aggregate number of shares of Common Stock then owned by all of the Participating Shareholders. (d) Any such purchase shall be made on the same price and other terms and conditions as the Proposed Purchaser has offered with respect to the Subject Shares. In the event that the Proposed Purchaser does not purchase the Tag-Along Shares from the Tag Along Shareholders on the same terms and conditions as specified in the Sale Notice, then the Selling Shareholder shall not be permitted to sell any Subject Shares to the Proposed Purchaser in the proposed transfer. The closing of any purchase from the Tag Along Shareholders shall occur contemporaneously with the purchase and sale of the Subject Shares or at such other time as such Tag-Along Shareholder and the Proposed Purchaser shall agree. (e) As used herein, the term "Exempt Transfer" shall mean any sale, disposition or transfer of the Subject Shares to be effected (i) through a registration of such shares under the - 4 - 5 Securities Act of 1933, as amended (the "Securities Act"), (ii) pursuant to and in compliance with Rule 144 promulgated by the Securities and Exchange Commission pursuant to the Securities Act, or (iii) transfers by a Selling Shareholder to any person who is a partner or equity holder of such Selling Shareholder, a successor of, or an entity all of the equity interests of which are directly or indirectly owned by, the Selling Shareholder or an Affiliate of the Selling Shareholder; provided that no transfer pursuant to (iii) above shall be an Exempt Transfer unless the transferee agrees in writing to be bound by this Agreement and executes an Addendum Agreement hereto. (f) The provisions of this Section 3 shall not apply to any bona fide charge, pledge or mortgage by any Shareholder of any shares of Common Stock owned or held by it or its rights under this Agreement; provided that any disposition of any such shares of Common Stock after foreclosure of such charge, pledge or mortgage shall be governed by the provisions of this Agreement, and the purchaser or purchasers of the shares shall have entered into an Addendum Agreement with Future and the other Shareholders. SECTION 4. RIGHT OF FIRST REFUSAL. (a) No Shareholder may sell, transfer or dispose of any shares (whether currently owned or hereafter acquired) of Common Stock except in compliance with this Section 4. If any Shareholder desires to dispose of any shares of Common Stock owned or held by it pursuant to a bona fide offer, such Shareholder (for purposes of this Section 4, a "Selling Shareholder") shall offer such shares for sale at the Purchase Price to the other Shareholders, all in accordance with the following provisions of this Section 4. (i) The Selling Shareholder shall deliver a written notice ("Offering Notice") to the other Shareholders, and within 30 days from the receipt of such Offering Notice, the other Shareholders shall deliver written notice ("Reply Notice") to the Selling Shareholder. If by their Reply Notice the other Shareholders accept the offer of the Selling Shareholder, such Reply Notice shall constitute an agreement binding upon the Selling Shareholder and the other Shareholders to sell and purchase the offered shares at the Purchase Price. Once the Offering Notice is delivered, the offer by the Selling Shareholder may not be withdrawn prior to the expiration of the option of the other Shareholders, as provided in this Section 4. (ii) Any dispute concerning the calculation of the Purchase Price shall be resolved by the Board of Directors of the Company, excluding any member of the Board who is, or is a director, officer, partner or stockholder of, the Selling Shareholder or who has a right to purchase stock from the Selling Shareholder in the transaction for which the Purchase Price is being determined; provided that if all directors are excluded pursuant to the foregoing, such disputes shall be submitted to binding arbitration as provided in Exhibit B. The Purchase Price shall be paid in cash at the closing. (iii) If the other Shareholders do not accept an offer of the Selling Shareholder pursuant to the foregoing provisions of this Section 4 the Selling Shareholder shall be freed and discharged, except as herein stated, from all obligations under the terms of this Agreement other than to sell the offered shares to the purchaser and at the price and upon the - 5 - 6 terms stated in the Offering Notice given by the Selling Shareholder pursuant to this Section 4, but only if such sale shall be completed within a period of ninety days from the date of delivery of the Offering Notice to the other Shareholders. If the Selling Shareholder does not complete such sale within such ninety-day period, all the provisions of this Agreement, including the provisions of this Section 4, shall apply to any future sale or offer for sale of such shares of Common Stock owned by the Selling Shareholder. (b) Upon any involuntary disposition of a Shareholder's shares of Common Stock, such Shareholder or its representative shall send notice thereof, disclosing in full to the Company and the other Shareholders the nature and details of such involuntary disposition and offer such shares for sale at the Market Price of Common Stock to the other Shareholders, all in accordance with the following provisions of this Section 4. As used in this Section 4(b), the term "Selling Shareholder" shall mean such Shareholder or its representative, as the case may be. (i) The Selling Shareholder shall deliver an Offering Notice to the other Shareholders. Each of the other Shareholders shall have 30 days from the receipt of their respective Offering Notice to deliver a Reply Notice to the Selling Shareholder. If by their Reply Notice the other Shareholders accept the offer of the Selling Shareholder, such Reply Notice shall constitute an agreement binding upon the Selling Shareholder and the other Shareholders to sell and purchase the offered shares at the price and upon the terms stated in the Offering Notice of the Selling Shareholder. (ii) In connection with any purchase and sale of shares of Common Stock pursuant to paragraph (i) of this Section 4(b), the purchaser or purchasers shall pay the purchase price for the shares in cash at the closing. (iii) If the Shareholders do not accept the offer of the Selling Shareholder pursuant to the foregoing provisions of this Section 4(b), the Selling Shareholder shall be freed and discharged from all obligations under the terms of this Agreement except to dispose of the offered shares by involuntary disposition but only if the transferee under any such disposition shall have entered into and Addendum Agreement with the Company and the other Shareholders. If such involuntary disposition is not effected, all the provisions of this Agreement, including the provisions of this Section 4, shall apply to any future involuntary disposition of such shares of Common Stock owned by the Selling Shareholder. (c) The provisions of this Section 4 shall not apply to any bona fide charge, pledge or mortgage by any Shareholder of any shares of Common Stock owned or held by it or its rights under this Agreement; provided that any disposition of any such shares of Common Stock after foreclosure of such charge, pledge or mortgage shall be governed by the provisions of this Agreement, and the purchaser or purchasers of the shares shall have entered into an Addendum Agreement with Future and the other Shareholders. SECTION 5. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS. Each Shareholder hereby represents and warrants to the other Shareholders as follows: - 6 - 7 (a) As of the date hereof, such Shareholder is the record and beneficial owner of the number of shares of Common Stock set forth opposite its name in the attached Exhibit 4(a). (b) Such Shareholder, if not a natural person, is duly formed, validly existing and in good standing under the laws of the jurisdiction of its formation. (c) Such Shareholder has full power and authority to execute, deliver, and perform this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by such Shareholder and constitutes a valid and legally binding obligation of such Shareholder, enforceable against such Shareholder in accordance with its terms. (d) The execution, delivery, and performance by such Shareholder of this Agreement do not and will not (i) if not a natural person, be in contravention of or violate any provision of its charter or other governing documents, as amended to the date hereof, (ii) conflict with or result in a violation of any provision of, or constitute (with or without the giving of notice or the passage of time or both) a default under, or give rise (with or without the giving of notice or the passage of time or both) to any right of termination, cancellation, or acceleration under, any bond, debenture, note, mortgage, indenture, lease, contract, agreement, or other instrument or obligation to which such Shareholder is a party or by which such Shareholder or any of its properties may be bound or (iii) violate any applicable law, rule or regulation binding upon such Shareholder. (e) No consent, approval, order, or authorization of, or declaration, filing, or registration with, any court or governmental agency or of any third party is required to be obtained or made by such Shareholder in connection with the execution, delivery, or performance by such Shareholder of this Agreement. SECTION 6. SURVIVAL OF PROVISIONS. All representations, warranties and covenants made by each party hereto in this Agreement or any other document contemplated hereby shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement or such other document, regardless of any investigation made by or on behalf of any such party. SECTION 7. ENTIRE AGREEMENT. This Agreement and the other documents contemplated hereunder contain the entire understanding of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, understandings, negotiations, and discussions among the parties with respect to such subject matter, including, without limitation that certain Voting Agreement dated November 25, 1997, by and between Future, Energy PLC, EnCap LP, Carl Price and Don Wm. Reynolds and that certain Purchase and Sale Agreement dated November 25, 1997, by and among Future, Energy PLC, EnCap LP and Gecko Booty 1994 I Limited Partnership. Neither Future nor any Shareholder shall be a party to any agreement involving any holder of capital stock of Future, as such, unless Future and all such Shareholders are also parties to that agreement, except with the written consent of Future and all such Shareholders who are not parties to such an agreement. - 7 - 8 SECTION 8. AMENDMENTS. This Agreement may be amended, modified, supplemented, restated or discharged only by an instrument in writing signed by each of the Subject Shareholders hereto. For purposes of this section, a Subject Shareholder shall be deemed to have properly executed an amendment hereto upon the consent of the holders of a majority of the then outstanding Voting Securities held by the members of such Subject Shareholder. SECTION 9. NOTICES. All notices and other communications required under this Agreement shall (unless otherwise specifically provided herein) be in writing and be delivered personally, by recognized commercial courier or delivery service (which provides a receipt), by telecopier (with receipt acknowledged), or by registered or certified mail (postage prepaid), at the following addresses: If to Bargo: c/o Bargo Energy Company 700 Louisiana, Suite 3700 Houston, Texas 77002 Attention: Tim J. Goff Fax No.: 713-236-9799 If to B. Carl Price or Don Wm. Reynolds: c/o Future Petroleum Corporation 2351 West Northwest Highway Suite 2130 Dallas, Texas 75220 Attention: Carl Price Fax No.: 214-350-8382 If to Energy PLC or EnCap LP: c/o EnCap Investments, L.C. 1100 Louisiana, Suite 3150 Houston, Texas 77002 Attention: Gary R. Petersen or Colin Nisbeth Fax No.: 713-659-6130 and shall be considered delivered on the date of receipt. A Shareholder may specify as its proper address any other post office address within the continental limits of the United States by giving notice to the other Shareholders, in the manner provided in this Section, at least ten (10) days prior to the effective date of such change of address. Any party hereto may designate a different address by notice to the other parties. - 8 - 9 SECTION 10. TERMINATION. This Agreement shall terminate upon the earlier of (i) the written consent of each of the Shareholders, (ii) when the Shareholders collectively hold an aggregate of less than 30%, or when, with respect to a Subject Shareholder, such Subject Shareholder owns less than 5% of the issued and outstanding shares of Common Stock (and this Agreement shall be terminated solely with respect to such Subject Shareholder but shall remain in effect as to those Subject Shareholders owning 5% or more of the issued and outstanding shares of Common Stock). SECTION 11. POWER OF ATTORNEY. For the purpose of executing an Addendum Agreement, all the Shareholders hereby appoint Future as their agent and attorney to execute such Addendum Agreement on their behalf and expressly bind themselves to the Addendum Agreement by Future's execution of that Agreement without further action on their part. SECTION 12. NO WAIVER. The failure of any party hereto to insist upon strict performance of a covenant hereunder or of any obligation hereunder, irrespective of the length of time for which such failure continues, shall not be a waiver of such party's right to demand strict compliance in the future. No consent or waiver, express or implied, to or of any breach or default in the performance of any obligation hereunder shall constitute a consent or waiver to or of any other breach or default in the performance of the same or any other obligation hereunder. SECTION 13. CHOICE OF LAW. This Agreement shall be governed by the laws of the State of Utah. SECTION 14. SUCCESSORS AND ASSIGNS. This Agreement shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. SECTION 15. REFERENCES AND CONSTRUCTION. (a) For purposes of this Agreement, whenever any Shareholder is required to offer shares of Common Stock to the other Shareholders pursuant to this Agreement, such offer shall be deemed to be made to the other Shareholders pro rata in accordance with their respective holdings of shares of Common Stock at the time of the offer, or in such other proportions as may be agreed upon by all Shareholders electing to accept the offer who, pursuant to this agreement, would purchase more or less than their pro rata share. Except as may otherwise be agreed, each member of the group to whom such shares are so offered shall have the right to purchase that proportion of the number of such offered shares that the number of shares of Common Stock owned by such member bears to - 9 - 10 the total number of shares of Common Stock owned by the members of the group electing to accept the offer. (b) The provisions of Sections 3 and 4 shall not apply to transactions between members of a group, so that transactions between members of the Price Group shall not be subject to Sections 3 and 4, transactions between members of the EnCap Group shall not be subject to Sections 3 and 4 and transactions between members of the Bargo Group shall not be subject to Sections 3 and 4 and any shares transferred pursuant to such transactions shall remain subject to this Agreement. The parties hereto consent to the pledge of shares of Common Stock pursuant to those certain Pledge Agreements (stock) by Bargo, Energy PLC and EnCap LP, B. Carl Price and Don Wm. Reynolds, respectively, in favor of Bank of America National Trust and Savings Association and agree that Sections 3 and 4 hereof shall not be applicable to such pledges or any foreclosures or resales thereunder. (c) All references in this Agreement to articles, sections, subsections and other subdivisions refer to corresponding articles, sections, subsections and other subdivisions of this Agreement unless expressly provided otherwise. (d) Titles appearing at the beginning of any of such subdivisions are for convenience only and shall not constitute part of such subdivisions and shall be disregarded in construing the language contained in such subdivisions. (e) The words "this Agreement", "this instrument", "herein", "hereof", "hereby", hereunder" and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. (f) Words in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires. (g) Unless the context otherwise requires or unless otherwise provided herein, the terms defined in this Agreement which refer to a particular agreement, instrument or document also refer to and include all renewals, extensions, modifications, amendments or restatements of such agreement, instrument or document, provided that nothing contained in this subsection shall be construed to authorize such renewal, extension, modification, amendment or restatement. (h) Examples shall not be construed to limit, expressly or by implication, the matter they illustrate. (i) The word "or" is not exclusive and the word "includes" and its derivatives means "includes, but is not limited to" and corresponding derivative expressions. (j) No consideration shall be given to the fact or presumption that one party had a greater or lesser hand in drafting this Agreement. (k) All references herein to "$" or "dollars" shall refer to U.S. Dollars. - 10 - 11 SECTION 16. ENDORSEMENTS. The certificate or certificates representing the Voting Securities now owned or hereafter acquired by the Shareholders shall have conspicuously stamped, printed, or typed on the face or back thereof a legend substantially in the following form: "The shares represented hereby are subject to that certain Shareholders' Agreement dated as of August 14, 1998, by and among the Company, B. Carl Price, Don Wm. Reynolds, Energy Capital Investment Company PLC, and EnCap Equity 1994 Limited Partnership and Bargo Energy Resources, Ltd. A copy of the Shareholders' Agreement and all applicable amendments thereto will be furnished by the Company to the holder hereof without charge upon written request to the Company at its principal place of business or registered office." SECTION 17. SPECIFIC PERFORMANCE. Each of the parties hereto recognizes that any breach of the terms of this Agreement may give rise to irreparable harm for which money damages would not be an adequate remedy, and accordingly agree that, in addition to other remedies, any nonbreaching party shall be entitled to enforce the terms of this Agreement by a decree of specific performance without the necessity of proving the inadequacy as a remedy of money damages. SECTION 18. COUNTERPARTS. This Agreement may be executed in multiple counterparts, with each such counterpart constituting an original and all of such counterparts constituting but one and the same agreement. - 11 - 12 EXHIBIT 4(a) -----------
Number of Shares Shareholder of Common Stock B. Carl Price..................................................... 1,089,149 Don Wm. Reynolds.................................................. 753,362 Energy Capital Investment Company PLC............................. 2,269,886 EnCap Equity 1994 Limited Partnership............................. 2,424,973 Bargo Energy Resources, Ltd....................................... 4,694,859
- 12 - EX-4.8 4 NOTE RESTRUCTURING AGREEMENT 1 EXHIBIT 4.8 NOTE RESTRUCTURING AGREEMENT THIS NOTE RESTRUCTURING AGREEMENT (this "AGREEMENT") is made and entered into this 14th day of August, 1998, by and among Future Petroleum Corporation, a Utah corporation ("FUTURE"), Energy Capital Investment Company PLC, an English investment company ("ECIC"), and EnCap Equity 1994 Limited Partnership, a Texas limited partnership ("ENCAP LP"). RECITALS: A. Reference is herein made to (i) that certain Purchase and Sale Agreement dated November 27, 1997, by and among Future, ECIC, EnCap LP and Gecko Booty 1994 I Limited Partnership, a Texas limited partnership ("GECKO BOOTY"), as amended by that certain May 1998 Amendment to Purchase and Sale Agreement dated as of May 1, 1998, by and among Future, ECIC and EnCap LP (the "NOVEMBER 1997 PURCHASE AGREEMENT"), and (ii) that certain Purchase and Sale Agreement dated May 1, 1998, by and among Future, ECIC, EnCap and NCI Enterprises, Inc., a Texas corporation (the "MAY 1998 PURCHASE AGREEMENT"). B. Under the November 1997 Purchase Agreement, (i) each of ECIC and EnCap LP transferred and assigned to a subsidiary of Future certain limited partnership interests described more particularly therein in exchange for (x) shares Common Stock (as defined herein) and a promissory note executed by Future in the principal amount of $3,123,041, in the instance of ECIC (the "ECIC NOTE"), and (y) shares of Common Stock and a promissory note executed by Future in the principal amount of $3,301,959 (the "ENCAP LP NOTE"), in the instance of EnCap LP, and (ii) Gecko Booty transferred and assigned to a subsidiary of Future certain oil and gas properties described more particularly therein for a promissory note executed by Future in the principal amount of $175,000 (the "GECKO BOOTY NOTE"). C. Under the May 1997 Purchase Agreement, each of ECIC and EnCap LP transferred and assigned to a subsidiary of Future certain limited partnership interests specified more particularly therein in exchange for (i) shares of Common Stock and a promissory note executed by Future in the principal amount of $247,653.12, in the instance of ECIC, and (ii) shares of Common Stock and a promissory note executed by Future in the principal amount of $412,346.88. At the time of the closing of the transactions under the May 1997 Purchase Agreement, Future executed and delivered (a) to ECIC, a Renewal Promissory Note (the "ECIC MAY 1998 RENEWAL NOTE") in the principal amount of $3,370,694.12 (which note, by its terms, constituted a renewal, extension and increase of the ECIC Note) and (b) to EnCap LP, a Renewal Promissory Note (the "ENCAP LP MAY 1998 RENEWAL NOTE")in the principal amount of $3,714,305.88 (which note, by its terms, constituted a renewal, extension and increase of the EnCap LP Note). D. Future proposes to execute and deliver that certain Agreement and Plan of Merger of even date herewith by and among Future, Bargo Energy Resources, Ltd., a Texas -1- 2 limited partnership, SCL-CAL Company, a Texas corporation, and a wholly-owned subsidiary of Future (the "MERGER AGREEMENT"). Future also propose to execute and deliver that certain Credit Agreement of even date herewith (the "SENIOR CREDIT FACILITY") by and between Future and Bank of America National Trust and Savings Association, a national banking association ("SENIOR LENDER"). E. In connection with the transactions contemplated under the immediately preceding paragraph, it is contemplated that (i) ECIC and EnCap LP will subordinate the indebtedness owed to them by Future to the Senior Credit Facility, (ii) Future, ECIC and EnCap LP will revise and restructure the indebtedness owed by Future to ECIC, EnCap LP and Gecko Booty and (iii) that Future will issue additional shares of Common Stock to ECIC and EnCap LP, all of which actions are intended to qualify as a recapitalization under Section 368(a)(1)(E) of the Internal Revenue Code. F. The parties hereto deem it in their mutual best interests to enter into this Agreement to reflect their agreements with respect to the matters described above. AGREEMENT: NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual covenants and agreements contained herein, the parties hereto do hereby agree as follows: ARTICLE I DEFINITIONS, REFERENCES AND CONSTRUCTION SECTION 1.1. CERTAIN DEFINED TERMS. When used in this Agreement, the following terms shall have the respective meanings assigned to them in this Section 1.1 or in the section, subsections or other subdivisions referred to below: "ADDITIONAL SECURITY DOCUMENTS" shall mean the agreements, documents and other instruments listed in Exhibit 1.1--Additional Security Documents. "AFFILIATE" shall mean, when used with respect to another person, any person directly or indirectly controlling, controlled by or under common control with such other person. "AGREEMENT" shall mean this Note Restructuring Agreement, as hereafter changed, amended or modified in accordance with the terms hereof. "AMENDED RENEWAL NOTES" shall mean the ECIC Amended Renewal Note and the EnCap LP Amended Renewal Note. "BMC LP" shall mean BMC Development No. 1 Limited Partnership, a Texas limited partnership. -2- 3 "CHANGE OF CONTROL" shall mean the occurrence of either of the following events: (a) any person or two or more persons acting as a group shall acquire beneficial ownership (within the meaning of Rule 13d-3 of the Commission under the Exchange Act, and including holding proxies to vote for the election of directors other than proxies held by Future's management or their designees to be voted in favor of persons nominated by Future's Board of Directors) of 33% or more of the outstanding voting securities of Future, measured by voting power (including both common stock and any preferred stock or other equity securities entitling the holders thereof to vote with the holders of common stock in elections for directors of Future), exclusive of the issuance of shares of Common Stock contemplated under this Agreement and the Merger Agreement, or (b) one-third or more of the directors of Future shall consist of persons not nominated by Future's Board of Directors (not including as Board nominees any directors which the Board is obligated to nominate pursuant to shareholders agreements, voting trust arrangements or similar arrangements, exclusive of the Shareholders' Agreement). "CLOSING DATE" shall mean the date on which all of the transactions under the Merger Agreement and the Senior Credit Facility are to be consummated. "CLOSING SHARES" shall mean the shares of Common Stock issued to ECIC and EnCap LP under Section 2.2(b) and Section 2.2(c), respectively. "COLLATERAL" shall mean all property of any kind which is subject to a Lien in favor of ECIC or EnCap LP or which, under the terms of any Amended Security Document, is purported to be subject to such a Lien. "COMMISSION" shall mean the Securities and Exchange Commission (or any successor body thereto). "COMMON STOCK" shall mean shares of common stock of Future, $0.01 par value per share, and any shares issued or issuable with respect thereto by way of a stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization. "CONSOLIDATED" refers to the consolidation of any person, in accordance with GAAP, with its properly consolidated subsidiaries. References herein to a person's Consolidated financial statements, financial position, financial condition, liabilities, etc. refer to the consolidated financial statements, financial position, financial condition, liabilities, etc. of such person and its properly consolidated subsidiaries. "DEFAULT" shall mean an Event of Default and any default, event or condition which would, with the giving of any requisite notices and the passage of any requisite periods of time, constitute an Event of Default. "ECIC" shall have the meaning assigned to such term in the introductory paragraph to this Agreement. -3- 4 "ECIC AMENDED RENEWAL NOTE" shall mean the ECIC May 1998 Renewal Note, as amended by the ECIC Amendment to Note. "ECIC AMENDMENT TO NOTE" shall have the meaning assigned to such term in Section 2.1(f). "ECIC MAY 1998 RENEWAL NOTE" shall have the meaning assigned to such term in Paragraph C of the Recitals hereto. "ENCAP LP" shall have the meaning assigned to such term in the introductory paragraph to this Agreement. "ENCAP LP AMENDED RENEWAL NOTE" shall mean the EnCap LP May 1998 Renewal Note, as amended by the EnCap LP Amendment to Note. "ENCAP LP AMENDMENT TO NOTE" shall have the meaning assigned to such term in Section 2.1(g). "ENCAP LP MAY 1998 RENEWAL NOTE" shall have the meaning assigned to such term in Paragraph C of the Recitals hereto. "ENGINEERING REPORT" shall mean the engineering report referenced in Section 6.2(d). "EVENT OF DEFAULT" shall have the meaning assigned to such term in Section 8.1. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended, and all rules and regulations promulgated under such Act. "FISCAL QUARTER" shall mean a three-month period ending on March 31, June 30, September 30 and December 31 of any year. "FISCAL YEAR" shall mean the twelve-month period ending on December 31 of any year. "FUTURE" shall have the meaning assigned to such term in the introductory paragraph to this Agreement. "FUTURE CAL-TEX CORPORATION" shall mean Future CAL-TEX Corporation, a Texas corporation. "FUTURE LP" shall mean Future Acquisition 1995, Ltd., a Texas limited partnership. "FUTURE NEVADA" shall mean Future Energy Corporation, a Nevada corporation. -4- 5 "FUTURE TEXAS" shall mean Future Petroleum Corporation, a Texas corporation. "GAAP" shall mean those generally accepted accounting principles and practices which are recognized as such by the Financial Accounting Standards Board (or any generally recognized successor). "GECKO BOOTY"shall have the meaning assigned to such term in Paragraph A of the Recitals hereto. "GECKO BOOTY NOTE" shall have the meaning assigned to such term in Paragraph B of the Recitals hereto. "INDEBTEDNESS" of any person means Liabilities in any of the following categories: (a) Liabilities for borrowed money; (b) Liabilities constituting an obligation to pay the deferred purchase price of property or services; (c) Liabilities evidenced by a bond, debenture, note or similar instrument; (d) Liabilities which would under GAAP be shown on such person's balance sheet as a liability, and is payable more than one year from the date of creation thereof (other than reserves for taxes and reserves for contingent obligations); (e) Liabilities arising under futures contracts, forward contracts, swap, cap or collar contracts, option contracts, hedging contracts, other derivative contracts, or similar agreements; (f) Liabilities constituting principal under leases capitalized in accordance with GAAP; (g) Liabilities arising under conditional sales or other title retention agreements; (h) Liabilities owing under direct or indirect guaranties of Liabilities of any other person or constituting obligations to purchase or acquire or to otherwise protect or insure a creditor against loss in respect of Liabilities of any other person (such as obligations under working capital maintenance agreements, agreements to keep-well, or agreements to purchase Liabilities, assets, goods, securities or services), but excluding endorsements in the ordinary course of business of negotiable instruments in the course of collection; (i) Liabilities (for example, repurchase agreements) consisting of an obligation to purchase securities or other property, if such Liabilities arises out of or in connection with the sale of the same or similar securities or property; (j) Liabilities with respect to letters of credit or applications or reimbursement agreements therefor; (k) Liabilities with respect to payments received in consideration of oil, gas, or other minerals yet to be acquired or produced at the time of payment (including obligations under "take-or-pay" contracts to deliver gas in return for payments already received and the undischarged balance of any production payment created by such person or for the creation of which such person directly or indirectly received payment), or (l) Liabilities with respect to other obligations to deliver goods or services in consideration of advance payments therefor; provided, however, that the "Indebtedness" of any person shall not include Liabilities that were incurred by such person on ordinary trade terms to vendors, suppliers, or other persons providing goods and services for use by such person in the ordinary course of its business, unless and until such Liabilities are outstanding more than 90 days past the original invoice or billing date therefor. "INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986, as amended. -5- 6 "LIABILITIES" shall mean, as to any person, all indebtedness, liabilities and obligations of such person, whether matured or unmatured, liquidated or unliquidated, primary or secondary, direct or absolute, fixed or contingent, and whether or not required to be considered pursuant to GAAP. "LIEN" shall mean, with respect to any property or assets, any right or interest therein of a creditor to secure Liabilities owed to such creditor or any other arrangement with such creditor which provides for the payment of such Liabilities out of such property or assets or which allows him to have such Liabilities satisfied out of such property or assets prior to the general creditors of any owner thereof, including any lien, mortgage, security interest, pledge, deposit, production payment, rights of a vendor under any title retention or conditional sale Agreement or lease substantially equivalent thereto, tax lien, mechanic's or materialman's lien, or any other charge or encumbrance for security purposes, whether arising by law or Agreement or otherwise, but excluding any right of offset which arises without Agreement in the ordinary course of business. "Lien" shall also mean any filed financing statement, any registration of a pledge (such as with an issuer of uncertificated securities), or any other arrangement or action which would serve to perfect a Lien described in the preceding sentence, regardless of whether such financing statement is filed, such registration is made, or such arrangement or action is undertaken before or after such Lien exists. "MATERIAL ADVERSE CHANGE" means a material and adverse change to (a) Future's and its Subsidiaries' Consolidated financial condition, (b) the operations or properties of Future and its Subsidiaries, considered as a whole, (c) Future's ability to timely pay the Obligations, or (d) the enforceability of the material terms of this Agreement or any other Note Document. "MAY 1998 PURCHASE AGREEMENT" shall have the meaning assigned to such term in Paragraph A of the Recitals hereto. "MERGER AGREEMENT" shall have the meaning assigned to such term in Paragraph D of the Recitals hereto. "NCI-SHAWNEE LP" shall mean NCI-Shawnee Limited Partnership, a Texas limited partnership. "NOTE DOCUMENT" shall mean this Agreement, the Amended Renewal Notes, the Security Documents, the security and other similar documents previously delivered by Future or its Subsidiaries under the Purchase Agreements and all other agreements, certificates, documents, commitments and writings at any time delivered in connection herewith or therewith. "NOVEMBER 1997 PURCHASE AGREEMENT" shall have the meaning assigned to such term in Paragraph A of the Recitals hereto. -6- 7 "OBLIGATIONS" shall mean all Liabilities owing ECIC and EnCap LP under or pursuant to the this Agreement, the Amended Renewal Notes or any of the other Note Documents. "PDP RESERVES" shall mean Proved Reserves which are categorized as both "Developed" and "Producing" in the Definitions for Oil and Gas Reserves promulgated by the Society of Petroleum Engineers (or any generally recognized successor) as in effect at the time in question. "PDP RESERVES TO DEBT RATIO" shall mean the ratio obtained by dividing (a) the pre-income tax value of projected net revenues attributable to the PDP Reserves of Future set forth in the most recent Engineering Report utilizing a 10% discount rate, by (b) Future's total outstanding Indebtedness. "PERMITTED INVESTMENT" shall mean any investment, loan, advance, guaranty or capital contribution by Future or any Subsidiary in any of the following: (a) properties or assets to be used in the ordinary course of business of Future and its Subsidiaries; (b) current assets arising from the sale of goods and services in the ordinary course of business of Future and its Subsidiaries; (c) investments in one or more of Future's Subsidiaries or in any person that concurrently with such investment becomes a Subsidiary; (d) any marketable obligation maturing not later than one year after the date of acquisition therefor, issued or guaranteed by the United States of America or by any agency of the United States of America which has the full faith and credit of the United States of America; (e) commercial paper which is given the highest rating by a credit rating agency of recognized national standing and maturing not more than 270 days from the date of creation thereof; and (f) any demand deposit or time deposit (including certificates of deposit and money market or sweep accounts) with a commercial bank or trust company organized and doing business under the laws of the United States of America or any state thereof which has capital, surplus and undivided profits of at least $250,000,000, provided that such deposit must be either payable on demand or mature not more than twelve months from the date of investment therein. "PURCHASE AGREEMENTS" shall mean the November 1997 Purchase Agreement and the May 1998 Purchase Agreement. "RESTRICTED PAYMENT" shall mean any Distribution (as defined below) in respect of Future or any Subsidiary thereof (other than on account of capital stock or other equity interests of a Subsidiary owned legally or beneficially by Future or another Subsidiary), including any Distribution resulting in the acquisition by Future of securities that would constitute treasury stock. As used in this definition, "DISTRIBUTION" shall mean, in respect of any corporation, partnership or other business entity (a) dividends or other distributions or payments on capital stock or other equity interest of such corporation, partnership or other business entity (except distributions in such stock or other equity interest) and (b) the redemption or acquisition of such stock or other equity interests or of warrants, rights or other options to purchase such stock or other equity interests (except when solely in exchange for such stock or other equity interests). -7- 8 "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and all rules and regulations under such Act. "SECURITY DOCUMENTS" shall have the meaning assigned to such term in the November 1997 Purchase Agreement plus the Additional Security Documents. "SENIOR CREDIT FACILITY" shall have the meaning assigned to such term in Paragraph D of the Recitals hereto. "SENIOR LENDER" shall have the meaning assigned to such term in Paragraph D of the Recitals hereto. "SHAREHOLDERS' AGREEMENT" shall have the meaning assigned to such term in the Merger Agreement. "SUBORDINATION AGREEMENT" shall have the meaning assigned to such term in Section 2.1(b). "SUBSIDIARY" shall mean, with respect to any person, any corporation, association, partnership, joint venture, or other business or corporate entity, enterprise or organization which is directly or indirectly (through one or more intermediaries) controlled by or owned fifty percent or more by such person SECTION 1.2. REFERENCES AND CONSTRUCTION. (a) All references in this Agreement to articles, sections, subsections and other subdivisions refer to corresponding articles, sections, subsections and other subdivisions of this Agreement unless expressly provided otherwise. (b) Titles appearing at the beginning of any of such subdivisions are for convenience only and shall not constitute part of such subdivisions and shall be disregarded in construing the language contained in such subdivisions. (c) The words "this Agreement", "this instrument", "herein", "hereof", "hereby", "hereunder" and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. (d) Words in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires. Pronouns in masculine, feminine and neuter genders shall be construed to include any other gender. (e) Unless the context otherwise requires or unless otherwise provided herein, the terms defined in this Agreement which refer to a particular Agreement, instrument or -8- 9 document also refer to and include all renewals, extensions, modifications, amendments or restatements of such Agreement, instrument or document, provided that nothing contained in this subsection shall be construed to authorize such renewal, extension, modification, amendment or restatement. (f) Examples shall not be construed to limit, expressly or by implication, the matter they illustrate. (g) The word "or" is not exclusive and the word "includes" and its derivatives means "includes, but is not limited to" and corresponding derivative expressions. (h) No consideration shall be given to the fact or presumption that one party had a greater or lesser hand in drafting this Agreement. (i) All references herein to "$" or "dollars" shall refer to U.S. Dollars. (j) Exhibits 1.1 -- Additional Security Documents, 2.1(b), 2.1(f), 2.1(g) and 2.2(d)(iii) are attached hereto. Each such Exhibit is incorporated herein by reference for all purposes and references to this Agreement shall also include such Exhibit unless the context in which used shall otherwise require. ARTICLE II CERTAIN AGREEMENTS IN RESPECT OF THE FUTURE INDEBTEDNESS SECTION 2.1. CERTAIN AGREEMENTS. On the Closing Date and subject to Section 2.2 and the other terms and provisions hereof: (a) ECIC and EnCap LP agree to consent to the execution and delivery by Future of the Merger Agreement and the Senior Credit Facility. (b) ECIC and EnCap LP agree to execute and deliver that certain Master Subordination Agreement by and among ECIC, EnCap LP and Senior Lender dated as of even date herewith, substantially in the form of such document attached hereto as Exhibit 2.1(b) in all material respects (the "SUBORDINATION AGREEMENT"). (c) Future agrees to pay in full the Gecko Booty Note. (d) Future agrees to make a payment of principal on the ECIC May 1998 Renewal Note in the amount of $754,065.03. (e) Future agrees to make a payment of principal on the EnCap LP May 1998 Renewal Note in the amount of $830,934.97. -9- 10 (f) Future agrees to execute and deliver to ECIC that certain Amendment to ECIC Renewal Note substantially in the form of such document attached hereto as Exhibit 2.1(f) in all material respects (the "ECIC AMENDMENT TO NOTE"). (g) Future agrees to execute and deliver to EnCap LP that certain Amendment to Renewal Note substantially in the form of such document attached hereto as Exhibit 2.1(g) in all material respects (the "ENCAP AMENDMENT TO NOTE"). (h) Future agrees to execute and deliver (or cause to be executed and delivered) to ECIC and EnCap LP the Additional Security Documents. (i) Future agrees to issue the Closing Shares as provided in Section 2.2. SECTION 2.2. CERTAIN CONDITIONS PRECEDENT. (a) The obligations of the parties under Section 2.1 and elsewhere herein shall be subject to the following conditions precedent: (i) The Merger Agreement shall have been executed and delivered by the parties thereto and the transactions to be consummated thereunder at closing shall have been consummated. (ii) The Senior Credit Facility shall have been executed and delivered by the Senior Lender and the transactions to be consummated thereunder at closing shall have been consummated. (iii) The Subordination Agreement shall have been executed and delivered by the Senior Lender. (b) The obligations of ECIC under Section 2.1 and elsewhere herein shall be further subject to the receipt by it on the Closing Date of a stock certificate or certificates evidencing 1,373,077 shares of Common Stock. (c) The obligations of EnCap LP under Section 2.1 and elsewhere herein shall be further subject to the receipt by it on the Closing Date of a stock certificate or certificates evidencing 1,471,783 shares of Common Stock. (d) The obligations of ECIC and EnCap LP under Section 2.1 and elsewhere herein shall be further subject to the receipt by it on the Closing Date of the following: (i) Certificates of existence and good standing with respect to Future, Future-CAL, Future Texas, Future Nevada, Future LP, BMC LP and NCI-Shawnee LP. -10- 11 (ii) Copies certified by the Board of Directors or General Partners, as applicable, of resolutions adopted by Future, Future Texas, Future Nevada, Future LP, BMC LP, NCI-Shawnee LP and Future CAL-TEX, as necessary, with respect to the execution, delivery and performance of this Agreement, the ECIC Amendment to Note, the EnCap LP Amendment to Note and the Additional Security Documents. (iii) Opinion of Kruse, Landa & Maycock LLP reasonably acceptable to ECIC and EnCap LP dated the Closing Date and covering the matters described in Exhibit 2.2(d)(iii). SECTION 2.3. AGREEMENT REGARDING TREATMENT OF TRANSACTION. The parties hereto agree that the transactions contemplated by this Agreement shall be treated for U.S. federal income tax purposes as a "recapitalization" of Future under Section 368(a)(1)(E) of the Internal Revenue Code, and as an exchange of the ECIC May 1998 Renewal Note for the ECIC Amended Renewal Note and of the EnCap LP May 1998 Renewal Note for the EnCap Amended Renewal Note plus the Closing Shares, and that all indebtedness involved in such exchange shall be treated as "securities" under Section 354 of the Internal Revenue Code to the extent permitted by applicable law. ARTICLE III REPRESENTATIONS AND WARRANTIES OF ECIC AND ENCAP LP Each of ECIC and EnCap LP hereby severally and as to itself represents and warrants to Future as follows: SECTION 3.1. ORGANIZATION AND EXISTENCE. It is duly formed and validly existing under the laws of the jurisdiction of its formation. SECTION 3.2. POWER AND AUTHORITY. It has all requisite power and authority to execute, deliver, and perform this Agreement and each other Agreement, instrument, or document executed or to be executed by it in connection with the transactions contemplated hereby to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution, delivery, and performance by it of this Agreement and each other Agreement, instrument, or document executed or to be executed by it in connection with the transactions contemplated hereby to which it is a party, and the consummation by it of the transactions contemplated hereby and thereby, have been duly and validly authorized by all necessary action on its part. SECTION 3.3. VALID AND BINDING AGREEMENT. This Agreement has been duly executed and delivered by it and constitutes, and each other Agreement, instrument, or document executed or to be executed by it in connection with the transactions contemplated hereby to which it is a party has been, or when executed will be, duly executed and delivered by it and -11- 12 constitutes, or when executed and delivered will constitute, a valid and legally binding obligation of it, enforceable against it in accordance with their respective terms, except that such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally and (b) equitable principles which may limit the availability of certain equitable remedies (such as specific performance) in certain instances. SECTION 3.4. NON-CONTRAVENTION. Neither the execution, delivery, and performance by it of this Agreement and each other Agreement, instrument, or document executed or to be executed by it in connection with the transactions contemplated hereby to which it is a party nor the consummation by it of the transactions contemplated hereby and thereby do and will (a) conflict with or result in a violation of any provision of its partnership Agreement or other governing instruments, (b) conflict with or result in a violation of any provision of, or constitute (with or without the giving of notice or the passage of time or both) a default under, or give rise (with or without the giving of notice or the passage of time or both) to any right of termination, cancellation, or acceleration under, any bond, debenture, note, mortgage, indenture, lease, contract, Agreement, or other instrument or obligation to which it is a party or by which it or any of its properties may be bound, (c) result in the creation or imposition of any lien or other encumbrance upon its properties, or (d) violate any applicable law, rule or regulation binding upon it. SECTION 3.5. APPROVALS. No consent, approval, order, or authorization of, or declaration, filing, or registration with, any court or governmental agency or of any third party is required to be obtained or made by it in connection with the execution, delivery, or performance by it of this Agreement and each other Agreement, instrument, or document executed or to be executed by it in connection with the transactions contemplated hereby to which it is a party or the consummation by it of the transactions contemplated hereby and thereby. SECTION 3.6. PENDING LITIGATION. There are no pending suits, actions, or other proceedings in which it is a party which affect the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. SECTION 3.7. INVESTMENT EXPERIENCE. It is able to bear the economic risks of its investment in the Closing Shares, and consequently without limiting the generality of the foregoing, it is able to hold the Closing Shares acquired pursuant to the terms hereof for an indefinite period of time and has a sufficient net worth to sustain a loss of all or a portion of its investment in the Closing Shares in the event such loss should occur. It has such knowledge and experience in financial and business matters that it is capable of evaluating the risks and merits of an investment in the Closing Shares. SECTION 3.8. INVESTMENT INTENT. It is acquiring the Closing Shares for its own account for investment and not with view to the distribution, resale, subdivision, or -12- 13 fractionalization thereof, and it has no present plans to enter into any contract, undertaking, Agreement, or arrangement for any such distribution, resale, subdivision, or fractionalization. SECTION 3.9. RESTRICTED SECURITIES. It is aware that it must bear the economic risk of its investment in the Closing Shares for an indefinite period of time because the Closing Shares have not been registered under the Securities Act or under the securities laws of any state of the United States, and therefore cannot be sold unless they are subsequently registered under the Securities Act and any applicable state securities laws or unless an exemption from such registration is available. It also recognizes that no U.S. federal or state agency has passed upon the Closing Shares to be issued hereunder to date or made any finding or determination as to the fairness of an investment in such shares. It agrees that the Closing Shares acquired by it hereunder shall not be sold, assigned, pledged, hypothecated or otherwise transferred unless they are registered under the Securities Act and applicable state securities laws or unless an exemption from such registration is available. SECTION 3.10. LEGEND. It acknowledges that a legend in substantially the following form will be placed on any certificate(s) evidencing the Closing Shares issued hereunder: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE "RESTRICTED SECURITIES" WITHIN THE MEANING OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLYING WITH RULE 144 IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OR OTHER COMPLIANCE WITH THE SECURITIES ACT." It further understands that Future may refuse to register transfer of the Closing Shares issued hereunder in the absence of compliance with Rule 144 unless it furnishes Future with a "no-action" or interpretive letter from the Commission or an opinion of counsel reasonably acceptable to Future stating that the transfer may be effected without registration under the Securities Act. SECTION 3.11. ACCURACY OF INFORMATION. All information which such it has provided to Future or its agents or representatives concerning its suitability to hold the Closing Shares following the transactions contemplated hereby is complete, accurate and correct. SECTION 3.12. NO SOLICITATION. It was not any time solicited by any leaflet, public promotional meeting, circular, newspaper or magazine article, radio or television advertisement, or any other form of general advertising or solicitation in connection with the offer, sale or purchase of the Closing Shares under this Agreement. -13- 14 SECTION 3.13. ACCREDITED INVESTOR. It is an "accredited investor," as such term is defined in Regulation D promulgated pursuant to the Securities Act. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF FUTURE Future represents and warrants to ECIC and EnCap LP as follows: SECTION 4.1. ORGANIZATION AND EXISTENCE. Future is a corporation duly organized, legally existing and in good standing under the laws of the State of Utah. SECTION 4.2. POWER AND AUTHORITY. Future has full corporate power and corporate authority to execute, deliver, and perform this Agreement and each other Agreement, instrument, or document executed or to be executed by it in connection with the transactions contemplated hereby to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution, delivery, and performance by Future of this Agreement and each other Agreement, instrument, or document executed or to be executed by Future in connection with the transactions contemplated hereby to which it is a party, and the consummation by it of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action of Future. SECTION 4.3. VALID AND BINDING AGREEMENT. This Agreement has been duly executed and delivered by Future and constitutes, and each other Agreement, instrument, or document executed or to be executed by Future in connection with the transactions contemplated hereby to which it is a party has been, or when executed will be, duly executed and delivered by Future and constitutes, or when executed and delivered will constitute, a valid and legally binding obligation of Future, enforceable against it in accordance with their respective terms, except that such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally and (b) equitable principles which may limit the availability of certain equitable remedies (such as specific performance) in certain instances. SECTION 4.4. NON-CONTRAVENTION. The execution, delivery, and performance by Future of this Agreement and each other Agreement, instrument, or document executed or to be executed by Future in connection with the transactions contemplated hereby to which it is a party and the consummation by it of the transactions contemplated hereby and thereby do not and will not (a) conflict with or result in a violation of any provision of the charter or bylaws or other governing instruments of Future, (b) conflict with or result in a violation of any provision of, or constitute (with or without the giving of notice or the passage of time or both) a default under, or give rise (with or without the giving of notice or the passage of time or both) to any right of termination, cancellation, or acceleration under, any bond, debenture, note, mortgage, indenture, lease, contract, Agreement, or other instrument or obligation to -14- 15 which Future is a party or by which Future or any of its properties may be bound, (c) except as contemplated by this Agreement, result in the creation or imposition of any lien or other encumbrance upon the properties of Future, or (d) violate any applicable law, rule or regulation binding upon Future. SECTION 4.5. APPROVALS. No consent, approval, order, or authorization of, or declaration, filing, or registration with, any court or governmental agency or of any third party is required to be obtained or made by Future in connection with the execution, delivery, or performance by Future of this Agreement and each other Agreement, instrument, or document executed or to be executed by Future in connection with the transactions contemplated hereby to which it is a party or the consummation by it of the transactions contemplated hereby and thereby, other than compliance with any applicable requirements of the Securities Act and any applicable state securities laws. SECTION 4.6. PENDING LITIGATION. There are no pending suits, actions, or other proceedings in which Future is a party which affect the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. SECTION 4.7. NOVEMBER 1997 AGREEMENT. Future is in compliance in all material respects with the terms and provisions of Articles X and XI of the November 1997 Agreement. SECTION 4.8. CLOSING SHARES. The Closing Shares have been duly authorized for such issuance and, when issued and delivered by Future in accordance with the provisions of this Agreement, will be validly issued, fully paid, and nonassessable. The issuance of the Closing Shares under this Agreement is not subject to any preemptive or similar rights. SECTION 4.9. SEC FILINGS. Except as otherwise disclosed to ECIC and EnCap LP, Future is current in its obligations to file all periodic reports and proxy statements with the Commission required to be filed under the Exchange Act. Future's Annual Report on Form-10KSB for the year ended December 31, 1997, Future's Form 8-K/A filed on February 27, 1998, and Future's Quarterly Report on Form-10QSB for the quarter ending March 31, 1998 (collectively, the "SEC DOCUMENTS") are all of the documents the Future was required to file with the Commission since January 1, 1998. As of their respective dates, the SEC Documents complied as to form in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission thereunder applicable to such SEC Documents. The SEC Documents do not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of circumstances then existing. The audited Consolidated financial statements and unaudited Consolidated interim financial statements of Future included in the SEC Documents comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the Commission with respect thereto; present fairly in all material respects, in conformity with GAAP applied on a consistent basis, the Consolidated financial position of Future as of the dates thereof and its Consolidated results of operations and changes in financial position for the periods then ended -15- 16 (subject to normal year-end adjustments in the case of the unaudited interim financial statements and the fact that certain information and notes have been condensed or omitted in accordance with the Exchange Act and the rules promulgated thereunder); and are in all material respects in accordance with the books of account and records of Future and its subsidiaries. There are no material liabilities of Future (contingent or otherwise), other than as disclosed in the SEC Documents and the financial statements included therein and except as contemplated by the Senior Credit Facility. ARTICLE V PREPAYMENTS OF THE AMENDED RENEWAL NOTES SECTION 5.1. OPTIONAL PREPAYMENTS. Future may, upon five business days' notice to the holders of the Amended Renewal Notes, from time to time and without premium or penalty prepay the Amended Renewal Notes, in whole or in part, so long as the aggregate amount of each partial prepayment of principal on the Amended Renewal Notes equals at least $100,000 or any higher integral multiple of $100,000. Each prepayment of principal under this Section shall be accompanied by all interest then accrued and unpaid on the principal so prepaid. All principal and interest prepaid pursuant to this Section shall be in addition to, but not in lieu of, all payments otherwise required to be paid under the Note Documents at the time of such prepayment. SECTION 5.2. PREPAYMENTS ON THE SALE OF ASSETS. In the event that Future or any Subsidiary thereof sells, transfers or otherwise assigns any oil, gas or other mineral property to a third party for cash (in this Section, a "SUBJECT PROPERTY"), Future shall, no later than two business days after such sale, transfer or assignment is consummated, make a prepayment of the Future Renewal Notes in an amount equal to the Designated Amount. Each holder of a Amended Renewal Note shall be entitled to receive a pro rata share of the Designated Amount, which pro rata share shall be determined by dividing the then outstanding principal balance of such holder's Amended Renewal Note by the sum of the then outstanding principal balances of the Amended Renewal Notes. As used in this Section, the following terms shall have the respective meanings assigned to them below: "BORROWING BASE" shall have the meaning assigned to such term in Senior Credit Facility. "DESIGNATED AMOUNT" shall be equal to A plus B, where "A" is equal to the PV-10 Value of the Subject Property minus the attendant reduction in the Borrowing Base under the Senior Credit Facility as a result of the sale or disposition of the Subject Property, and where "B" is equal to 20% of the Excess Proceeds. -16- 17 "EXCESS PROCEEDS" shall mean, when used with respect to a Subject Property, the cash proceeds received by Future in connection with the sale, transfer or other disposition of such Subject Property minus the PV-10 Value of such Subject Property. "PV-10 VALUE" shall mean, when used with respect to a Subject Property, the pre-federal income tax present value of projected net revenues attributable to the PDP Reserves assigned to the Subject Property in the most recent Engineering Report utilizing a 10% discount rate. Any amounts so received by a holder of a Amended Renewal Note shall be applied first against any accrued but unpaid interest on such note and second against the outstanding principal amount of such note. SECTION 5.3. PREPAYMENTS UPON THE OCCURRENCE OF A LIQUIDITY EVENT. Upon receipt by Future of cash as a result of a Liquidity Event (as defined below), Future shall, no later than two business days thereafter, make a prepayment of the Amended Renewal Notes in an aggregate amount equal to 50% of the Net Proceeds. As used in this Section the following terms shall have the respective meanings assigned to them below: "LIQUIDITY EVENT" shall mean a public or private offering by Future of equity or debt securities for cash (exclusive, however, of any offering of securities by Future in connection with any merger or consolidation of Future with another entity). "NET PROCEEDS" shall mean the aggregate cash proceeds received by Future as a result of the Liquidity Event minus (a) the transaction costs incurred by Future in connection with such Liquidity Event and (b) that portion of the cash proceeds paid by Future to the Senior Lender under the terms of the Senior Credit Facility. Each holder of a Amended Renewal Note shall be entitled to receive a pro rata share of any amount paid under this Section, which pro rata share shall be determined by dividing the then outstanding principal balance of such holder's Amended Renewal Note by the sum of the then outstanding principal balances of the Amended Renewal Notes. Any amounts so received by a holder of a Amended Renewal Note shall be applied first against any accrued but unpaid interest on such note and second against the outstanding principal amount of such note. ARTICLE VI AFFIRMATIVE COVENANTS OF FUTURE To induce ECIC and EnCap LP to enter into this Agreement, Future warrants, covenants and agrees that until the full and final payment of the Obligations, unless ECIC and EnCap LP have previously otherwise agreed: -17- 18 SECTION 6.1. PAYMENT AND PERFORMANCE. Future will pay all amounts due under the Amended Renewal Notes in accordance with the terms thereof and will observe, perform and comply with every covenant, term and condition expressed or implied in this Agreement. Future will cause each of its Subsidiaries to observe, perform and comply with every such term, covenant and condition. SECTION 6.2. BOOKS, FINANCIAL STATEMENTS AND REPORTS. Future and each of its Subsidiaries will at all times maintain full and accurate books of account and records. Future will maintain and will cause its Subsidiaries to maintain a standard system of accounting, will maintain its Fiscal Year, and will furnish the following statements and reports to each of ECIC and EnCap LP at Future's expense: (a) As soon as available, and in any event within ninety-five (95) days after the end of each Fiscal Year, complete Consolidated financial statements of Future together with all notes thereto, prepared in reasonable detail in accordance with GAAP, together with an unqualified opinion, based on an audit using generally accepted auditing standards, by independent certified public accountants selected by Future and acceptable to ECIC and EnCap LP, stating that such Consolidated financial statements have been so prepared. These financial statements shall contain a Consolidated balance sheet as of the end of such Fiscal Year and Consolidated statements of earnings, of cash flows, and of changes in owners' equity for such Fiscal Year, each setting forth in comparative form the corresponding figures for the preceding Fiscal Year. (b) As soon as available, and in any event within fifty (50) days after the end of each Fiscal Quarter, Future's Consolidated balance sheet as of the end of such Fiscal Quarter and Consolidated statements of Future's earnings and cash flows for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter, all in reasonable detail and prepared in accordance with GAAP, subject to changes resulting from normal year-end adjustments. In addition Future will, together with each such set of financial statements and each set of financial statements furnished under subsection (a) of this section, furnish a certificate in a form reasonably acceptable to ECIC and EnCap LP signed by the chief financial officer of Future stating that such financial statements are accurate and complete (subject to normal year-end adjustments) and stating that no Default exists at the end of such Fiscal Quarter or at the time of such certificate or specifying the nature and period of existence of any such Default. (c) Promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent by Future to its stockholders and all registration statements, periodic reports and other statements and schedules filed by Future with any securities exchange, the Commission or any similar governmental authority. (d) Annually within 115 days after the end of each Fiscal Year beginning with the Fiscal Year ending December 31, 1998, a report containing (i) an estimation of the oil and gas reserves, classified by appropriate categories, as of the end of the preceding Fiscal Year -18- 19 attributable to the interest of the Future therein, (ii) a projection of the rate of production of and net income from such reserves with respect to such interest, (iii) a calculation of the present worth of such net income discounted at a rate of 10%, and (iv) a schedule or complete description of all assumptions, estimates and projections made or used in the preparation of such report. Each such report shall be prepared by an independent petroleum engineer acceptable to ECIC and EnCap LP in accordance with customary and generally accepted standards and practices for petroleum engineers, and shall be based on (1) prices used by Houston Energy Banks, as reported by Madison Energy Advisors, Inc., escalated at a rate not to exceed 3% per annum, (2) lease operating expenses and production taxes derived from and consistent with those actually incurred by Future, escalated at the same rate, if any, being applied to prices, and (3) such other assumptions as shall be reasonably acceptable to ECIC and EnCap LP. (e) Promptly, such other information with respect to the business and operations of Future and its Subsidiaries, as ECIC and EnCap LP may reasonably request. SECTION 6.3. NOTICE OF MATERIAL EVENTS AND CHANGE OF ADDRESS. Future will promptly notify each of ECIC and EnCap LP in writing, stating that such notice is being given pursuant to this Agreement, of: (a) the occurrence of any Material Adverse Change, (b) the occurrence of any Default, (c) the acceleration of the maturity of any indebtedness owed by Future or any Subsidiary thereof or of any default by any Future or any such Subsidiary under any indenture, mortgage, agreement, contract or other instrument to which any of them is a party or by which any of them or any of their properties is bound, if such acceleration or default could cause a Material Adverse Change, (d) any claim of $100,000 or more, any notice of potential liability under any environmental laws which might exceed such amount, or any other material adverse claim asserted against Future or any Subsidiary thereof or with respect to Future or any of such Subsidiary's properties, and (e) the filing of any suit or proceeding against Future or any Subsidiary thereof in which an adverse decision could cause a Material Adverse Change. Upon the occurrence of any of the foregoing Future and any Subsidiary thereof will take all necessary or appropriate steps to remedy promptly any such Material Adverse Change, Default, acceleration or default, to protect against any such adverse claim, to defend any such suit or proceeding, and to resolve all controversies on account of any of the foregoing. Future will also notify ECIC and EnCap LP in writing at least twenty business days prior to the date that Future or any Subsidiary thereof changes its name or the location of its chief executive -19- 20 office or principal place of business or the place where it keeps its books and records concerning the Collateral, furnishing with such notice any necessary financing statement amendments or requesting ECIC and EnCap LP to prepare the same. SECTION 6.4. MAINTENANCE OF PROPERTIES. Future and each of its Subsidiaries will maintain, preserve, protect, and keep all Collateral and all other property used or useful in the conduct of its business in good condition and in compliance with all applicable laws, and will from time to time make all repairs, renewals and replacements needed to enable the business and operations carried on in connection therewith to be promptly and advantageously conducted at all times. SECTION 6.5. MAINTENANCE OF EXISTENCE AND QUALIFICATIONS. Future and each of its Subsidiaries will maintain and preserve its existence and its rights and franchises in full force and effect and will qualify to do business in all states or jurisdictions where required by applicable law, except where the failure so to qualify will not cause a Material Adverse Change. SECTION 6.6. PAYMENT OF TRADE LIABILITIES, TAXES, ETC. Future and each of its Subsidiaries will (a) timely file all required tax returns; (b) timely pay all taxes, assessments, and other governmental charges or levies imposed upon it or upon its income, profits or property; (c) pay when due all Liabilities owed by it on ordinary trade terms to vendors, suppliers and other persons providing goods and services used by it in the ordinary course of its business; (d) pay and discharge when due all other Liabilities now or hereafter owed by it; and (e) maintain appropriate accruals and reserves for all of the foregoing in accordance with GAAP. Future and each of its Subsidiaries may, however, delay paying or discharging any of the foregoing so long as it is in good faith contesting the validity thereof by appropriate proceedings and has set aside on its books adequate reserves therefor. SECTION 6.7. INSURANCE. Future and each of its Subsidiaries will keep or cause to be kept insured by financially sound and reputable insurers its properties in such forms and amounts and against such risks as are customary for persons engaged in the same or similar business of owning and operating similar properties. Upon demand by ECIC and EnCap LP any insurance policies covering Collateral shall be endorsed (a) to provide for payment of losses to ECIC and EnCap LP as its interests may appear and (b) to provide that such policies may not be canceled or reduced or affected in any material manner for any reason without fifteen days prior notice to ECIC and EnCap LP. SECTION 6.8. COMPLIANCE WITH AGREEMENTS AND LAW. Future and each of its Subsidiaries will perform all material obligations it is required to perform under the terms of each indenture, mortgage, deed of trust, security Agreement, lease, franchise, Agreement, contract or other instrument or obligation to which it is a party or by which it or any of its properties is bound. Future and each of its Subsidiaries will conduct its business and affairs in compliance with all laws applicable thereto. -20- 21 SECTION 6.9. AGREEMENT TO DELIVER SECURITY DOCUMENTS. Future agrees to deliver and to cause each of its Subsidiaries to deliver, to further secure the Amended Renewal Notes whenever requested by ECIC and EnCap LP in their sole and absolute discretion, deeds of trust, mortgages, chattel mortgages, security agreements, financing statements and other Security Documents in form and substance satisfactory to them for the purpose of granting, confirming, and perfecting liens or security interests in any real or personal property now owned or hereafter acquired by Future and any such Subsidiary. SECTION 6.10. PERFECTION AND PROTECTION OF SECURITY INTERESTS AND LIENS. Future will from time to time deliver, and will cause each of its Subsidiaries from time to time to deliver, to ECIC and EnCap LP any financing statements, continuation statements, extension agreements and other documents, properly completed and executed (and acknowledged when required) by Future or any such Subsidiary in form and substance satisfactory to ECIC and EnCap LP, which they request for the purpose of perfecting, confirming, or protecting any Liens or other rights in Collateral securing any Obligations. SECTION 6.11. DESIGNATION OF AGENT FOR SALE. If either (a) the Amended Renewal Notes have not been paid in full within the two-year period commencing the Closing Date or (b) the PDP Reserves to Debt Ratio is less than 1.0 to 1.0 at any time after the Closing for a period of 180 consecutive days, Future agrees (i) that upon the written request of holders of the Amended Renewal Notes, it will retain a person designated by such holders for the express purpose of locating a buyer for all or substantially all of the assets of Future (which person shall be retained on terms generally customary in the industry for transactions of this type), (ii) that if a person is so designated, Future will cooperate and otherwise act in good faith in connection with the efforts of such person in locating a buyer and (iii) that if a prospective buyer or buyers are located, Future will consider in good faith any offer(s) tendered by them and, if a determination is made to accept any offer, to use its reasonable best efforts to obtain any necessary consent(s) of the Senior Lender or other third parties to any such sale. ARTICLE VII NEGATIVE COVENANTS OF FUTURE To induce ECIC and EnCap LP to enter into this Agreement, Future warrants, covenants and agrees that until the full and final payment of the Obligations, unless ECIC and EnCap LP have previously otherwise agreed: SECTION 7.1. INDEBTEDNESS. Neither Future nor any Subsidiary thereof will in any manner owe or be liable for Indebtedness except: (a) the Obligations; (b) the Senior Credit Facility; -21- 22 (c) obligations under operating leases entered into in the ordinary course of Future's or its Subsidiaries' business in arm's length transactions at competitive market rates under competitive terms and conditions in all respects; (d) Indebtedness owed by Future or any Subsidiary thereof which is subordinated to the Obligations upon terms and conditions satisfactory to ECIC and EnCap LP in their sole and absolute discretion; (e) purchase money Indebtedness in an aggregate principal amount not to exceed $200,000 at any time, provided that the original principal amount of any such Indebtedness shall not be in excess of the purchase price of the asset acquired thereby and such Indebtedness shall be secured only by the acquired asset; (f) Indebtedness in the principal amount of approximately $20,000 owed Bank One Texas on a workover rig; and (g) Indebtedness in the principal amount of approximately $20,000 owed Sam Henderson. SECTION 7.2. LIMITATION ON LIENS. Neither Future nor any Subsidiary thereof will create, assume or permit to exist any Lien upon any of the properties or assets which it now owns or hereafter acquires, except, to the extent not otherwise forbidden by the Security Documents the following: (a) Liens which secure Obligations only; (b) Liens which secure the Senior Credit Facility;. (c) Statutory Liens for taxes, statutory mechanics' and materialmen's Liens incurred in the ordinary course of business, and other similar Liens incurred in the ordinary course of business, provided such Liens do not secure Indebtedness and secure only Indebtedness which is not delinquent or for which adequate reserves have been set aside. (d) Liens securing Indebtedness described in Section 7.1(e). (e) Existing Lien in favor of Sam Henderson covering properties located in Wichita County, Texas. (f) Existing Lien in favor of Bank One Texas on the Indebtedness described in Section 7.1 (f). SECTION 7.3. LIMITATION ON MERGERS. Except as expressly provided in this Section and exclusive of the merger contemplated by the Merger Agreement, neither Future nor any Subsidiary thereof will merge or consolidate with or into any other business entity. Any -22- 23 Subsidiary of Future may, however, be merged into or consolidated with either Future or another Subsidiary which is wholly-owned by Future, so long as Future or the Subsidiary wholly-owned by Future is the surviving business entity. Future will not issue any securities other than shares of its common stock or any options or warrants giving the holders thereof only the right to acquire such shares. No Subsidiary of Future will issue any additional shares of its capital stock or other securities or any options, warrants or other rights to acquire such additional shares or other securities except to Future. No Subsidiary of Future which is a partnership will allow any diminution of Future's interest (direct or indirect) therein. SECTION 7.4. LIMITATION ON SALES OF PROPERTY. Neither Future nor any Subsidiary thereof will sell, transfer, lease, exchange, alienate or dispose of any Collateral except, to the extent not otherwise forbidden under the Security Documents: (a) equipment which is worthless or obsolete or which is replaced by equipment of equal suitability and value; (b) inventory (including oil and gas sold as produced and seismic data) which is sold in the ordinary course of business on ordinary trade terms; or (c) other property which is sold for fair consideration not in the aggregate in excess of $500,000 in any Fiscal Year (commencing with Fiscal Year 1998). SECTION 7.5. LIMITATION ON INVESTMENTS AND NEW BUSINESSES. Neither Future nor any Subsidiary thereof will make any expenditure or commitment or incur any obligation or enter into or engage in any transaction except in the ordinary course of business (which ordinary course of business includes the acquisition, directly or indirectly, of oil and gas properties), engage directly or indirectly in any business or conduct any operations except in connection with or incidental to its present businesses and operations, make any acquisitions of or capital contributions to or other investments in any person, other than Permitted Investments, or make any significant acquisitions or investments in any properties other than oil and gas properties. SECTION 7.6. TRANSACTIONS WITH AFFILIATES. Neither Future nor any of its Subsidiaries will engage in any material transaction with any of its Affiliates on terms which are less favorable to it than those which would have been obtainable at the time in arm's-length dealing with persons other than such Affiliates, provided that such restriction shall not apply to transactions among Future and its wholly-owned Subsidiaries. SECTION 7.7. RESTRICTED PAYMENTS. Future will not, and will not permit any of its Subsidiaries to, declare or make, or incur any liability to declare or make, any Restricted Payment. -23- 24 ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES SECTION 8.1. EVENTS OF DEFAULT. Each of the following constitutes an "EVENT OF DEFAULT" for purposes of the Amended Renewal Notes and this Agreement: (a) a default in the payment of principal of any Amended Renewal Note when and as the same shall become due and payable; (b) a default in the payment of any interest upon any Amended Renewal Note when such interest becomes due and payable and continuance of such default for a period of 5 business days; (c) a default in the performance or observation of any covenant, Agreement or condition contained in either Article VI or Article VII, which default is not remedied within 30 days after the earlier of (i) the day on which Future first obtains knowledge of such default or (ii) the day on which written notice thereof is given to Future by the holder of any Amended Renewal Note; (d) the PDP Reserves to Debt Ratio is less than 1.0 to 1.0, which default is not remedied within 30 days after the day on which written notice thereof is given to Future by the holder of any Amended Renewal Note; (e) any "default" or "event of default" occurs under any Note Document which defines either such term, and the same is not remedied within the applicable period of grace (if any) provided in such Note Document; (f) any representation or warranty previously, presently or hereafter made in writing by or on behalf of Future or any Subsidiary thereof in connection with this Agreement or any Note Document shall prove to have been false or incorrect in any material respect on any date on or as of which made, which default is not remedied within 30 days after the earlier of (i) the day on which Future first obtains knowledge of such default or (ii) the day on which written notice thereof is given to Future by the holder of any Amended Renewal Note; (g) Future or any Subsidiary fails to duly observe, perform or comply with any Agreement with any person or any term or condition of any loan document relating to the Senior Credit Facility or any other Agreement or instrument, if such Agreement or instrument is materially significant to Future or such Subsidiary, and such failure is not remedied within the applicable period of grace (if any) provided in such Agreement or instrument; (h) Buyer or any Subsidiary thereof fails to pay any portion, when such portion is due, of any of its Indebtedness in excess of $100,000, or breaches or defaults in the performance of any Agreement or instrument by which any such Indebtedness is issued, evidenced, governed, or secured, and any such failure, breach or default continues beyond any applicable period of grace provided therefor; -24- 25 (i) Future or any Subsidiary thereof: (i) suffers the entry against it of a judgment, decree or order for relief by a tribunal of competent jurisdiction in an involuntary proceeding commenced under any applicable bankruptcy, insolvency or other similar Law of any jurisdiction now or hereafter in effect, including the federal Bankruptcy Code, as from time to time amended, or has any such proceeding commenced against it which remains undismissed for a period of thirty days; or (ii) commences a voluntary case under any applicable bankruptcy, insolvency or similar Law now or hereafter in effect, including the federal Bankruptcy Code, as from time to time amended; or applies for or consents to the entry of an order for relief in an involuntary case under any such Law; or makes a general assignment for the benefit of creditors; or fails generally to pay (or admits in writing its inability to pay) its debts as such debts become due; or takes corporate or other action to authorize any of the foregoing; or (iii) suffers the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of all or a substantial part of its assets or of any part of the Collateral in a proceeding brought against or initiated by it, and such appointment or taking possession is neither made ineffective nor discharged within thirty days after the making thereof, or such appointment or taking possession is at any time consented to, requested by, or acquiesced to by it; or (iv) suffers the entry against it of a final judgment for the payment of money in excess of $100,000 (not covered by insurance satisfactory to Sellers in their discretion), unless the same is discharged within thirty days after the date of entry thereof or an appeal or appropriate proceeding for review thereof is taken within such period and a stay of execution pending such appeal is obtained; or (v) suffers a writ or warrant of attachment or any similar process to be issued by any tribunal against all or any substantial part of its assets or any part of the Collateral, and such writ or warrant of attachment or any similar process is not stayed or released within thirty days after the entry or levy thereof or after any stay is vacated or set aside; (j) Any Change in Control occurs; and (k) Any Material Adverse Change occurs. Upon the occurrence of an Event of Default described in subsection (i)(i), (i)(ii) or (i)(iii) of this section with respect to Future or a Subsidiary thereof, all of the Obligations shall thereupon be immediately due and payable, without demand, presentment, notice of demand or of dishonor and nonpayment, protest, notice of protest, notice of intention to accelerate, -25- 26 declaration or notice of acceleration, or any other notice or declaration of any kind, all of which are hereby expressly waived by Future and each such Subsidiary. Upon the occurrence of an Event of Default described in subsection (a) or subsection (b), any holder of a Amended Renewal Note may during its continuance, by written notice to Future declare the Amended Renewal Note held by it to be due and payable, whereupon such Amended Renewal Note shall forthwith mature and become due and payable. Upon the occurrence of any other Event of Default, the Majority of Noteholders may at any time during its continuance, declare all of the Amended Renewal Notes to be due and payable, whereupon all of the Amended Renewal Notes shall forthwith mature and become due and payable. As used in the immediately preceding sentence, the term "MAJORITY OF THE NOTEHOLDERS" shall mean those holder(s) of Amended Renewal Notes who hold 51% in aggregate principal amount of the Amended Renewal Notes at the time outstanding, exclusive of any Amended Renewal Notes held by Future or any Subsidiary. SECTION 8.2. REMEDIES. If any Default shall occur and be continuing, each Seller may protect and enforce its rights under the Note Documents by any appropriate proceedings, including proceedings for specific performance of any covenant or Agreement contained in any Note Document, and each holder of a Amended Renewal Note may enforce the payment of any Obligations due it or enforce any other legal or equitable right which it may have. All rights, remedies and powers conferred upon the holders of the Amended Renewal Notes under the Note Documents shall be deemed cumulative and not exclusive of any other rights, remedies or powers available under the Note Documents or at law or in equity. ARTICLE IX NOTICES All notices and other communications required under this Agreement shall (unless otherwise specifically provided herein) be in writing and be delivered personally, by recognized commercial courier or delivery service (which provides a receipt), by telecopier (with receipt acknowledged), or by registered or certified mail (postage prepaid), at the following addresses: If to ECIC or EnCap LP: Energy Capital Investment Company PLC EnCap Equity 1994 Limited Partnership % EnCap Investments L.C. 1100 Louisiana Suite 3150 Houston, Texas 77002 Attention: Gary R. Petersen or Colin Nisbeth Fax No.: 713-659-6130 -26- 27 If to Future: 2351 West Northwest Highway, Suite 2130 Dallas, Texas 75220 Attention: Carl Price Fax No.: 214-350-8382 and shall be considered delivered on the date of receipt. Either Future or a holder of a Amended Renewal Note may specify as its proper address any other post office address within the continental limits of the United States by giving notice to the other party, in the manner provided in this Article, at least ten (10) days prior to the effective date of such change of address. ARTICLE X MISCELLANEOUS SECTION 10.1. WAIVER AND AMENDMENT. No failure or delay (whether by course of conduct or otherwise) by any holder of a Amended Renewal Note in exercising any right, power or remedy which such holder may have under any of the Note Documents shall operate as a waiver thereof or of any other right, power or remedy, nor shall any single or partial exercise by such holder of any such right, power or remedy preclude any other or further exercise thereof or of any other right, power or remedy. No waiver of any provision of any Note Document and no consent to any departure therefrom shall ever be effective unless it is in writing and signed as provided below in this section, and then such waiver or consent shall be effective only in the specific instances and for the purposes for which given and to the extent specified in such writing. This Agreement and the other Note Documents set forth the entire understanding between the parties hereto with respect to the transactions contemplated herein and therein and supersede all prior discussions and understandings with respect to the subject matter hereof and thereof; without limiting the foregoing, the parties hereto agree that, upon consummation of the transactions contemplated hereby, the terms and provisions of Articles X, XI and XII of the November 1997 Purchase Agreement shall be deemed terminated and of no further effect whatsoever. No waiver, consent, release, modification or amendment of or supplement to this Agreement or the other Note Documents shall be valid or effective against any party hereto unless the same is in writing and signed by such party. SECTION 10.2. JOINT ACKNOWLEDGMENT. THIS WRITTEN AGREEMENT AND THE OTHER NOTE DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. SECTION 10.3. SURVIVAL OF AGREEMENTS. All of Future's various representations, warranties, covenants and agreements in the Note Documents shall survive the execution and delivery of this Agreement and the other Note Documents and the performance hereof and -27- 28 thereof, and shall further survive until all of the obligations are paid in full to the holders of the Amended Renewal Notes and all of such holders' obligations to Future are terminated. SECTION 10.4. PAYMENT OF EXPENSES. (a) Future will promptly pay all reasonable costs and expenses incurred by or on behalf of the holders of the Amended Renewal Notes (including attorneys' fees, consultants' fees and engineering fees, travel costs and miscellaneous expenses) in connection with (i) the negotiation, preparation, execution and delivery of the Note Documents, and any and all consents, waivers or other documents or instruments relating thereto, (ii) the borrowing hereunder and other action reasonably required in the course of administration hereof, (iii) monitoring or confirming (or preparation or negotiation of any document related to) Future's compliance with any covenants or conditions contained in this Agreement or in any Note Document, and (iv) all reasonable costs and expenses incurred by or on behalf of a holder of a Amended Renewal Note (including attorneys' fees, consultants' fees and accounting fees) in connection with the defense or enforcement of any of the Note Documents (including this section) or the defense of such holder's exercise of its rights thereunder. (b) Provided the transactions contemplated by the Agreement are consummated, Future will also promptly pay all reasonable costs and expenses of ECIC and EnCap LP (including attorneys' fees) in connection with the negotiation, preparation, execution and delivery of the Merger Agreement and any and all other documents or instruments relating thereto. SECTION 10.5. GOVERNING LAW. THE NOTE DOCUMENTS SHALL BE DEEMED CONTRACTS AND INSTRUMENTS MADE UNDER THE LAWS OF THE STATE OF TEXAS AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND THE LAW OF THE UNITED STATES OF AMERICA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. FUTURE HEREBY IRREVOCABLY SUBMITS ITSELF TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE STATE OF TEXAS AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDING RELATING TO THE NOTE DOCUMENTS OR THE OBLIGATIONS BY ANY MEANS ALLOWED UNDER TEXAS OR FEDERAL LAW. SECTION 10.6. LIMITATION ON INTEREST. The holders of the Amended Renewal Notes, Future and any other parties to the Note Documents intend to contract in strict compliance with applicable usury law from time to time in effect. In furtherance thereof such persons stipulate and agree that none of the terms and provisions contained in the Note Documents shall ever be construed to create a contract to pay, for the use, forbearance or detention of money, interest in excess of the maximum amount of interest permitted to be charged by applicable law from time to time in effect. Neither Future nor any present or future guarantors, endorsers, or other persons hereafter becoming liable for payment of any Obligation shall ever be liable for unearned interest thereon or shall ever be required to pay interest thereon in excess of the maximum amount that may be lawfully charged under applicable law from time to time in effect, and the provisions of this section shall control over -28- 29 all other provisions of the Note Documents which may be in conflict or apparent conflict herewith. Each holder of a Amended Renewal Note expressly disavows any intention to charge or collect excessive unearned interest or finance charges in the event the maturity of any Obligation is accelerated. If the maturity of any Obligation is accelerated for any reason, any Obligation is prepaid and as a result any amounts held to constitute interest are determined to be in excess of the legal maximum, or any holder of any or all of the Obligations shall otherwise collect moneys which are determined to constitute interest which would otherwise increase the interest on any or all of the Obligations to an amount in excess of that permitted to be charged by applicable law then in effect, then all sums determined to constitute interest in excess of such legal limit shall, without penalty, be promptly applied to reduce the then outstanding principal of the related Obligations or, at such holder's option, promptly returned to Future or the other payor thereof upon such determination. In determining whether or not the interest paid or payable, under any specific circumstance, exceeds the maximum amount permitted under applicable law, each holder of an Obligation and Future (and any other payors thereof) shall to the greatest extent permitted under applicable law, characterize any non-principal payment as an expense, fee or premium rather than as interest, exclude voluntary prepayments and the effects thereof, and amortize, prorate, allocate, and spread the total amount of interest throughout the entire contemplated term of the instruments evidencing the Obligations in accordance with the amounts outstanding from time to time thereunder and the maximum legal rate of interest from time to time in effect under applicable law in order to lawfully charge the maximum amount of interest permitted under applicable law. SECTION 10.7. SEVERABILITY. If any term or provision of any Note Document shall be determined to be illegal or unenforceable all other terms and provisions of the Note Documents shall nevertheless remain effective and shall be enforced to the fullest extent permitted by applicable Law. SECTION 10.8. COUNTERPARTS. This Agreement may be separately executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to constitute one and the same Agreement. SECTION 10.9. WAIVER OF JURY TRIAL; PUNITIVE DAMAGES, ETC. EACH OF FUTURE, ECIC AND ENCAP LP HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH THE NOTE DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED THEREWITH, BEFORE OR AFTER MATURITY; WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY "SPECIAL DAMAGES", AS DEFINED BELOW, CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS LETTER AGREEMENT, THE OTHER NOTE DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS -29- 30 SECTION. AS USED IN THIS SECTION, "SPECIAL DAMAGES" INCLUDES ALL SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE ANY PAYMENTS OR FUNDS WHICH ANY PARTY HERETO HAS EXPRESSLY PROMISED TO PAY OR DELIVER TO ANY OTHER PARTY HERETO. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -30- 31 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year set forth above. FUTURE PETROLEUM CORPORATION, a Utah Corporation By: /s/ CARL PRICE --------------------------------- Name: Carl Price Title: President ENERGY CAPITAL INVESTMENT COMPANY PLC By: /s/ GARY R. PETERSEN --------------------------------- Name: Gary R. Petersen Title: Director ENCAP EQUITY 1994 LIMITED PARTNERSHIP By: ENCAP INVESTMENTS L.C., General Partner By: /s/ GARY R. PETERSEN --------------------------------- Name: Gary R. Petersen Title: Managing Director -31- EX-4.9 5 REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 4.9 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and entered into as of this 14th day of August, 1998, by and among Future Petroleum Corporation, a Utah corporation (the "COMPANY"), Energy Capital Investment Company PLC, an English investment company ("ENERGY PLC"), and EnCap Equity 1994 Limited Partnership, a Texas limited partnership ("ENCAP LP"). RECITALS: A. Reference is herein made to that certain Agreement and Plan of Merger dated as of August 14, 1998 (the "MERGER AGREEMENT"), by and among the Company, Future CALTEX Corporation, a Texas corporation, Bargo Energy Resources, Ltd., a Texas limited partnership, and SCL-CAL Company, a Texas corporation. B. Energy PLC and EnCap LP are the current record and beneficial owners of an aggregate 1,850,000 shares of Common Stock (the "FUND I CURRENT SHARES"). In connection with the transaction contemplated by the Merger Agreement, Energy PLC and EnCap LP have agreed to subordinate certain indebtedness owed to them by the Company. As part of the consideration for such agreement, the Company will issue to Energy PLC and EnCap LP an aggregate of 2,844,859 shares of Common Stock (the "FUND I ADDITIONAL SHARES"). . C. In order to induce Energy PLC and EnCap LP to subordinate the indebtedness referenced in the immediately preceding paragraph (and recognizing that they would not be willing to take the above described actions in the absence of this Agreement), the Company has agreed to provide Energy PLC and EnCap LP with the registration rights set forth herein. AGREEMENT: NOW, THEREFORE, for and in consideration of the foregoing Recitals and the mutual covenants contained herein, the sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, do hereby agree as follows: SECTION 1. DEFINITIONS AND REFERENCES. (a) When used in this Agreement, the following terms shall have the respective meanings assigned to them in this Section 1 or in the sections, subsections or other subdivisions referred to below: "AGREEMENT" shall mean this Agreement, as hereafter changed, modified or amended in accordance with the terms hereof. "BARGO AGREEMENT" shall have the meaning assigned to it in Section 11(b). -1- 2 "BARGO HOLDERS" shall mean "Holders," as such term is defined in the Bargo Agreement. "BARGO SECURITIES" shall mean "Registrable Securities," as such term is defined in the Bargo Agreement. "COMMISSION" shall mean the Securities and Exchange Commission (or any successor body thereto). "COMPANY" shall have the meaning assigned to it in the introductory paragraph hereof. "COMMON STOCK" shall mean the common stock of the Company, $0.01 par value per share. "DEMAND REGISTRATION" shall have the meaning assigned to it in Section 2(a). "ENCAP LP" shall have the meaning assigned to it in the introductory paragraph hereof. "ENERGY PLC" shall have the meaning assigned to it in the introductory paragraph hereof. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended, and all rules and regulations promulgated under such Act. "FUND I ADDITIONAL SHARES" shall have the meaning assigned to such term in Paragraph B of the Recitals hereto. "FUND I CURRENT SHARES" shall have the meaning assigned to such term in Paragraph B of the Recitals hereto. "FUND I SHARES" shall mean the Fund I Current Shares and the Fund I Additional Shares. "HOLDER" shall mean any Person that holds Registrable Securities. "HOLDER INDEMNIFIED PARTIES" shall have the meaning assigned to it in Section 6(a). "MERGER AGREEMENT" shall have the meaning assigned to it in Paragraph A of the Recitals hereto. "PERSON" shall mean any individual, corporation, partnership, joint venture, limited partnership, limited liability company, trust, unincorporated organization or government or any agency or political subdivision thereof. -2- 3 "PIGGYBACK REGISTRATION" shall have the meaning assigned to it in Section 3. "REGISTRABLE SECURITIES" shall mean (i) the Fund I Shares and (ii) any securities issued or issuable with respect to any of the shares described in clause (i) above by way of a stock dividend or other distribution or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization; provided, that a share of Common Stock or security described in clauses (i) and (ii) shall cease to be a Registrable Security for purposes of this Agreement at such time as either (A) counsel to the Company renders an opinion to the Holder of such share or security to the effect that such share or security can be freely transferred without registration under the Securities Act (which counsel and opinion shall be reasonably acceptable to such Holder), (B) counsel to a Holder of such share or security renders an opinion to the Company to the effect that such share or security can be freely transferred without registration under the Securities Act (which counsel and opinion shall be reasonably acceptable to the Company), (C) securities for which a registration statement with respect to the sale of such securities has become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (D) such securities have been sold as permitted by Rule 144 (or any successor provision) under the Securities Act and the purchaser thereof does not receive "restricted securities" as defined in Rule 144, or (E) such securities shall have ceased to be outstanding. "REGISTRATION EXPENSES" shall mean all expenses incident to the Company's performance of or compliance with the registration rights granted hereunder, including (without limitation) all registration, filing, listing and NASD fees, fees and expenses of compliance with securities and blue sky laws, all word processing, duplicating, printing and engraving expenses, messenger, telephone and delivery expenses, and fees and disbursements of counsel for the Company, of its independent certified public accountants and any of its independent reserve engineers, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, premiums and other costs of policies of insurance against liabilities arising out of the public offering of the Registrable Securities being registered, and fees and disbursements of underwriters (excluding discounts and commissions); provided, that Registration Expenses shall not include any Selling Expenses. Without limiting the generality of any other provision hereof, no holder of Registrable Securities shall be responsible for any allocation of general and administrative (including all employee and compensation expenses) expenses incurred by the Company in connection with an offering. "SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and all rules and regulations under such Act. "SELLING EXPENSES" shall mean underwriting discounts or commissions, any selling commissions and stock transfer taxes attributable to sales of Registrable Securities and the fees and expenses of counsel for any Holder. -3- 4 (b) All references in this Agreement to sections, subsections and other subdivisions refer to corresponding sections, subsections and other subdivisions of this Agreement unless expressly provided otherwise. Titles appearing at the beginning of any of such subdivisions are for convenience only and shall not constitute part of such subdivisions and shall be disregarded in construing the language contained herein. The words "this Agreement", "this instrument", "herein", "hereof", "hereby", "hereunder" and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. Words in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires. Pronouns in masculine, feminine and neuter genders shall be construed to include any other gender. SECTION 2. DEMAND REGISTRATION RIGHTS. (a) One or more Holders of not less than 20% of the Registrable Securities ("Initiating Holders") then outstanding may request at any time after the expiration of the one-year period commencing as of the date hereof a registration by the Company under the Securities Act of all or a part its Registrable Securities (a "DEMAND REGISTRATION"). (b) Notwithstanding subsection (a) above or anything else herein to the contrary, the Company shall not be obligated to effect more than two registrations pursuant to this Section 2; provided, however, that any registration requested pursuant to this Section 2 will not be deemed to have been effected (i) unless it has become effective and remained effective for the lesser of (1) the period necessary to complete the sale or disposition of the Registrable Securities covered by such registration statement, or (2) 180 days after the effective date of such registration statement, except with respect to any registration statement filed pursuant to Rule 415 under the Securities Act, in which case the Company shall use its best efforts to keep such registration statement effective until such time as all of the Registrable Securities cease to be Registrable Securities; (ii) if, after it has become effective, such registration is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason not attributable to the selling Holders and has not thereafter become effective, or (iii) if the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such registration are not satisfied or waived, other than solely by reason of a failure on the part of the selling Holders; provided, further, that any such registration which does not become effective after the Company has filed a registration statement in accordance with the provisions of this Section 2 solely by reason of the refusal to proceed of the Holder or Holders that have requested the Demand Registration pursuant to subsection (a) above, including failure to comply with the provisions of this Agreement (other than any refusal to proceed based upon the advice of counsel to such Holder or Holders that the registration statement, or the prospectus contained therein, contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, or that such registration statement or such prospectus, or the distribution contemplated thereby, otherwise violates or would, if such distribution using such prospectus -4- 5 took place, violate any applicable state or federal securities law) shall be deemed to have been effected by the Company at the request of such Holder or Holders. (c) Notwithstanding subsection (a) above or anything else herein to the contrary, it is hereby agreed that a Demand Registration must cover no less than 50% of the Registrable Securities then outstanding. In the event a Holder requests that the Company effect a Demand Registration pursuant to this Section 2, the Company will (i) promptly give notice of the proposed registration to all other Holders and (ii) use its reasonable best efforts to effect the registration of the Registrable Securities specified in the request, together with the Registrable Securities of any other Holder joining in such request as are specified in a written request received by the Company within 20 days after receipt of the notice referred to in clause (i) above. (d) If the managing underwriter in any registration effected under this Section 2 advises the Company that, in its reasonable opinion, the number of securities requested to be included in such registration exceeds the number that can be sold in such offering within a price range acceptable to the Holders of 66 2/3% of the Registrable Securities requested to be included in such registration, the Company, except as provided in the following sentence, will include in such registration, to the extent of the number and type that the Company is so advised can be sold in such offering, Registrable Securities requested to be included in such registration, pro rata among the Holders requesting such registration on the basis of the estimated gross proceeds from the sale thereof. If the total number of Registrable Securities requested to be included in such registration cannot be included as provided in the preceding sentence, holders of Registrable Securities requesting registration thereof pursuant to this Section 2, representing not less than 33- 1/3% of the Registrable Securities with respect to which registration has been requested and constituting not less than 66 2/3% of the initiating Holders, shall have the right to withdraw the request for registration by giving written notice to the Company within 20 days after receipt of such notice by the Company and, in the event of such withdrawal, such request shall not be counted for purposes of the requests for registration to which holders of Registrable Securities are entitled pursuant to this Section 2. SECTION 3. PIGGYBACK REGISTRATION RIGHTS. If the Company proposes to register any of its securities under the Securities Act other than (a) under employee compensation or benefit programs, (b) an exchange offer or an offering of securities solely to the existing stockholders or employees of the Company, or (c) securities to be issued in a transaction described in Rule 145(a) promulgated under the Securities Act, whether or not for sale for its own account, and the registration form to be used may be used for the registration of Registrable Securities, the Company will give prompt written notice to Holders of Registrable Securities of its intention to effect such a registration and will include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within 15 days after the receipt of the Company's notice (a "PIGGYBACK REGISTRATION"). The Company shall use its reasonable best efforts to cause the managing underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in the registration statement (or registration statements) for such offering to be -5- 6 included therein on the same terms and conditions as any similar securities of the Company included therein. Notwithstanding the foregoing, if the Company gives notice of such a proposed registration, the total number of Registrable Securities which shall be included in such registration shall be reduced pro rata (on the basis of the estimated proceeds from the sale thereof) to such number, if any, as in the reasonable opinion of the managing underwriters of such offering would not adversely affect the marketability or offering price of all of the securities proposed to be offered by the Company in such offering; provided however, that (i) if such Piggyback Registration is incident to a primary registration on behalf of the Company, the securities to be included in the registration statement (or registration statements) for any Person other than the Holders, the Bargo Holders (if the Bargo Holders have exercised their rights under Section 3 of the Bargo Agreement) and the Company shall be first reduced prior to any such pro rata reduction and (ii) if such Piggyback Registration is incident to a secondary registration on behalf of holders of securities of the Company, the securities to be included in the registration statement (or registration statements) for any Person not exercising "demand" registration rights other than the Holders and the Bargo Holders (if the Bargo Holders have exercised their rights under Section 3 of the Bargo Agreement) shall be first reduced prior to any such pro rata reduction; provided, further, that if (1) the Holders have made a request under this Section 3 and the Bargo Holders have made a request under Section 3 of the Bargo Agreement and (2) all of the Registrable Securities of the Holders and all of the Bargo Securities of the Bargo Holders cannot be included in the registration statement(s) under the terms of such sections, the total number of Registrable Securities of the Holders and the Bargo Securities of the Bargo Holders which shall be included in such registration shall be reduced pro rata to such number, if any, as in the reasonable opinion of the managing underwriters of such offering would not adversely affect the marketability or offering price of all of the securities proposed to be offered by the Company in such offering. Subject to any applicable underwriting agreement, any Holder of Registrable Securities may withdraw at any time any Registrable Securities registered under this Section 3. No registration effected under this Section 3 shall relieve the Company of its obligation to effect any registration upon request under Section 2. SECTION 4. REGISTRATION PROCEDURES. (a) Whenever the Holders have requested that any Registrable Securities be registered pursuant to Section 2 or Section 3, the Company will as expeditiously as possible: (i) prepare and file with the Commission a registration statement on the appropriate form with respect to such Registrable Securities, and use its reasonable best efforts to cause such registration statement to become and remain effective as soon as reasonably practicable after the filing thereof (provided, that before filing a registration statement or prospectus or any amendments or supplements thereto, the Company will furnish copies of all such documents proposed to be filed to any Holder covered by such registration statement); -6- 7 (ii) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective until the earlier of (1)such time as all of such Registrable Securities covered by such registration statement have been sold (but not before the expiration of the applicable prospectus delivery period) or (2) 180 days after the effective date of such registration statement, except with respect to any registration statement filed pursuant to Rule 415 under the Securities Act, in which case the Company shall use its best efforts to keep such registration statement effective until such time as all of the Registrable Securities covered thereby cease to be Registrable Securities; and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such registration statement; (iii) notify each Holder of Registrable Securities covered by the registration statement ("SELLER") promptly after the Company shall receive notice thereof of the time when such registration statement has been filed; (iv) furnish to each seller of Registrable Securities such number of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including, without limitation, each preliminary prospectus) and such other documents as such Seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller (it being understood that the Company consents to the use of the prospectus and any amendment or supplement thereto by each Seller and the underwriter or underwriters, if any, in connection with the offering and sale of Registrable Securities covered by the prospectus or any amendment or supplement thereto); (v) use its reasonable best efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions within the United States as any Seller reasonably requests, to keep such registration or qualifications in effect for so long as such registration statement remains in effect, and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such Seller (provided that the Company will not be required to qualify generally to do business or subject itself to any general service of process in any jurisdiction where it is otherwise not then so subject); (vi) notify each Seller of such Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event (including those set forth in clauses (1) through (6) of paragraph (vii) below) which requires the making of any change in the prospectus included in such registration statement so that such document will not contain an untrue statement of a -7- 8 material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and, at the request of any such Seller, the Company will promptly prepare and furnish to such Seller and each underwriter, if any, a reasonable number of copies of a supplement or amendment to such prospectus so that such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; (vii) The Company will also notify each Seller promptly, and (if requested by a Seller) confirm such notice in writing, (1) when a prospectus or any prospectus supplement or post-effective amendment has been filed and, with respect to a registration statement or any post-effective amendment, when the same has become effective under the Securities Act and each applicable state law, (2) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to a registration statement or related prospectus or for additional information, (3) of the issuance by the Commission of any stop order suspending the effectiveness of a registration statement or the initiation of any proceedings for that purpose, (4) if at any time the representations or warranties of the Company or any subsidiary contained in any agreement (including any underwriting agreement) contemplated hereby cease to be true and correct in any material respect, (5) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, or (6) of the Company's reasonable determination that a post-effective amendment to a registration statement would be appropriate; (viii) use its reasonable best efforts to cause all such Registrable Securities to be listed on each securities exchange or exchanges, automated quotation system or over-the-counter market upon which securities of the Company of the same class are then listed; (ix) enter into such customary agreements (including, without limitation, underwriting agreements in customary form, substance and scope) and take all such other action as the Holders of a majority of the Registrable Securities being sold or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities; (x) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission and applicable state securities authorities; (xi) in the event of the issuance of any stop order suspending the effectiveness of a registration statement, or of any order suspending or preventing the use of any related prospectus or suspending the qualification of any Registrable Securities included in such registration statement for sale in any jurisdiction, the -8- 9 Company will use its reasonable best efforts promptly to obtain the withdrawal of such order; (xii) use its reasonable best efforts to cause such Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the Sellers thereof to consummate the disposition of such Registrable Securities; (xiii) in connection with an underwritten public offering of securities, use its reasonable best efforts to obtain a signed counterpart of a comfort letter from the Company's public accountants in customary form and covering such matters of the type customarily covered by comfort letters with respect to offerings of the type being made pursuant to the registration statement as the Sellers reasonably request and an opinion of counsel for the Company covering such matters with respect to such registration statement as are customarily covered in opinions of issuer's counsel and delivered to the underwriters in underwritten public offerings of securities; (xiv) the Company shall make available for inspection by the sellers of such Registrable Securities, any underwriter participating in any distribution pursuant to such registration statement and any attorney, accountant or other professional retained by the Holder or underwriter (in this paragraph collectively referred to as "INSPECTORS"), all financial and other records, pertinent corporate documents and properties of the Company as shall be reasonable necessary to enable them to exercise their due diligence responsibility, and cause the Company's officers, directors and employees to supply all information reasonably requested by any such inspectors in connection with such registration statement; (xv) cause representatives of the Company to participate in any "road show" or "road shows" reasonably requested by any underwriter of an underwritten or "best efforts" offering of any Registrable Securities; and (xvi) provide and cause to be maintained a transfer agent and registrar (which, in each case, may be the Company) for all Registrable Securities covered by such registration agreement from and after a date not later than the effective date of such registration. (b) Whenever the Holders of Registrable Securities have requested that any Registrable Securities be registered pursuant to Section 2 or Section 3, each Holder of Registrable Securities (including Registrable Securities in any registration statement filed pursuant to this Agreement) will be deemed to have agreed as follows: (i) upon receipt of notice from the Company of the happening of any event of the kind described in Section 4(a)(vi), the Holders of Registrable Securities covered by such registration statement will forthwith discontinue disposition of any such -9- 10 Registrable Securities . until the Holders of Registrable Securities receive copies of the supplemented or amended prospectus contemplated by Section 4(a)(vi), or until they are advised in writing by the Company that the use of the applicable prospectus may be resumed, and they have received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such prospectus (it being the agreement of the parties hereto, however, that the obligation of the Company with respect to maintaining the subject registration statement current and effective shall be extended by a period of days equal to the period the Holders of Registrable Securities are required by this Section 4(b)(i) to discontinue disposition of such Registrable Securities); and (ii) furnish to the Company such information regarding each Seller, the Registrable Securities held by such Seller, and the intended method of disposition thereof as the Company shall reasonably request and as shall be reasonably required in connection with the preparation of the applicable registration statement and other actions taken by the Company under this Agreement, and it shall be a condition precedent to the obligation of the Company to take any action pursuant to this Agreement in respect of the Registrable Securities owned by a Seller that such information has been furnished to the Company by such Seller. SECTION 5. EXPENSES OF REGISTRATION. The Company shall pay all Registration Expenses in connection with each registration effected pursuant to Sections 2 and 3. All Selling Expenses incurred by a Seller in connection with a registration effected pursuant to the terms hereof shall be borne by such Seller SECTION 6. INDEMNIFICATION. (a) The Company shall indemnify and hold harmless, with respect to any registration statement filed by it, to the full extent permitted by law, each Holder of Registrable Securities covered by such registration statement, its directors, officers, partners, agents, employees and each other Person, if any, who controls such Holder within the meaning of Section 15 of the Securities Act (collectively, "HOLDER INDEMNIFIED PARTIES") against all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation), joint or several, to which any such Holder Indemnified Party may become subject under the Securities Act, the Exchange Act, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement in which such Registrable Securities were included as contemplated hereby or any omission or -10- 11 alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary, final or summary prospectus, together with the documents incorporated by reference therein (as amended or supplemented if the Company shall have filed with the Commission any amendment thereof or supplement thereto), or any omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or (iii) any violation by the Company of any federal, state or common law rule or regulation applicable to the Company and relating to action of or inaction by the Company in connection with any such registration; provided, that each such Seller's liability under such indemnification shall be limited to the sales proceeds from the sale of the Company's securities owned by the sellers pursuant to such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement, and in each such case, the Company shall reimburse each such Holder Indemnified Party for any reasonable legal or other expenses incurred by any of them in connection with investigating or defending any such loss, claim, damage, liability, expense, action or proceeding; provided, however, that the Company shall not be liable to any such Holder Indemnified Party in any such case to the extent, that any such loss, claim, damage, liability or expense (or action or proceeding, whether commenced or threatened, in respect thereof) arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement or amendment thereof or supplement thereto or in any such preliminary, final or summary prospectus in reliance upon and in conformity with written information furnished to the Company by or on behalf of any such Holder Indemnified Party for use in the preparation thereof. Such indemnity and reimbursement of expenses and other obligations shall remain in full force and effect regardless of any investigation made by or on behalf of the Holder Indemnified Parties and shall survive the transfer of such securities by such Holder Indemnified Parties. (b) Each Holder of Registrable Securities participating in any registration hereunder shall severally (and not jointly or jointly and severally) indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors, officers, employees and agents, and each Person who controls the Company (within the meaning of Section 15 of the Securities Act) (collectively, "COMPANY INDEMNIFIED PARTIES") against all losses, claims, damages, liabilities and expenses to which any Company Indemnified Party may become subject under the Securities Act, the Exchange Act, at common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement in which such Holder's Registrable Securities were included or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary, final or summary prospectus, together with the documents incorporated by reference therein (as amended or supplemented if the Company shall have filed with the Commission any amendment thereof or supplement thereto), or the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading to the extent in the cases described in clauses (i) and (ii), that such untrue statement or omission was furnished in writing by such Holder for use in the preparation -11- 12 thereof, or (iii) any violation by such Holder of any federal, state or common law rule or regulation applicable to such Holder and relating to action of or inaction by such Holder in connection with any such registration; provided, that each such Seller's liability under such indemnification shall be limited to the sales proceeds from the sale of the Company's securities owned by the sellers pursuant to such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement, and in each such case, such Holder shall reimburse each such Company Indemnified Party for any reasonable legal or other expenses incurred by any of them in connection with investigating or defending any such loss, claim, damage, liability, expense, action or proceeding. Such indemnity obligation shall remain in full force and effect regardless of any investigation made by or on behalf of the Company Indemnified Parties (except as provided above) and shall survive the transfer of such securities by such Holder. (c) Promptly after receipt by an indemnified party under subsection (a) or (b) of written notice of the commencement of any action, suit, proceeding, investigation or threat thereof made in writing with respect to which a claim for indemnification may be made pursuant to this Section 6, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the indemnifying party of the threat or commencement thereof; provided, however, that the failure to so notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. If any such claim or action referred to under subsection (a) or (b) is brought against any indemnified party and it then notifies the indemnifying party of the threat or commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other indemnifying party similarly notified, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party. After notice from the indemnifying party to such indemnified party of its election so to assume the defense of any such claim or action, the indemnifying party shall not be liable to such indemnified party under this Section 6 for any legal expenses of counsel or any other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation unless the indemnifying party has failed to assume the defense of such claim or action or to employ counsel reasonably satisfactory to such indemnified party. Under no circumstances will the indemnifying party be obligated to pay the fees and expenses of more than one law firm for all indemnified parties. The indemnifying party shall not be required to indemnify the indemnified party with respect to any amounts paid in settlement of any action, proceeding or investigation entered into without the written consent of the indemnifying party, which consent shall not be unreasonably withheld. No indemnifying party shall consent to the entry of any judgment or enter into any settlement without the consent of the indemnified party unless (i) such judgment or settlement does not impose any obligation or liability upon the indemnified party other than the execution, delivery or approval thereof, and (ii) such judgment or settlement includes as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a full release and discharge from all liability in respect of -12- 13 such claim for all Persons that may be entitled to or obligated to provide indemnification or contribution under this Section 6. (d) Indemnification similar to that specified in the preceding subsections of this Section 6 (with appropriate modifications) shall be given by the Company and each Seller with respect to any required registration or qualification of securities under any state securities or blue sky laws. (e) If the indemnification provided for in this Section 6 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b), then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages, liabilities or expenses (or actions or proceedings in respect thereof) referred to in subsection (a) or (b) in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party on the other in connection with the statements, omissions, actions or inactions which resulted in such losses, claims, damages, liabilities or expenses as well as any other relevant equitable considerations. The relative fault of the indemnifying party and the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or the indemnified party, any action or inaction by any such party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement, omission, action or inaction. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or expenses (or actions or proceedings in respect thereof) pursuant to this subsection (e) shall be deemed to include, without limitation, any reasonable legal or other expenses incurred by such indemnified party in connection with investigating or defending any such action or claim (which shall be limited as provided in subsection (c) if the indemnifying party has assumed the defense of any such action in accordance with the provisions thereof) which is the subject of this subsection (e). No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. Promptly after receipt by an indemnified party under this subsection (e) of written notice of the commencement of any action, suit, proceeding, investigation or threat thereof made in writing with respect to which a claim for contribution may be made against an indemnifying party under this subsection (e), such indemnified party shall, if a claim for contribution in respect thereof is to be made against an indemnifying party, give written notice to the indemnifying party in writing of the commencement thereof (if the notice specified in subsection (c) has not been given with respect to such action); provided, however, that the failure to so notify the indemnifying party shall not relieve it from any obligation to provide contribution which it may have to any indemnified party under this subsection (e) except to the extent that the indemnifying party is actually prejudiced by the failure to give notice. The parties hereto agree that it would not be just and equitable if contribution pursuant to this paragraph were determined by pro rata allocation or by any other method of allocation -13- 14 which does not take account the equitable considerations referred to in the immediately preceding paragraph. If indemnification is available under this Section 6, the indemnifying parties shall indemnify each indemnified party to the fullest extent provided in subsections (a) and (b), without regard to the relative fault of said indemnifying party or any other equitable consideration provided for in this subsection. The provisions of this subsection shall be in addition to any other rights to indemnification or contribution which any indemnified party may have pursuant to law or contract, shall remain in full force and effect regardless of any investigation made by or on behalf of any indemnified party, and shall survive the transfer of securities by any such party. (f) In connection with any underwritten offering contemplated by this Agreement which includes Registrable Securities, the Company and Seller shall be required to enter into a customary underwriting agreement with the underwriter. SECTION 7. SELECTION OF UNDERWRITERS. If a registration effected pursuant to Section 2 is an underwritten offering or a best efforts underwritten offering, the investment bankers or investment bankers and manager or managers that will administer the offering shall be selected by the Holders of a majority of the Registrable Securities to be registered in such registration; provided, however, that such investment bankers and managers must be reasonably satisfactory to the Company. SECTION 8. RULE 144. The Company covenants to each Holder that, to the extent that the Company shall be required to do so under the Exchange Act, the Company shall (a) timely file the reports required to be filed by it under the Exchange Act or the Securities Act (including, but not limited to, the reports under Section 13 and 15(d) of the Exchange Act referred to in subparagraph (c) (1) of Rule 144 adopted by the Commission under the Securities Act) and the rules and regulations adopted by the Commission thereunder, and (b) take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitations of the exemption provided by Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission. Upon the request of any Holder, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. SECTION 9. MARKET STANDOFF AGREEMENT. (a) In order to facilitate the possibility of future public offerings of Common Stock, the Holders agree that in connection with an underwritten public offering for cash by the Company of its Common Stock or securities convertible into or exercisable or exchangeable for its Common Stock, each such Holder (regardless of whether such Holder is participating in the offering) will execute a customary agreement with the underwriters of such offering in -14- 15 substantially the form executed by directors and senior executive management of the Company in which the Holder agrees not to sell Registrable Securities owned by it for a period of up to 90 days following the effective date of the registration statement for such offering. Holders agree that during the above restricted period they will not directly or indirectly sell, offer to sell, contract to sell (including without limitation any short sale), grant an option to purchase or otherwise transfer of dispose of (other than donees who agree to be similarly bound) shares of Registrable Securities at any time during such period except securities included in such registration. In order to enforce the foregoing covenant, the Company may impose stop-order instructions with respect to such shares of Registrable Securities held by each Holder, which shall be binding upon any assignee or successor of such Holder (and the shares or securities of every other Person subject to the foregoing restriction), until the end of the restricted period. (b) During a period commencing on the filing by the Company of a registration statement which includes Registrable Securities (other than pursuant to Rule 415), the Company agrees not to effect any public sale or distribution (including by registering securities held by others) of any securities the same as or similar to those being registered by such registration statement, or any securities convertible into or exchangeable or exercisable for such securities, unless such sale or distribution is pursuant to such registration statement. SECTION 10. EXISTING FUND I REGISTRATION RIGHTS. The Company, Energy PLC and EnCap LP agree that effective immediately upon the execution and delivery of this Agreement by the parties hereto: (i) that certain Registration Rights Agreement dated as of November 25, 1997, by and among the Company, Energy PLC and EnCap LP, as amended by that certain Amendment No. 1 to Registration Rights Agreement dated as of May 1, 1998, shall be terminated and be of no further force and effect whatsoever; and (ii) that the registration rights accorded Energy PLC and EnCap LP under that certain April 1997 Agreement dated as of April 28, 1997, by and among the Company, Future Acquisition 1995, Ltd., Energy PLC and EnCap LP shall be terminated and of no further force and effect whatsoever. SECTION 11. OTHER EXISTING OR SUBSEQUENT REGISTRATION RIGHTS. (a) The Company represents and warrants to Energy PLC and EnCap LP that other than the registration rights referenced in Section 10 (which rights are being terminated as provided in such Section), the registration rights granted under this Agreement and the registration rights granted under the Bargo Agreement, the Company is not currently a party to any other agreement whereby it accords any Person any demand or piggy-back registration rights with respect to such Person's Common Stock. (b) Contemporaneously with executing and delivering this Agreement, the Company is executing and delivering that certain (i) Registration Rights Agreement dated as of even date herewith by and between the Company and Bargo Energy Resources, Ltd. (the "BARGO AGREEMENT") and (ii) Registration Rights Agreement dated as of even date herewith by and between the Company, Carl Price, et al. (the "PRICE AGREEMENT"). The Company represents and warrants that it has provided Energy PLC and EnCap LP with a true, complete and -15- 16 accurate copy of the Bargo Agreement and the Price Agreement and agrees that it will not agree to any amendment or other modification to the Bargo Agreement or the Price Agreement without having first received the written consent of the Holders of a majority of the Registrable Securities then outstanding. (c) The Company agrees that it will not hereafter grant to any Person demand registration rights without the prior written consent of the Holders of a majority of the number of Registrable Securities then outstanding. The Company agrees that it will not hereafter grant to any Person any piggy-back registration rights that are inconsistent with or violates the rights granted to the Holders of Registrable Securities under this Agreement. SECTION 12. MISCELLANEOUS. (a) Energy PLC and EnCap LP agree, and each other Holder of Registrable Securities (including Registrable Securities in any registration statement filed pursuant to this Agreement) will be deemed to have agreed, as follows: (i) if any Registrable Securities are being registered in any registration pursuant to this Agreement, the Holder thereof will comply with all anti-stabilization, manipulation and similar provisions of Section 10 of the Exchange Act, as amended, and any rules promulgated thereunder by the Commission and, at the request of the Company, will execute and deliver to the Company and to any underwriter participating in such offering, an appropriate agreement to such effect; and (ii) at the end of any period during which the Company is obligated to keep a registration statement current and effective as described herein, the Holders of Registrable Securities included in the registration statement shall discontinue sales thereof pursuant to such registration statement. (b) All questions concerning the construction, validity and interpretation of this Agreement shall be governed by the internal law, and not the law of conflicts, of the State of Texas. (c) All covenants and agreements in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto. In addition, the rights and obligations under this Agreement shall automatically be transferred to and binding on any transferee or assignee of the Registrable Securities; provided, that (i) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the Registrable Securities with respect to which such registration rights are being transferred or assigned, (ii) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement and (iii) the transfer and assignment of the subject Registrable Securities is in compliance with the Securities Act and applicable state securities -16- 17 laws or an exemption from the registration requirements of the Securities Act and applicable state securities laws. (d) This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter herein contained. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein, with respect to the registration rights granted by the Company to the Holders of the Registrable Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. (e) All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally or sent by reputable express courier service (charges prepaid), or mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid, or sent by telefax, to the parties at the following address (or to such other address or to the attention of such other person as the recipient party has specified by prior like notice to the sending party): If to the Company: Future Petroleum Corporation 2351 West Northwest Highway Dallas, Texas 75220 Telecopier No.: (214)350-8382 Attention: Carl Price If to Energy PLC or EnCap LP: c/o EnCap Investments L.C. 1100 Louisiana Suite 3150 Houston, Texas 77002 Telecopier No.: (713) 659-6130 Attention: Gary R. Petersen, Managing Director (f) If any provision of this Agreement is held to be unenforceable, this Agreement shall be considered divisible and such provision shall be deemed inoperative to the extent it is deemed unenforceable, and in all other respects this Agreement shall remain in full force and effect; provided, however, that if any such provision may be made enforceable by limitation thereof, then such provision shall be deemed to be so limited and shall be enforceable to the maximum extent permitted by applicable law. -17- 18 (g) This Agreement may be executed by the parties hereto in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same agreement. Each counterpart may consist of a number of copies hereof each signed by less than all, but together signed by all, the parties hereto. (h) Each Holder of Registrable Securities, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of breach by it of the provisions of this Agreement and hereby agrees to waive (to the extent permitted by law) the defense in any action for specific performance that a remedy of law would be adequate. (i) In any action or proceeding brought to enforce any provision of this Agreement, or where any provision hereof is validly asserted as a defense, the successful party shall be entitled to recover reasonable attorneys' fees in addition to any other available remedy. (j) The Company agrees to remove any stop transfer orders and similar instructions and any legends on certificates representing Registrable Securities describing transfer restrictions applicable to such securities upon the sale of such securities (i) pursuant to an effective Registration Statement under the Securities Act or (ii) in accordance with the provisions of Rule 144 under the Securities Act. (k) This Agreement may be amended, modified, supplemented, restated or discharged (and provisions hereof may be waived) only by an instrument in writing signed by the Company and the Holders of not less than 95% of the number of Registrable Securities then outstanding. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -18- 19 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. FUTURE PETROLEUM CORPORATION, a Utah corporation By: /s/ CARL PRICE -------------------------------- Name: Carl Price Title: President ENERGY CAPITAL INVESTMENT COMPANY PLC By: /s/ GARY R. PETERSEN -------------------------------- Name: Gary R. Petersen Title : Director ENCAP EQUITY 1994 LIMITED PARTNERSHIP By: EnCap Investments L.C., General Partner By: /s/ GARY R. PETERSEN -------------------------------- Name: Gary R. Petersen Title: Managing Director -19- EX-4.10 6 PLEDGE AGREEMENT (STOCK) 1 EXHIBIT 4.10 PLEDGE AGREEMENT (STOCK) THIS PLEDGE AGREEMENT (this "Pledge Agreement"), dated as of August 14, 1998, made by ENERGY CAPITAL INVESTMENT COMPANY PLC, an English investment company (the "Pledgor"), in favor of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association (the "Lender"). W I T N E S S E T H: WHEREAS, pursuant to the Credit Agreement, dated as of August 14, 1998 (together with all amendments and other modifications, if any, from time to time thereafter made thereto, the "Credit Agreement"), between FUTURE PETROLEUM CORPORATION, a Utah corporation (the "Borrower") and the Lender, the Lender has extended Commitments to make Loans to, and issue Letters of Credit at the request of, the Borrower; and WHEREAS, the Borrower or an Affiliate (as defined in the Credit Agreement) of the Borrower has entered into or may enter into certain Hedging Agreements (as defined in the Credit Agreement) with the Lender or an Affiliate of the Lender, pursuant to the terms of the Credit Agreement; WHEREAS, as a condition precedent to the making of the initial Loan and the issuance of Letters of Credit under the Credit Agreement, and the Lender's or such Affiliate of the Lender's obligations under the Hedging Agreements referred to above, the Pledgor is required to execute and deliver this Pledge Agreement; and WHEREAS, the Pledgor has duly authorized the execution, delivery and performance of this Pledge Agreement; NOW THEREFORE, for good and valuable consideration the receipt of which is hereby acknowledged, and in order to induce the Lender to make Loans (including the initial Loan) to, and to issue Letters of Credit at the request of, the Borrower pursuant to the Credit Agreement, and to induce the Lender or such Affiliate of the Lender to enter into Hedging Agreements with the Borrower or an affiliate of the Borrower, the Pledgor agrees, for the benefit of the Lender, as follows: 2 ARTICLE I DEFINITIONS SECTION 1.1 Certain Terms. The following terms (whether or not underscored) when used in this Pledge Agreement, including its preamble and recitals, shall have the following meanings (such definitions to be equally applicable to the singular and plural forms thereof): "Borrower" is defined in the first recital. "Collateral" is defined in Section 2.1. "Credit Agreement" is defined in the first recital. "Distributions" means all stock dividends, liquidating dividends, shares of stock resulting from (or in connection with the exercise of) stock splits, reclassifications, warrants, options, non-cash dividends, mergers, consolidations, and all other distributions (whether similar or dissimilar to the foregoing) on or with respect to any Pledged Shares or other shares of capital stock constituting Collateral, but shall not include Dividends. "Dividends" means cash dividends and cash distributions with respect to any Pledged Shares or other Pledged Property made in the ordinary course of business and not a liquidating dividend. "Lender" is defined in the preamble. "Pledge Agreement" is defined in the preamble. "Pledged Property" means all Pledged Shares, and all other pledged shares of capital stock, all other securities, all assignments of any amounts due or to become due with respect to the Pledged Shares, all other instruments which are now being delivered by the Pledgor to the Lender or may from time to time hereafter be delivered by the Pledgor to the Lender for the purpose of pledge under this Pledge Agreement or any other Loan Document, and all proceeds of any of the foregoing. "Pledged Share Issuer" means each Person identified in Attachment 1 hereto as the issuer of the Pledged Shares identified opposite the name of such Person. "Pledged Shares" means all shares of capital stock of any Pledged Share Issuer which are delivered by the Pledgor to the Lender as Pledged Property hereunder. "Pledgor" is defined in the preamble. "Secured Obligations" is defined in Section 2.2. -2- 3 "Securities Act" is defined in Section 6.2. "U.C.C." means the Uniform Commercial Code as in effect in the State of Illinois. SECTION 1.2 Credit Agreement Definitions. Unless otherwise defined herein or the context otherwise requires, terms used in this Pledge Agreement, including its preamble and recitals, have the meanings provided in the Credit Agreement. SECTION 1.3 U.C.C. Definitions. Unless otherwise defined herein or the context otherwise requires, terms for which meanings are provided in the U.C.C. are used in this Pledge Agreement, including its preamble and recitals, with such meanings. ARTICLE II PLEDGE SECTION 2.1 Grant of Security Interest. The Pledgor hereby pledges, hypothecates, assigns, charges, mortgages, delivers, and transfers to the Lender, and hereby grants to the Lender a continuing security interest in, all of the following property (the "Collateral"): 2.1.1 All issued and outstanding shares of capital stock of each Pledged Share Issuer identified in Attachment 1 hereto. 2.1.2 All other Pledged Shares issued from time to time. 2.1.3 All other Pledged Property, whether now or hereafter delivered to the Lender in connection with this Pledge Agreement. 2.1.4 All Dividends, Distributions, interest, and other payments and rights with respect to any Pledged Property. 2.1.5 All proceeds of any of the foregoing. SECTION 2.2 Security for Obligations. This Pledge Agreement secures the prompt payment and performance in full of (a) all Obligations now or hereafter existing under the Credit Agreement, the Notes and each other Loan Document, whether for principal, interest, costs, fees, expenses, or otherwise, including without limitation, Reimbursement Obligations, and (b) all other obligations of the Borrower or the Pledgor to the Lender or any Affiliate of the Lender, now or hereafter owing, howsoever created, arising or evidenced, whether direct or indirect, primary or secondary, fixed or absolute or contingent, joint or several, regardless of how evidenced or arising, including without limitation all Hedging Obligations (as defined in the Credit Agreement) arising under the Hedging Agreements, between the Borrower or any other Affiliate or now or hereafter existing or due or to become due and (c) all other obligations of the Borrower or any Affiliate of the Borrower and the -3- 4 Lender or any Affiliate of the Lender, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent or now or hereafter existing or due or to become due (all such Obligations and other obligations being the "Secured Obligations"). SECTION 2.3 Delivery of Pledged Property. All certificates or instruments representing or evidencing any Collateral, including all Pledged Shares, shall be delivered to and held by or on behalf of the Lender pursuant hereto, shall be in suitable form for transfer by delivery, and shall be accompanied by all necessary instruments of transfer or assignment, duly executed in blank. SECTION 2.4 Dividends on Pledged Shares. In the event that any Dividend is to be paid on any Pledged Share at a time when no Default has occurred and is continuing, such Dividend may be paid directly to the Pledgor. If any such Default has occurred and is continuing then any such Dividend shall be paid directly to the Lender. SECTION 2.5 Continuing Security Interest. This Pledge Agreement shall create a continuing security interest in the Collateral and shall 2.5.1 Remain in full force and effect until payment in full of all Secured Obligations and the termination of the Commitments and any other commitments of the Lender to the Pledgor, 2.5.2 Be binding upon the Pledgor and its successors, transferees and assigns, and 2.5.3 Inure to the benefit of the Lender and its successors, transferees, and assigns. Without limiting the foregoing clause (c), the Lender may assign or otherwise transfer (in whole or in part) any Note or Loan to any other Person or entity, and such other Person or entity shall thereupon become vested with all the rights and benefits in respect thereof granted to the Lender under any Loan Document (including this Pledge Agreement) or otherwise, subject, however, to any contrary provisions in such assignment or transfer, and to the provisions of Section 10.11 of the Credit Agreement. Upon the indefeasible payment in full of all principal and interest comprising the Secured Obligations and the termination of the Commitments and any other commitments of the Lender to the Pledgor, the security interest granted herein shall terminate and all rights to the Collateral shall revert to the Pledgor. Upon any such termination, the Lender will, at the Pledgor's sole expense, deliver to the Pledgor, without any representations, warranties or recourse of any kind whatsoever, all certificates and instruments representing or evidencing all Pledged Shares, together with all other Collateral held by the Lender hereunder, and execute and deliver to the Pledgor such documents as the Pledgor shall reasonably request to evidence such termination. -4- 5 ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.1 Warranties, etc. The Pledgor represents and warrants unto the Lender, as at the date of each pledge and delivery hereunder (including each pledge and delivery of Pledged Shares) by the Pledgor to the Lender of any Collateral, as set forth in this Article. 3.1.1 Ownership, No Liens, etc. The Pledgor is the legal and beneficial owner of, and has good and marketable title to (and has full right and authority to pledge and assign) such Collateral, free and clear of all liens, security interests, options, or other charges or encumbrances, except any lien or security interest granted pursuant hereto in favor of the Lender. 3.1.2 Valid Security Interest. The delivery of such Collateral to the Lender together with stock powers endorsed in blank is effective to create a valid, perfected, first priority security interest in such Collateral and all proceeds thereof, securing the Secured Obligations. No filing or other action will be necessary to perfect or protect such security interest. 3.1.3 As to Pledged Shares. In the case of any Pledged Shares constituting such Collateral, all of such Pledged Shares are duly authorized and validly issued, fully paid, and non-assessable, and constitute 17.80% of the issued and outstanding shares of capital stock of each Pledged Share Issuer. 3.1.4 Authorization, Approval, etc. No authorization, approval, or other action by, and no notice to or filing with, any governmental authority, regulatory body or any other Person is required either (a) for the pledge by the Pledgor of any Collateral pursuant to this Pledge Agreement or for the execution, delivery, and performance of this Pledge Agreement by the Pledgor, or (b) for the exercise by the Lender of the voting or other rights provided for in this Pledge Agreement, or, except with respect to any Pledged Shares, as may be required in connection with a disposition of such Pledged Shares by laws affecting the offering and sale of securities generally, the remedies in respect of the Collateral pursuant to this Pledge Agreement. 3.1.5 Compliance with Laws. The Pledgor is in compliance with the requirements of all applicable laws (including, without limitation, the provisions of the Fair Labor Standards Act), rules, regulations and orders of every governmental authority, the non-compliance with which could materially adversely affect the business, properties, assets, -5- 6 operations, condition (financial or otherwise) or prospects of the Pledgor or the value of the Collateral or the worth of the Collateral as collateral security. ARTICLE IV COVENANTS SECTION 4.1 Protect Collateral; Further Assurances, etc. The Pledgor will not sell, assign, transfer, pledge, or encumber in any other manner the Collateral (except in favor of the Lender hereunder). The Pledgor will warrant and defend the right and title herein granted unto the Lender in and to the Collateral (and all right, title, and interest represented by the Collateral) against the claims and demands of all Persons whomsoever. The Pledgor agrees that at any time, and from time to time, at the expense of the Pledgor, the Pledgor will promptly execute and deliver all further instruments, and take all further action, that may be necessary or desirable, or that the Lender may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Lender to exercise and enforce its rights and remedies hereunder with respect to any Collateral. SECTION 4.2 Stock Powers, etc. The Pledgor agrees that all Pledged Shares (and all other shares of capital stock constituting Collateral) delivered by the Pledgor pursuant to this Pledge Agreement will be accompanied by duly executed undated blank stock powers, or other equivalent instruments of transfer acceptable to the Lender. The Pledgor will, from time to time upon the request of the Lender, promptly deliver to the Lender such stock powers, instruments, and similar documents, satisfactory in form and substance to the Lender, with respect to the Collateral as the Lender may reasonably request and will, from time to time upon the request of the Lender after the occurrence of any Event of Default, promptly transfer any Pledged Shares or other shares of common stock constituting Collateral into the name of any nominee designated by the Lender. SECTION 4.3 Continuous Pledge. Subject to Section 2.4, the Pledgor will, at all times, keep pledged to the Lender pursuant hereto all Pledged Shares and all other shares of capital stock constituting Collateral, all Dividends and Distributions with respect thereto, and all other Collateral and other securities, instruments, proceeds, and rights from time to time received by or distributable to the Pledgor in respect of any Collateral. SECTION 4.4 Voting Rights; Dividends, etc. The Pledgor agrees: 4.4.1 After any Default shall have occurred and be continuing, promptly upon receipt thereof by the Pledgor and without any request therefor by the Lender, to deliver (properly endorsed where required hereby or requested by the Lender) to the Lender all Dividends, Distributions, all interest, all principal, all other cash payments, and all proceeds of the Collateral, all of which shall be held by the Lender as additional Collateral for use in accordance with Section 6.4; and -6- 7 4.4.2 After any Event of Default shall have occurred and be continuing and the Lender has notified the Pledgor of the Lender's intention to exercise its voting power under this Section 4.4.2 (a) the Lender may exercise (to the exclusion of the Pledgor) the voting power and all other incidental rights of ownership with respect to any Pledged Shares or other shares of capital stock constituting Collateral and the Pledgor hereby grants the Lender an irrevocable proxy, exercisable under such circumstances, to vote the Pledged Shares and such other Collateral, and (b) promptly to deliver to the Lender such additional proxies and other documents as may be necessary to allow the Lender to exercise such voting power. All Dividends, Distributions, interest, principal, cash payments, and proceeds which may at any time and from time to time be held by the Pledgor but which the Pledgor is then obligated to deliver to the Lender, shall, until delivery to the Lender, be held by the Pledgor separate and apart from its other property in trust for the Lender. The Lender agrees that unless an Event of Default shall have occurred and be continuing and the Lender shall have given the notice referred to in Section 4.4.2, the Pledgor shall have the exclusive voting power with respect to any shares of capital stock (including any of the Pledged Shares) constituting Collateral and the Lender shall, upon the written request of the Pledgor, promptly deliver such proxies and other documents, if any, as shall be reasonably requested by the Pledgor which are necessary to allow the Pledgor to exercise voting power with respect to any such share of capital stock (including any of the Pledged Shares) constituting Collateral; provided, however, that no vote shall be cast, or consent, waiver, or ratification given, or action taken by the Pledgor that would cause an Event of Default, impair any Collateral or be inconsistent with or violate any provision of the Credit Agreement or any other Loan Document (including this Pledge Agreement). SECTION 4.5 Additional Undertakings. The Pledgor will not, without the prior written consent of the Lender, (a) sell, assign, transfer, pledge, or encumber in any other manner Pledgor's interest in the Pledged Share Issuer, or (b) permit any of the assets of the Pledged Share Issuer to be sold, assigned, transferred, pledged, or encumbered in any other manner. ARTICLE V THE LENDER SECTION 5.1 Lender Appointed Attorney-in-Fact. The Pledgor hereby irrevocably appoints the Lender the Pledgor's attorney-in-fact, with full authority in the place and stead of the Pledgor and in the name of the Pledgor or otherwise, from time to time in the Lender's discretion, to take any action and to execute any instrument which the Lender may deem necessary or advisable to accomplish the purposes of this Pledge Agreement, including without limitation: -7- 8 5.1.1 After the occurrence and continuance of a Default, to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral. 5.1.2 To receive, endorse, and collect any drafts or other instruments, documents and chattel paper, in connection with Section 5.1.1 above. 5.1.3 To file any claims or take any action or institute any proceedings which the Lender may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Lender with respect to any of the Collateral. The Pledgor hereby acknowledges, consents and agrees that the power of attorney granted pursuant to this Section is irrevocable and coupled with an interest. Notwithstanding the foregoing, prior to the occurrence of an Event of Default, the Lender agrees that it shall first request that the Pledgor perform such action and, if the Pledgor shall not have performed such action within five (5) days following such request, the Lender shall be entitled to take such action pursuant hereto. SECTION 5.2 Lender May Perform. If the Pledgor fails to perform any agreement contained herein after being requested in writing to so perform, the Lender may itself perform, or cause performance of, such agreement, and the reasonable expenses of the Lender incurred in connection therewith shall be payable by the Pledgor pursuant to Section 6.5. SECTION 5.3 Lender Has No Duty. The powers conferred on the Lender hereunder are solely to protect its interest in the Collateral and shall not impose any duty on it to exercise any such powers. Except for the reasonable care of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Lender shall have no duty as to any Collateral or responsibility for (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Pledged Property, whether or not the Lender has or is deemed to have knowledge of such matters, or (b) taking any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. SECTION 5.4 Reasonable Care. The Lender is required to exercise reasonable care in the custody and preservation of any of the Collateral in its possession; provided, however, the Lender shall be deemed to have exercised reasonable care in the custody and preservation of any of the Collateral, if it takes such action for that purpose as the Pledgor reasonably requests in writing at times other than upon the occurrence and during the continuance of any Event of Default, but failure of the Lender to comply with any such request at any time shall not in itself be deemed a failure to exercise reasonable care. -8- 9 ARTICLE VI REMEDIES SECTION 6.1 Certain Remedies. If any Event of Default shall have occurred and be continuing: 6.1.1 The Lender may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the U.C.C. (whether or not the U.C.C. applies to the affected Collateral) and also may, without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Lender's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Lender may deem commercially reasonable. The Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten days' prior notice to the Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Lender shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Lender may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. 6.1.2 The Lender may (a) transfer all or any part of the Collateral into the name of the Lender or its nominee, with or without disclosing that such Collateral is subject to the lien and security interest hereunder; (b) notify the parties obligated on any of the Collateral to make payment to the Lender of any amount due or to become due thereunder; (c) enforce collection of any of the Collateral by suit or otherwise, and surrender, release or exchange all or any part thereof, or compromise or extend or renew for any period (whether or not longer than the original period) any obligations of any nature of any party with respect thereto; (d) endorse any checks, drafts, or other writings in the Pledgor's name to allow collection of the Collateral; (e) take control of any proceeds of the Collateral; and -9- 10 (f) execute (in the name, place and stead of the Pledgor) endorsements, assignments, stock powers and other instruments of conveyance or transfer with respect to all or any of the Collateral. SECTION 6.2 Securities Laws. If the Lender shall determine to exercise its right to sell all or any of the Collateral pursuant to Section 6.1, the Pledgor agrees that, upon request of the Lender, the Pledgor will, at its own expense: 6.2.1 Execute and deliver, and cause each issuer of the Collateral contemplated to be sold and the directors and officers thereof to execute and deliver (in each case to the extent required by law), all such instruments and documents, and do or cause to be done all such other acts and things, as may be necessary or, in the opinion of the Lender, advisable to register such Collateral under, or otherwise permit the Collateral to be privately sold or transferred in compliance with, the provisions of the Securities Act of 1933, as from time to time amended (the "Securities Act"), and to cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law to be furnished, and to make all amendments and supplements thereto and to the related prospectus which, in the opinion of the Lender, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. 6.2.2 Use its best efforts to qualify the Collateral under, or to permit the Collateral to be privately sold or transferred in compliance with, the state securities or "Blue Sky" laws and to obtain all necessary governmental approvals for the sale of the Collateral, as requested by the Lender. 6.2.3 Cause each such issuer to make available to its security holders, as soon as practicable, an earnings statement that will satisfy the provisions of Section 11(a) of the Securities Act. 6.2.4 Do or cause to be done all such other acts and things as may be necessary to make such sale of the Collateral or any part thereof valid and binding and in compliance with applicable law. SECTION 6.3 Compliance with Restrictions. The Pledgor agrees that in any sale of any of the Collateral whenever an Event of Default shall have occurred and be continuing, the Lender is hereby authorized to comply with any limitation or restriction in connection with such sale as it may be advised by counsel is necessary in order to avoid any violation of applicable law (including compliance with such procedures as may restrict the number of prospective bidders and purchasers, require that such prospective bidders and purchasers have certain qualifications, and restrict such prospective bidders and purchasers to persons who will represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or resale of such Collateral), or in order to obtain any required approval of the sale or of the purchaser by any -10- 11 governmental regulatory authority or official, and the Pledgor further agrees that such compliance shall not result in such sale being considered or deemed not to have been made in a commercially reasonable manner, nor shall the Lender be liable nor accountable to the Pledgor for any discount allowed by the reason of the fact that such Collateral is sold in compliance with any such limitation or restriction. SECTION 6.4 Application of Proceeds. All cash proceeds received by the Lender in respect of any sale of, collection from, or other realization upon, all or any part of the Collateral may, in the discretion of the Lender, be held by the Lender as additional collateral security for, or then or at any time thereafter be applied (after payment of any amounts payable to the Lender pursuant to Sections 10.3 and 10.4 of the Credit Agreement and Section 6.5 hereof) in whole or in part by the Lender against, all or any part of the Secured Obligations in such order as the Lender shall elect. Any surplus of such cash or cash proceeds held by the Lender and remaining after payment in full of all the Secured Obligations, and the termination of all Commitments and any other commitments by the Lender to the Pledgor, shall be paid over to the Pledgor or to whomsoever may be lawfully entitled to receive such surplus. SECTION 6.5 Indemnity and Expenses. The Pledgor hereby indemnifies and holds harmless the Lender from and against any and all claims, losses, and liabilities arising out of or resulting from this Pledge Agreement (including enforcement of this Pledge Agreement), except claims, losses, or liabilities resulting from the Lender's gross negligence or wilful misconduct. Upon demand, the Pledgor will pay to the Lender the amount of any and all reasonable expenses, including the reasonable fees and disbursements of its counsel and of any experts and agents, which the Lender may incur in connection with: (a) the exercise or enforcement of any of the rights of the Lender hereunder; or (b) the failure by the Pledgor to perform or observe any of the provisions hereof. ARTICLE VII MISCELLANEOUS PROVISIONS SECTION 7.1 Loan Document. This Pledge Agreement is a Loan Document executed pursuant to the Credit Agreement and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with the terms and provisions thereof. SECTION 7.2 Amendments, etc. No amendment to or waiver of any provision of this Pledge Agreement nor consent to any departure by the Pledgor herefrom shall in any event be effective unless the same shall be in writing and signed by the Lender, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it is given. -11- 12 SECTION 7.3 Protection of Collateral. The Lender may from time to time, at its option, perform any act which the Pledgor agrees hereunder to perform and which the Pledgor shall fail to perform after being requested in writing so to perform (it being understood that no such request need be given after the occurrence and during the continuance of an Event of Default) and the Lender may from time to time take any other action which the Lender reasonably deems necessary for the maintenance, preservation or protection of any of the Collateral or of its security interest therein. SECTION 7.4 Addresses for Notices. All notices and other communications provided to any party hereto under this Pledge Agreement shall be in writing and shall be hand delivered or sent by a nationally recognized overnight courier, certified mail (return receipt requested), or telecopy to such party at its address or telecopy number set forth on the signature pages hereof or at such other address or telecopy number as may be designated by such party in a notice to the other party. Without limiting any other means by which a party may be able to provide that a notice has been received by the other party, a notice shall be deemed to be duly received (a) if sent by hand, on the date when left with a responsible person at the address of the recipient; (b) if sent by certified mail, on the fifth business day after delivery to the U.S. Post Office; (c) if sent by overnight courier, on the first business day after delivery to such courier; or (d) if sent by telecopy, on the date of receipt by the sender of an acknowledgment or transmission reports generated by the machine from which the telecopy was sent indicating that the telecopy was sent in its entirety to the recipient's telecopy number. SECTION 7.5 Section Captions. Section captions used in this Pledge Agreement are for convenience of reference only, and shall not affect the construction of this Pledge Agreement. SECTION 7.6 Severability. Wherever possible each provision of this Pledge Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Pledge Agreement shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Pledge Agreement. SECTION 7.7 The Lender as Agent for its Affiliates. As described above, certain Affiliates of the Lender are or may become parties to certain Hedging Agreements with the Pledgor and/or Affiliates of the Pledgor. This Pledge Agreement secures the obligations of the Pledgor and such Affiliates, as the case may be, under such Hedging Agreements, and the parties hereto acknowledge for all purposes that the Lender acts as agent on behalf of such Affiliates of the Lender which are so entitled to share in the rights and benefits accruing to the Lender under this Pledge Agreement. SECTION 7.8 Governing Law, Entire Agreement, etc. THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF -12- 13 ILLINOIS. THIS PLEDGE AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO. SECTION 7.9 Non-Recourse Nature of Liability. (a) Notwithstanding anything to the contrary contained or implied in this Pledge Agreement, the Pledgor shall not be personally liable under any theory for any amount due under the Credit Agreement, the Notes or such other Loan Documents, and the Lender shall not seek a deficiency or personal judgment against the Pledgor for payment of the Obligations evidenced by the Credit Agreement, the Notes or such other Loan Documents. No property or assets of the Pledgor, other than the Collateral pledged pursuant to this Pledge Agreement, shall be sold, levied upon or otherwise used to satisfy any judgment rendered in connection with any action brought against the Borrower or its Subsidiaries with respect to this Pledge Agreement, the Credit Agreement, the Notes or such other Loan Documents. (b) Notwithstanding the provisions of Section 7.9(a) to the contrary, nothing contained in this Pledge Agreement, the Credit Agreement or any other Loan Document shall be construed to (i) impair or limit the rights of the Lender arising under this Pledge Agreement, or any other Security Document or other documents to which the Pledgor is a party thereto in its individual capacity; (ii) impair or limit any of the Obligations of the Borrower or its Subsidiaries under any Loan Document to which it is a party; (iii) impair or limit the validity of the indebtedness evidenced by this Pledge Agreement, the Credit Agreement, the Notes or the other Loan Documents or prevent the taking of any action permitted by law against the Borrower or its Subsidiaries or the assets of the Borrower or its Subsidiaries or the proceeds of such assets; or (iv) prevent the commencement of any action, suit or proceeding against any Person (or prevent the service of papers under any Person) for the purpose of obtaining jurisdiction over the Borrower or its Subsidiaries. -13- 14 IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the day and year first above written. ENERGY CAPITAL INVESTMENT COMPANY PLC, an English investment company By: /s/ GARY R. PETERSEN --------------------------------- Name: Gary R. Petersen Title: Director Address: 1100 Louisiana Street Suite 3150 Houston, Texas 77002 Facsimile No.: (713) 659-6130 Attention: Gary R. Petersen -14- 15 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: /s/ RICHARD A. BERNARDY ------------------------------------- Name: Richard A. Bernardy Title: Vice President Address: 333 Clay Street Suite 4550 Houston, TX 77002 Facsimile No.: (713) 651-4888 Attention: Richard A. Bernardy -15- 16 ATTACHMENT 1 to Pledge Agreement Pledged Shares
Pledged Share Issuer Common Stock - -------------------- ----------------------------------------------------------- Authorized Outstanding Number of Shares % of Shares Shares Shares Pledged Pledged ---------- ----------- ---------------- ----------- Future Petroleum Corporation, 30,000,000 12,757,015 2,269,886 17.80% a Utah corporation
-1- EX-4.11 7 PLEDGE AGREEMENT (STOCK) 1 EXHIBIT 4.11 PLEDGE AGREEMENT (STOCK) THIS PLEDGE AGREEMENT (this "Pledge Agreement"), dated as of August 14, 1998, made by ENCAP EQUITY 1994 LIMITED PARTNERSHIP, a Texas limited partnership (the "Pledgor"), in favor of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association (the "Lender"). W I T N E S S E T H: WHEREAS, pursuant to the Credit Agreement, dated as of August 14, 1998 (together with all amendments and other modifications, if any, from time to time thereafter made thereto, the "Credit Agreement"), between FUTURE PETROLEUM CORPORATION, a Utah corporation (the "Borrower") and the Lender, the Lender has extended Commitments to make Loans to, and issue Letters of Credit at the request of, the Borrower; and WHEREAS, the Borrower or an Affiliate (as defined in the Credit Agreement) of the Borrower has entered into or may enter into certain Hedging Agreements (as defined in the Credit Agreement) with the Lender or an Affiliate of the Lender, pursuant to the terms of the Credit Agreement; WHEREAS, as a condition precedent to the making of the initial Loan and the issuance of Letters of Credit under the Credit Agreement, and the Lender's or such Affiliate of the Lender's obligations under the Hedging Agreements referred to above, the Pledgor is required to execute and deliver this Pledge Agreement; and WHEREAS, the Pledgor has duly authorized the execution, delivery and performance of this Pledge Agreement; NOW THEREFORE, for good and valuable consideration the receipt of which is hereby acknowledged, and in order to induce the Lender to make Loans (including the initial Loan) to, and to issue Letters of Credit at the request of, the Borrower pursuant to the Credit Agreement, and to induce the Lender or such Affiliate of the Lender to enter into Hedging Agreements with the Borrower or an affiliate of the Borrower, the Pledgor agrees, for the benefit of the Lender, as follows: 2 ARTICLE I DEFINITIONS SECTION 1.1 Certain Terms. The following terms (whether or not underscored) when used in this Pledge Agreement, including its preamble and recitals, shall have the following meanings (such definitions to be equally applicable to the singular and plural forms thereof): "Borrower" is defined in the first recital. "Collateral" is defined in Section 2.1. "Credit Agreement" is defined in the first recital. "Distributions" means all stock dividends, liquidating dividends, shares of stock resulting from (or in connection with the exercise of) stock splits, reclassifications, warrants, options, non-cash dividends, mergers, consolidations, and all other distributions (whether similar or dissimilar to the foregoing) on or with respect to any Pledged Shares or other shares of capital stock constituting Collateral, but shall not include Dividends. "Dividends" means cash dividends and cash distributions with respect to any Pledged Shares or other Pledged Property made in the ordinary course of business and not a liquidating dividend. "Lender" is defined in the preamble. "Pledge Agreement" is defined in the preamble. "Pledged Property" means all Pledged Shares, and all other pledged shares of capital stock, all other securities, all assignments of any amounts due or to become due with respect to the Pledged Shares, all other instruments which are now being delivered by the Pledgor to the Lender or may from time to time hereafter be delivered by the Pledgor to the Lender for the purpose of pledge under this Pledge Agreement or any other Loan Document, and all proceeds of any of the foregoing. "Pledged Share Issuer" means each Person identified in Attachment 1 hereto as the issuer of the Pledged Shares identified opposite the name of such Person. "Pledged Shares" means all shares of capital stock of any Pledged Share Issuer which are delivered by the Pledgor to the Lender as Pledged Property hereunder. "Pledgor" is defined in the preamble. "Secured Obligations" is defined in Section 2.2. -2- 3 "Securities Act" is defined in Section 6.2. "U.C.C." means the Uniform Commercial Code as in effect in the State of Illinois. SECTION 1.2 Credit Agreement Definitions. Unless otherwise defined herein or the context otherwise requires, terms used in this Pledge Agreement, including its preamble and recitals, have the meanings provided in the Credit Agreement. SECTION 1.3 U.C.C. Definitions. Unless otherwise defined herein or the context otherwise requires, terms for which meanings are provided in the U.C.C. are used in this Pledge Agreement, including its preamble and recitals, with such meanings. ARTICLE II PLEDGE SECTION 2.1 Grant of Security Interest. The Pledgor hereby pledges, hypothecates, assigns, charges, mortgages, delivers, and transfers to the Lender, and hereby grants to the Lender a continuing security interest in, all of the following property (the "Collateral"): 2.1.1 All issued and outstanding shares of capital stock of each Pledged Share Issuer identified in Attachment 1 hereto. 2.1.2 All other Pledged Shares issued from time to time. 2.1.3 All other Pledged Property, whether now or hereafter delivered to the Lender in connection with this Pledge Agreement. 2.1.4 All Dividends, Distributions, interest, and other payments and rights with respect to any Pledged Property. 2.1.5 All proceeds of any of the foregoing. SECTION 2.2 Security for Obligations. This Pledge Agreement secures the prompt payment and performance in full of (a) all Obligations now or hereafter existing under the Credit Agreement, the Notes and each other Loan Document, whether for principal, interest, costs, fees, expenses, or otherwise, including without limitation, Reimbursement Obligations, and (b) all other obligations of the Borrower or the Pledgor to the Lender or any Affiliate of the Lender, now or hereafter owing, howsoever created, arising or evidenced, whether direct or indirect, primary or secondary, fixed or absolute or contingent, joint or several, regardless of how evidenced or arising, including without limitation all Hedging Obligations (as defined in the Credit Agreement) arising under the Hedging Agreements, between the Borrower or any other Affiliate or now or hereafter existing or due or to -3- 4 become due and (c) all other obligations of the Borrower or any Affiliate of the Borrower and the Lender or any Affiliate of the Lender, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent or now or hereafter existing or due or to become due (all such Obligations and other obligations being the "Secured Obligations"). SECTION 2.3 Delivery of Pledged Property. All certificates or instruments representing or evidencing any Collateral, including all Pledged Shares, shall be delivered to and held by or on behalf of the Lender pursuant hereto, shall be in suitable form for transfer by delivery, and shall be accompanied by all necessary instruments of transfer or assignment, duly executed in blank. SECTION 2.4 Dividends on Pledged Shares. In the event that any Dividend is to be paid on any Pledged Share at a time when no Default has occurred and is continuing, such Dividend may be paid directly to the Pledgor. If any such Default has occurred and is continuing then any such Dividend shall be paid directly to the Lender. SECTION 2.5 Continuing Security Interest. This Pledge Agreement shall create a continuing security interest in the Collateral and shall 2.5.1 Remain in full force and effect until payment in full of all Secured Obligations and the termination of the Commitments and any other commitments of the Lender to the Pledgor, 2.5.2 Be binding upon the Pledgor and its successors, transferees and assigns, and 2.5.3 Inure to the benefit of the Lender and its successors, transferees, and assigns. Without limiting the foregoing clause (c), the Lender may assign or otherwise transfer (in whole or in part) any Note or Loan to any other Person or entity, and such other Person or entity shall thereupon become vested with all the rights and benefits in respect thereof granted to the Lender under any Loan Document (including this Pledge Agreement) or otherwise, subject, however, to any contrary provisions in such assignment or transfer, and to the provisions of Section 10.11 of the Credit Agreement. Upon the indefeasible payment in full of all principal and interest comprising the Secured Obligations and the termination of the Commitments and any other commitments of the Lender to the Pledgor, the security interest granted herein shall terminate and all rights to the Collateral shall revert to the Pledgor. Upon any such termination, the Lender will, at the Pledgor's sole expense, deliver to the Pledgor, without any representations, warranties or recourse of any kind whatsoever, all certificates and instruments representing or evidencing all Pledged Shares, together with all other Collateral held by the Lender hereunder, and execute and deliver to the Pledgor such documents as the Pledgor shall reasonably request to evidence such termination. -4- 5 ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.1 Warranties, etc. The Pledgor represents and warrants unto the Lender, as at the date of each pledge and delivery hereunder (including each pledge and delivery of Pledged Shares) by the Pledgor to the Lender of any Collateral, as set forth in this Article. 3.1.1 Ownership, No Liens, etc. The Pledgor is the legal and beneficial owner of, and has good and marketable title to (and has full right and authority to pledge and assign) such Collateral, free and clear of all liens, security interests, options, or other charges or encumbrances, except any lien or security interest granted pursuant hereto in favor of the Lender. 3.1.2 Valid Security Interest. The delivery of such Collateral to the Lender together with stock powers endorsed in blank is effective to create a valid, perfected, first priority security interest in such Collateral and all proceeds thereof, securing the Secured Obligations. No filing or other action will be necessary to perfect or protect such security interest. 3.1.3 As to Pledged Shares. In the case of any Pledged Shares constituting such Collateral, all of such Pledged Shares are duly authorized and validly issued, fully paid, and non-assessable, and constitute 19.01% of the issued and outstanding shares of capital stock of each Pledged Share Issuer. 3.1.4 Authorization, Approval, etc. No authorization, approval, or other action by, and no notice to or filing with, any governmental authority, regulatory body or any other Person is required either (a) for the pledge by the Pledgor of any Collateral pursuant to this Pledge Agreement or for the execution, delivery, and performance of this Pledge Agreement by the Pledgor, or (b) for the exercise by the Lender of the voting or other rights provided for in this Pledge Agreement, or, except with respect to any Pledged Shares, as may be required in connection with a disposition of such Pledged Shares by laws affecting the offering and sale of securities generally, the remedies in respect of the Collateral pursuant to this Pledge Agreement. 3.1.5 Compliance with Laws. The Pledgor is in compliance with the requirements of all applicable laws (including, without limitation, the provisions of the Fair Labor Standards Act), rules, regulations and orders of every governmental authority, the non-compliance with which could materially adversely affect the business, properties, assets, -5- 6 operations, condition (financial or otherwise) or prospects of the Pledgor or the value of the Collateral or the worth of the Collateral as collateral security. ARTICLE IV COVENANTS SECTION 4.1 Protect Collateral; Further Assurances, etc. The Pledgor will not sell, assign, transfer, pledge, or encumber in any other manner the Collateral (except in favor of the Lender hereunder). The Pledgor will warrant and defend the right and title herein granted unto the Lender in and to the Collateral (and all right, title, and interest represented by the Collateral) against the claims and demands of all Persons whomsoever. The Pledgor agrees that at any time, and from time to time, at the expense of the Pledgor, the Pledgor will promptly execute and deliver all further instruments, and take all further action, that may be necessary or desirable, or that the Lender may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Lender to exercise and enforce its rights and remedies hereunder with respect to any Collateral. SECTION 4.2 Stock Powers, etc. The Pledgor agrees that all Pledged Shares (and all other shares of capital stock constituting Collateral) delivered by the Pledgor pursuant to this Pledge Agreement will be accompanied by duly executed undated blank stock powers, or other equivalent instruments of transfer acceptable to the Lender. The Pledgor will, from time to time upon the request of the Lender, promptly deliver to the Lender such stock powers, instruments, and similar documents, satisfactory in form and substance to the Lender, with respect to the Collateral as the Lender may reasonably request and will, from time to time upon the request of the Lender after the occurrence of any Event of Default, promptly transfer any Pledged Shares or other shares of common stock constituting Collateral into the name of any nominee designated by the Lender. SECTION 4.3 Continuous Pledge. Subject to Section 2.4, the Pledgor will, at all times, keep pledged to the Lender pursuant hereto all Pledged Shares and all other shares of capital stock constituting Collateral, all Dividends and Distributions with respect thereto, and all other Collateral and other securities, instruments, proceeds, and rights from time to time received by or distributable to the Pledgor in respect of any Collateral. SECTION 4.4 Voting Rights; Dividends, etc. The Pledgor agrees: 4.4.1 After any Default shall have occurred and be continuing, promptly upon receipt thereof by the Pledgor and without any request therefor by the Lender, to deliver (properly endorsed where required hereby or requested by the Lender) to the Lender all Dividends, Distributions, all interest, all principal, all other cash payments, and all proceeds of the Collateral, all of which shall be held by the Lender as additional Collateral for use in accordance with Section 6.4; and -6- 7 4.4.2 After any Event of Default shall have occurred and be continuing and the Lender has notified the Pledgor of the Lender's intention to exercise its voting power under this Section 4.4.2 (a) the Lender may exercise (to the exclusion of the Pledgor) the voting power and all other incidental rights of ownership with respect to any Pledged Shares or other shares of capital stock constituting Collateral and the Pledgor hereby grants the Lender an irrevocable proxy, exercisable under such circumstances, to vote the Pledged Shares and such other Collateral, and (b) promptly to deliver to the Lender such additional proxies and other documents as may be necessary to allow the Lender to exercise such voting power. All Dividends, Distributions, interest, principal, cash payments, and proceeds which may at any time and from time to time be held by the Pledgor but which the Pledgor is then obligated to deliver to the Lender, shall, until delivery to the Lender, be held by the Pledgor separate and apart from its other property in trust for the Lender. The Lender agrees that unless an Event of Default shall have occurred and be continuing and the Lender shall have given the notice referred to in Section 4.4.2, the Pledgor shall have the exclusive voting power with respect to any shares of capital stock (including any of the Pledged Shares) constituting Collateral and the Lender shall, upon the written request of the Pledgor, promptly deliver such proxies and other documents, if any, as shall be reasonably requested by the Pledgor which are necessary to allow the Pledgor to exercise voting power with respect to any such share of capital stock (including any of the Pledged Shares) constituting Collateral; provided, however, that no vote shall be cast, or consent, waiver, or ratification given, or action taken by the Pledgor that would cause an Event of Default, impair any Collateral or be inconsistent with or violate any provision of the Credit Agreement or any other Loan Document (including this Pledge Agreement). SECTION 4.5 Additional Undertakings. The Pledgor will not, without the prior written consent of the Lender, (a) sell, assign, transfer, pledge, or encumber in any other manner Pledgor's interest in the Pledged Share Issuer, or (b) permit any of the assets of the Pledged Share Issuer to be sold, assigned, transferred, pledged, or encumbered in any other manner. ARTICLE V THE LENDER SECTION 5.1 Lender Appointed Attorney-in-Fact. The Pledgor hereby irrevocably appoints the Lender the Pledgor's attorney-in-fact, with full authority in the place and stead of the Pledgor and in the name of the Pledgor or otherwise, from time to time in the Lender's discretion, to take any action and to execute any instrument which the Lender may deem necessary or advisable to accomplish the purposes of this Pledge Agreement, including without limitation: -7- 8 5.1.1 After the occurrence and continuance of a Default, to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral. 5.1.2 To receive, endorse, and collect any drafts or other instruments, documents and chattel paper, in connection with Section 5.1.1 above. 5.1.3 To file any claims or take any action or institute any proceedings which the Lender may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Lender with respect to any of the Collateral. The Pledgor hereby acknowledges, consents and agrees that the power of attorney granted pursuant to this Section is irrevocable and coupled with an interest. Notwithstanding the foregoing, prior to the occurrence of an Event of Default, the Lender agrees that it shall first request that the Pledgor perform such action and, if the Pledgor shall not have performed such action within five (5) days following such request, the Lender shall be entitled to take such action pursuant hereto. SECTION 5.2 Lender May Perform. If the Pledgor fails to perform any agreement contained herein after being requested in writing to so perform, the Lender may itself perform, or cause performance of, such agreement, and the reasonable expenses of the Lender incurred in connection therewith shall be payable by the Pledgor pursuant to Section 6.5. SECTION 5.3 Lender Has No Duty. The powers conferred on the Lender hereunder are solely to protect its interest in the Collateral and shall not impose any duty on it to exercise any such powers. Except for the reasonable care of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Lender shall have no duty as to any Collateral or responsibility for (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Pledged Property, whether or not the Lender has or is deemed to have knowledge of such matters, or (b) taking any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. SECTION 5.4 Reasonable Care. The Lender is required to exercise reasonable care in the custody and preservation of any of the Collateral in its possession; provided, however, the Lender shall be deemed to have exercised reasonable care in the custody and preservation of any of the Collateral, if it takes such action for that purpose as the Pledgor reasonably requests in writing at times other than upon the occurrence and during the continuance of any Event of Default, but failure of the Lender to comply with any such request at any time shall not in itself be deemed a failure to exercise reasonable care. -8- 9 ARTICLE VI REMEDIES SECTION 6.1 Certain Remedies. If any Event of Default shall have occurred and be continuing: 6.1.1 The Lender may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the U.C.C. (whether or not the U.C.C. applies to the affected Collateral) and also may, without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Lender's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Lender may deem commercially reasonable. The Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten days' prior notice to the Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Lender shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Lender may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. 6.1.2 The Lender may (a) transfer all or any part of the Collateral into the name of the Lender or its nominee, with or without disclosing that such Collateral is subject to the lien and security interest hereunder; (b) notify the parties obligated on any of the Collateral to make payment to the Lender of any amount due or to become due thereunder; (c) enforce collection of any of the Collateral by suit or otherwise, and surrender, release or exchange all or any part thereof, or compromise or extend or renew for any period (whether or not longer than the original period) any obligations of any nature of any party with respect thereto; (d) endorse any checks, drafts, or other writings in the Pledgor's name to allow collection of the Collateral; (e) take control of any proceeds of the Collateral; and -9- 10 (f) execute (in the name, place and stead of the Pledgor) endorsements, assignments, stock powers and other instruments of conveyance or transfer with respect to all or any of the Collateral. SECTION 6.2 Securities Laws. If the Lender shall determine to exercise its right to sell all or any of the Collateral pursuant to Section 6.1, the Pledgor agrees that, upon request of the Lender, the Pledgor will, at its own expense: 6.2.1 Execute and deliver, and cause each issuer of the Collateral contemplated to be sold and the directors and officers thereof to execute and deliver (in each case to the extent required by law), all such instruments and documents, and do or cause to be done all such other acts and things, as may be necessary or, in the opinion of the Lender, advisable to register such Collateral under, or otherwise permit the Collateral to be privately sold or transferred in compliance with, the provisions of the Securities Act of 1933, as from time to time amended (the "Securities Act"), and to cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law to be furnished, and to make all amendments and supplements thereto and to the related prospectus which, in the opinion of the Lender, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. 6.2.2 Use its best efforts to qualify the Collateral under, or to permit the Collateral to be privately sold or transferred in compliance with, the state securities or "Blue Sky" laws and to obtain all necessary governmental approvals for the sale of the Collateral, as requested by the Lender. 6.2.3 Cause each such issuer to make available to its security holders, as soon as practicable, an earnings statement that will satisfy the provisions of Section 11(a) of the Securities Act. 6.2.4 Do or cause to be done all such other acts and things as may be necessary to make such sale of the Collateral or any part thereof valid and binding and in compliance with applicable law. SECTION 6.3 Compliance with Restrictions. The Pledgor agrees that in any sale of any of the Collateral whenever an Event of Default shall have occurred and be continuing, the Lender is hereby authorized to comply with any limitation or restriction in connection with such sale as it may be advised by counsel is necessary in order to avoid any violation of applicable law (including compliance with such procedures as may restrict the number of prospective bidders and purchasers, require that such prospective bidders and purchasers have certain qualifications, and restrict such prospective bidders and purchasers to persons who will represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or resale of such Collateral), or in order to obtain any required approval of the sale or of the purchaser by any -10- 11 governmental regulatory authority or official, and the Pledgor further agrees that such compliance shall not result in such sale being considered or deemed not to have been made in a commercially reasonable manner, nor shall the Lender be liable nor accountable to the Pledgor for any discount allowed by the reason of the fact that such Collateral is sold in compliance with any such limitation or restriction. SECTION 6.4 Application of Proceeds. All cash proceeds received by the Lender in respect of any sale of, collection from, or other realization upon, all or any part of the Collateral may, in the discretion of the Lender, be held by the Lender as additional collateral security for, or then or at any time thereafter be applied (after payment of any amounts payable to the Lender pursuant to Sections 10.3 and 10.4 of the Credit Agreement and Section 6.5 hereof) in whole or in part by the Lender against, all or any part of the Secured Obligations in such order as the Lender shall elect. Any surplus of such cash or cash proceeds held by the Lender and remaining after payment in full of all the Secured Obligations, and the termination of all Commitments and any other commitments by the Lender to the Pledgor, shall be paid over to the Pledgor or to whomsoever may be lawfully entitled to receive such surplus. SECTION 6.5 Indemnity and Expenses. The Pledgor hereby indemnifies and holds harmless the Lender from and against any and all claims, losses, and liabilities arising out of or resulting from this Pledge Agreement (including enforcement of this Pledge Agreement), except claims, losses, or liabilities resulting from the Lender's gross negligence or wilful misconduct. Upon demand, the Pledgor will pay to the Lender the amount of any and all reasonable expenses, including the reasonable fees and disbursements of its counsel and of any experts and agents, which the Lender may incur in connection with: (a) the exercise or enforcement of any of the rights of the Lender hereunder; or (b) the failure by the Pledgor to perform or observe any of the provisions hereof. ARTICLE VII MISCELLANEOUS PROVISIONS SECTION 7.1 Loan Document. This Pledge Agreement is a Loan Document executed pursuant to the Credit Agreement and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with the terms and provisions thereof. SECTION 7.2 Amendments, etc. No amendment to or waiver of any provision of this Pledge Agreement nor consent to any departure by the Pledgor herefrom shall in any event be effective -11- 12 unless the same shall be in writing and signed by the Lender, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it is given. SECTION 7.3 Protection of Collateral. The Lender may from time to time, at its option, perform any act which the Pledgor agrees hereunder to perform and which the Pledgor shall fail to perform after being requested in writing so to perform (it being understood that no such request need be given after the occurrence and during the continuance of an Event of Default) and the Lender may from time to time take any other action which the Lender reasonably deems necessary for the maintenance, preservation or protection of any of the Collateral or of its security interest therein. SECTION 7.4 Addresses for Notices. All notices and other communications provided to any party hereto under this Pledge Agreement shall be in writing and shall be hand delivered or sent by a nationally recognized overnight courier, certified mail (return receipt requested), or telecopy to such party at its address or telecopy number set forth on the signature pages hereof or at such other address or telecopy number as may be designated by such party in a notice to the other party. Without limiting any other means by which a party may be able to provide that a notice has been received by the other party, a notice shall be deemed to be duly received (a) if sent by hand, on the date when left with a responsible person at the address of the recipient; (b) if sent by certified mail, on the fifth business day after delivery to the U.S. Post Office; (c) if sent by overnight courier, on the first business day after delivery to such courier; or (d) if sent by telecopy, on the date of receipt by the sender of an acknowledgment or transmission reports generated by the machine from which the telecopy was sent indicating that the telecopy was sent in its entirety to the recipient's telecopy number. SECTION 7.5 Section Captions. Section captions used in this Pledge Agreement are for convenience of reference only, and shall not affect the construction of this Pledge Agreement. SECTION 7.6 Severability. Wherever possible each provision of this Pledge Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Pledge Agreement shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Pledge Agreement. SECTION 7.7 The Lender as Agent for its Affiliates. As described above, certain Affiliates of the Lender are or may become parties to certain Hedging Agreements with the Pledgor and/or Affiliates of the Pledgor. This Pledge Agreement secures the obligations of the Pledgor and such Affiliates, as the case may be, under such Hedging Agreements, and the parties hereto acknowledge for all purposes that the Lender acts as agent on behalf of such Affiliates of the Lender which are so entitled to share in the rights and benefits accruing to the Lender under this Pledge Agreement. SECTION 7.8 Governing Law, Entire Agreement, etc. THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS, EXCEPT TO THE EXTENT THAT -12- 13 THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF ILLINOIS. THIS PLEDGE AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT THERETO. SECTION 7.9 Non-Recourse Nature of Liability. (a) Notwithstanding anything to the contrary contained or implied in this Pledge Agreement, the Pledgor shall not be personally liable under any theory for any amount due under the Credit Agreement, the Notes or such other Loan Documents, and the Lender shall not seek a deficiency or personal judgment against the Pledgor for payment of the Obligations evidenced by the Credit Agreement, the Notes or such other Loan Documents. No property or assets of the Pledgor, other than the Collateral pledged pursuant to this Pledge Agreement, shall be sold, levied upon or otherwise used to satisfy any judgment rendered in connection with any action brought against the Borrower or its Subsidiaries with respect to this Pledge Agreement, the Credit Agreement, the Notes or such other Loan Documents. (b) Notwithstanding the provisions of Section 7.9(a) to the contrary, nothing contained in this Pledge Agreement, the Credit Agreement or any other Loan Document shall be construed to (i) impair or limit the rights of the Lender arising under this Pledge Agreement, or any other Security Document or other documents to which the Pledgor is a party thereto in its individual capacity; (ii) impair or limit any of the Obligations of the Borrower or its Subsidiaries under any Loan Document to which it is a party; (iii) impair or limit the validity of the indebtedness evidenced by this Pledge Agreement, the Credit Agreement, the Notes or the other Loan Documents or prevent the taking of any action permitted by law against the Borrower or its Subsidiaries or the assets of the Borrower or its Subsidiaries or the proceeds of such assets; or (iv) prevent the commencement of any action, suit or proceeding against any Person (or prevent the service of papers under any Person) for the purpose of obtaining jurisdiction over the Borrower or its Subsidiaries. -13- 14 IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the day and year first above written. ENCAP EQUITY 1994 LIMITED PARTNERSHIP, a Texas limited partnership By: EnCap Investments L.C., General Partner By: /s/ GARY R. PETERSEN ------------------------------------ Name: Gary R. Petersen Title: Managing Director Address: 1100 Louisiana Street Suite 3150 Houston, Texas 77002 Facsimile No.: (713) 659-6130 Attention: Gary R. Petersen -14- 15 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: /s/ RICHARD A. BERNARDY ------------------------------------ Name: Richard A. Bernardy Title: Vice President Address: 333 Clay Street Suite 4550 Houston, TX 77002 Facsimile No.: (713) 651-4888 Attention: Richard A. Bernardy -15- 16 ATTACHMENT 1 to Pledge Agreement Pledged Shares
Pledged Share Issuer Common Stock - -------------------- -------------------------------------------------------------- Authorized Outstanding Number of Shares % of Shares Shares Shares Pledged Pledged ----------- ----------- ---------------- ----------- Future Petroleum Corporation, 30,000,000 12,757,015 2,424,973 19.01% a Utah corporation
-1- EX-4.12 8 MASTER SUBORDINATION AGREEMENT 1 EXHIBIT 4.12 MASTER SUBORDINATION AGREEMENT THIS MASTER SUBORDINATION AGREEMENT (this "Subordination Agreement"), dated as of August 14, 1998, is between ENCAP EQUITY 1994 LIMITED PARTNERSHIP, a Texas limited partnership ("EnCap 1994") and ENERGY CAPITAL INVESTMENT COMPANY PLC, an English investment company ("EnCap PLC"; together with EnCap 1994, sometimes collectively herein called "Junior Creditor") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association, as agent (together with its successors, transferees and assigns, "Senior Creditor") . W I T N E S S E T H: A. FUTURE PETROLEUM CORPORATION, a Utah corporation ("Borrower"), FUTURE CAL-TEX CORPORATION, a Texas corporation ("Newco"), FUTURE ACQUISITION 1995, LTD., a Texas limited partnership ("Future 1995"), BMC DEVELOPMENT NO. 1 LIMITED PARTNERSHIP, a Texas limited partnership ("BMC") and NCI-SHAWNEE LIMITED PARTNERSHIP, a Texas limited partnership ("Shawnee"; together with Borrower, BMC, Future 1995 and Newco, sometimes collectively called the "Company"), is the owner of certain oil and gas leases and other related real and personal property interests located in various counties and states, as more fully described on Exhibit A hereto (the "Land"), together with the buildings, structures and other improvements located and constructed thereon, the "Real Property". B. Borrower is indebted to Junior Creditor and GECKO BOOTY 1994 I LIMITED PARTNERSHIP, a Texas limited partnership ("Gecko"), which indebtedness is evidenced by (i) that certain Renewal Promissory Note executed by Borrower, on or about May 1, 1998, in favor of EnCap 1994, in the original principal sum of $3,714,305.88; (ii) that certain Renewal Promissory Note executed by Borrower, on or about May 1, 1998, in favor of EnCap PLC, in the original principal sum of $3,370,694.12; (iii) that certain Renewal Promissory Note executed by Borrower, on or about May 1, 1998, in favor of Gecko, in the original principal sum of $175,000 (collectively, the "Junior Note"; the obligations of Company to Junior Creditor, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due, are hereinafter collectively referred to as the "Junior Obligations"). C. The Junior Obligations are secured by, among other things, those certain mortgages and deeds of trust, covering the Real Property, more fully described in Schedule I hereto (collectively, the "Junior Mortgages"). The Junior Obligations are also secured by, among other things, those certain guaranties, pledges, security agreements and other documents and instruments more fully described in Schedule I hereto (such agreements and instruments, together with the Junior Mortgages, herein called the "Junior Security Documents" and the real property and personal property collateral now or hereafter encumbered by the Junior Security Documents herein called the "Junior Collateral"). 2 D. Contemporaneously with the execution and delivery of this Subordination Agreement, Borrower has (i) paid in full all amounts due and owing to Gecko under the Junior Note such that Gecko no longer has any right, title or interest in the Junior Note, the Junior Security Documents or the Junior Collateral, and (ii) paid a portion of the indebtedness to Junior Creditor evidenced by the Junior Note, such that the amount currently outstanding under the Junior Note is less than the original principal amount thereof. E. Company is also indebted to Senior Creditor under that certain Credit Agreement dated as of August 14, 1998 (as the same may be from time to time amended, modified, supplemented or amended and restated, the "Credit Agreement"), between Borrower and Senior Creditor. F. It is a condition precedent to extension of credit under the Credit Agreement that Company execute and deliver, and cause each of the Subsidiaries of the Borrower (collectively, the "Subsidiary Guarantors") to execute and deliver mortgages, guaranties, pledges, security agreements and other documents and instruments more fully described in Schedule II hereto (such agreements and instruments herein called the "Senior Security Documents" and the real property and personal property collateral now or hereafter encumbered by the Senior Security Documents herein called the "Senior Collateral"), in favor of Senior Creditor to secure the payment and performance by Company of the Obligations under the Credit Agreement. G. It is a condition precedent to the making of the loans under the Credit Agreement that Junior Creditor subordinate its debt and liens from Company and the Subsidiary Guarantors, including its liens against and security interests in the Real Property arising under the Junior Mortgages and its security interest in the other Junior Collateral to that of Senior Creditor and its right to payment of the Junior Obligations to the Senior Obligations. H. Junior Creditor has duly authorized the execution, delivery and performance of this Subordination Agreement. I. It is in the best interests of Junior Creditor to execute this Subordination Agreement inasmuch as Junior Creditor will derive substantial direct and indirect benefits from the extension of credit to Company by Senior Creditor. NOW, THEREFORE, for good and valuable consideration the receipt of which is hereby acknowledged, and in order to induce Senior Creditor to extend credit pursuant to the Credit Agreement, Junior Creditor agrees, for the benefit of Senior Creditor, as follows: SECTION 1. Definitions. Capitalized terms used but not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement. As used in this Subordination Agreement, the following terms shall have the following respective meanings: -2- 3 BMC is defined in Recital A. Company is defined in Recital A. Credit Agreement is defined in the Recital D. Junior Collateral is defined in Recital C. Junior Mortgages is defined in Recital C. Junior Obligations is defined in Recital B. Junior Note is defined in Recital B. Junior Security Documents is defined in Recital C. Land is defined in Recital A. Real Property is defined in Recital A. Senior Collateral is defined in Recital E. Senior Creditor is defined in the preamble. Senior Interest is defined in Section 3(b). Senior Obligations means all Obligations to the Senior Creditor under the Credit Agreement and the other Loan Documents (including (i) principal, (ii) interest, including without limitation any and all interest accruing on any of the Senior Obligations after the commencement of any proceedings referred to in Section 4 hereof, notwithstanding any provision or rule of law which might restrict the rights of Senior Creditor, as against the Company or anyone else, to collect such interest, (iii) any Hedging Obligation, (iv) costs, (v) fees (including reasonable attorneys' fees and disbursements), (vi) expenses, and (vii) other liability or obligation arising under or in connection with the Credit Agreement), howsoever created, arising or evidenced under such documents, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due. For the purposes of this Subordination Agreement, Senior Obligations shall include all liabilities described in this definition, notwithstanding any right or power of the Company or any other Person to assert any claim or defense as to the invalidity or unenforceability of any such liabilities, and no such claim or defense shall affect or impair the agreements and obligations of Junior Creditor hereunder. -3- 4 Senior Security Documents is defined in Recital E. Subordinate Interest is defined in Section 3(b). Subordination Agreement is defined in the preamble. SECTION 2. Notice of Junior Obligations, etc. Junior Creditor will, from time to time: (a) promptly notify Senior Creditor of the creation of any Junior Obligations, and of the issuance of any promissory note or other instrument to evidence any Junior Obligations and (b) upon request by Senior Creditor, cause any Junior Obligations which are not then evidenced by a promissory note or other instrument of Company to be so evidenced. Such note shall contain the following provision: "The indebtedness evidenced by this instrument is subordinated to the prior payment in cash in full of the Senior Obligations (as defined in the Master Subordination Agreement, dated as of August 14, 1998, made by and between the "Junior Creditor" therein (including the payee named herein) and Future Petroleum Corporation, a Utah Corporation, Future CAL-TEX Corporation, a Texas corporation, Future Acquisition 1995, Ltd., a Texas limited partnership, BMC Development No. 1 Limited Partnership, a Texas limited partnership, NCI Shawnee Limited Partnership, a Texas limited partnership, Future Energy Corporation, a Nevada corporation and Future Petroleum Corporation, a Texas corporation, in favor of Bank of America National Trust and Savings Association (the "Subordination Agreement") pursuant to, and to the extent provided in, the Subordination Agreement by the maker hereof and payee named herein in favor of Bank of America National Trust and Savings Association and any person now or hereafter designated as its designees, agents, successors or assigns." SECTION 3. Subordination. Except as Senior Creditor may hereafter otherwise expressly consent in writing, (a) the payment of all Junior Obligations shall be postponed and subordinated to the indefeasible payment in full of all Senior Obligations (and the termination of all Commitments), and no payments or other distributions whatsoever in respect of any Junior Obligations shall be made, nor shall any property or assets of Company or any Subsidiary Guarantor be applied to the purchase or other acquisition or to the defeasance or retirement of any Junior Obligations; provided, that from time to time commencing on August 14, 2000, Borrower may pay and Junior Creditor may receive and retain regularly scheduled interest payments on the Junior Note so long as, both before and after the making of each such interest payment, no Default shall have occurred and be continuing, including without limitation, a Default under Section 8.2.4 of the Credit Agreement, (b) all mortgage or deed of trust liens and security interests under the Junior Security Documents or otherwise, now existing or hereafter acquired by Junior Creditor in any of the Junior Collateral or the Senior Collateral (the "Subordinate Interest") shall be subordinated to the security -4- 5 interest of Senior Creditor, under the Senior Security Documents or otherwise, in the Senior Collateral (the "Senior Interest"), irrespective of the time or order of attachment or perfection of any security interest (or any defects or omissions in respect thereof) or the time or order of filing of any financing statements or other documents, or any statutes, rules, law, or court decisions to the contrary. For the purposes of this Subordination Agreement, the Senior Obligations shall not be deemed to have been indefeasibly paid in cash in full until the Senior Creditor shall have received full payment of the Senior Obligations in cash, which payment shall have been retained by the Senior Creditor for a period of time in excess of all applicable preference or other similar periods under applicable bankruptcy, insolvency or creditors' rights laws and all Commitments of the Senior Creditor under the Credit Agreement shall have irrevocably terminated. SECTION 4. Bankruptcy, Insolvency, etc. In the event of any dissolution, winding up, liquidation, readjustment, reorganization or other similar proceedings relating to Company, any Subsidiary Guarantor or to any of their creditors, as such, or to its property (whether voluntary or involuntary, partial or complete, and whether in bankruptcy, insolvency or receivership, or upon an assignment for the benefit of creditors, or any other marshalling of the assets and liabilities of Company or any Subsidiary Guarantor, or any sale of all or substantially all of the assets of Company or any Subsidiary Guarantor, or otherwise), the Senior Obligations shall first be paid in full in cash and all Commitments terminated before the Junior Creditor shall be entitled to receive and to retain any payment or distribution in respect of the Junior Obligations and, in order to implement the foregoing: (a) all payments and distributions of any kind or character in respect of the Junior Obligations to which Junior Creditor would be entitled if the Junior Obligations were not subordinated, or subordinated and pledged or assigned pursuant to this Subordination Agreement, shall be made directly to Senior Creditor; (b) Junior Creditor shall promptly file a claim or claims, in the form required in such proceedings, for the full outstanding amount of the Junior Obligations, and shall cause said claim or claims to be approved and all payments and other distributions in respect thereof to be made directly to Senior Creditor; and (c) Junior Creditor hereby irrevocably agrees that, notwithstanding any agreement between Junior Creditor and the Company or the Subsidiary Guarantors to the contrary, Senior Creditor may, at its sole discretion, in the name of Junior Creditor or otherwise, demand, sue for, collect, receive and receipt for any and all such payments or distributions, and file, prove and vote or consent in any such proceedings with respect to any and all claims of Junior Creditor relating to the Junior Obligations. SECTION 5. Payments Held in Trust. In the event that Junior Creditor receives any payment or other distribution of any kind or character from Company or any Subsidiary Guarantor, or from any other source whatsoever, in respect of any of the Junior Obligations, such payment or other distribution shall be received in trust for Senior Creditor and promptly turned over by Junior Creditor to Senior Creditor. Junior Creditor will mark its books and records, and cause Company to mark its books and records, so as clearly to indicate that the Junior Obligations are subordinated in accordance with the terms of this Subordination Agreement, and will cause to be clearly inserted in any promissory note or other instrument which at any time evidences any of the Junior -5- 6 Obligations the statement described in Section 1. Junior Creditor will execute such further documents or instruments and take such further action as Senior Creditor may reasonably from time to time request to carry out the intent of this Subordination Agreement. SECTION 6. Application of Payments; Limited Subrogation. All payments and distributions received by Senior Creditor in respect of the Junior Obligations, to the extent received in or converted into cash, may be applied by Senior Creditor first to the payment of any and all expenses (including attorneys' fees and legal expenses) paid or incurred by Senior Creditor in enforcing this Subordination Agreement, or any security therefor, and any balance thereof shall, solely as between Junior Creditor and Senior Creditor, be applied by Senior Creditor in such order of application as Senior Creditor may from time to time select, toward the payment of the Senior Obligations remaining unpaid; but, as between Company, any Subsidiary Guarantor and any of their creditors, no such payments or distributions of any kind or character shall be deemed to be payments or distributions in respect of the Senior Obligations; and, notwithstanding any such payments or distributions received by Senior Creditor in respect of the Junior Obligations and so applied by Senior Creditor toward the payment of the Senior Obligations, Junior Creditor shall be subrogated to the then existing rights of Senior Creditor, if any, in respect of the Senior Obligations, only at such time as this Subordination Agreement shall have terminated and Senior Creditor shall have received indefeasible payment of the full amount of the Senior Obligations and all Commitments shall have terminated. SECTION 7. Waivers by Junior Creditor. Junior Creditor hereby waives: (a) notice of acceptance by Senior Creditor or any holder of the Senior Note of this Subordination Agreement; (b) all notices that may be required by statute, rule of law or otherwise, now or hereafter in effect, to preserve intact any rights against Junior Creditor, including notice of the existence or creation or non-payment of all or any of the Senior Obligations or the exercise of any remedies under the Loan Documents or with respect to the Senior Collateral; (c) all diligence in collection or protection of or realization upon the Senior Obligations or any thereof or any security therefor, including any claim that any Senior Creditor may not have disposed of any such security in a commercially reasonable manner or that any Senior Creditor failed to exhaust any remedies (including against any guarantor) or to mitigate the damages resulting from a Senior Default; (d) any notice of any sale, transfer or other disposition by any Person of any right under title to or interest in any Loan Document or the Collateral; (e) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge, release or defense of a junior creditor or that might otherwise limit exercise by any Senior Creditor of its rights against Junior Creditor hereunder and (f) all rights and defenses arising out of any election of remedies by any Senior Creditor, even though such election of remedies may impair or destroy any rights of subrogation Junior Creditor may have against the Company or any Subsidiary Guarantor by operation of law or otherwise. SECTION 8. Obligations of Junior Creditor. Junior Creditor will not, without prior written consent of Senior Creditor, (a) transfer, assign, or attempt to enforce or collect any Junior Obligations or any rights in respect thereof, including without limitation the declaration of any default or breach under or the acceleration of the maturity of the Junior Obligations, or any attempt -6- 7 to liquidate, foreclose, enforce or realize on any of the Junior Collateral (provided that nothing herein shall prevent Junior Creditor from filing proofs of claim in any bankruptcy proceeding so long as Junior Creditor is otherwise in compliance with its obligations in this Subordination Agreement); (b) take any additional collateral for any Junior Obligations except for liens on and security interests in the Senior Collateral where such liens and security interests have been subordinated to the Senior Interest as provided in this Subordination Agreement; (c) convert any Junior Obligations into stock of Company or any Subsidiary Guarantor; (d) sell, assign, transfer, endorse, pledge, encumber or otherwise dispose of any of the Junior Obligations; (e) permit the terms of any of the Junior Obligations to be changed in such a manner as to have an adverse effect upon the rights or interests of the Senior Creditor; or (f) commence, or join with any other creditor in commencing, any bankruptcy, reorganization or insolvency proceedings with respect to Company or any Subsidiary Guarantor. SECTION 9. Continuing Subordination; Termination. This Subordination Agreement shall, in all respects, be a continuing agreement and shall remain in full force and effect (notwithstanding, without limitation, the dissolution of Junior Creditor) until the indefeasible payment in full of all of the Senior Obligations and the termination of all Commitments. Junior Creditor agrees that following such termination this Subordination Agreement shall be automatically reinstated if for any reason any payment made on the Senior Obligations is rescinded or must be otherwise restored by Senior Creditor, whether as a result of any proceedings in bankruptcy or reorganization or otherwise. SECTION 10. Rights of Senior Creditor. Senior Creditor may, from time to time, whether before or after any discontinuance of this Subordination Agreement, at its discretion and without notice to Junior Creditor, take any or all of the following actions: (a) retain or obtain a security interest in any property to secure any of the Senior Obligations; (b) retain or obtain the primary or secondary obligations of any other obligor or obligors with respect to any of the Senior Obligations; (c) extend or renew for one or more periods (whether or not longer than the original period), alter or exchange any of the Senior Obligations, or release or compromise any obligation of any nature of any obligor with respect to any of the Senior Obligations; and (d) release its security interest in, or surrender, release or permit any substitution or exchange for all or any part of any property securing any of the Senior Obligations, or extend or renew for one or more periods (whether or not longer than the original period), or release, compromise, alter or exchange any obligations of any nature of any obligor with respect to any such property. SECTION 11. Transfer of Senior Obligations. Senior Creditor may, from time to time, whether before or after any discontinuance of this Subordination Agreement, without notice to Junior Creditor, assign or transfer any or all of the Senior Obligations, or any interest therein; and, notwithstanding any such assignment or transfer or any subsequent assignment or transfer thereof, such Senior Obligations shall be and remain Senior Obligations for the purposes of this Subor dination Agreement, and every immediate and successive assignee or transferee of any of the Senior Obligations or of any interest therein shall, to the extent of the interest of such assignee or transferee in the Senior Obligations, be entitled to the benefits of this Subordination Agreement to the same extent as if such assignee or transferee were the Senior Creditor; provided, however, that, unless the -7- 8 Senior Creditor shall otherwise consent in writing, the Senior Creditor shall have an unimpaired right, prior and superior to that of any such assignee or transferee, to enforce this Subordination Agreement, for the benefit of the Senior Creditor, as to those of the Senior Obligations which the Senior Creditor has not assigned or transferred. SECTION 12. Transfer of Collateral. Senior Creditor may, from time to time, whether before or after any termination of this Subordination Agreement, without notice to Junior Creditor, dispose of, and exercise any other rights with respect to, any or all of the Collateral, free of the Subordinate Interest; provided, however, that Junior Creditor does not waive hereby any rights that may not be waived under Applicable Law. Junior Creditor shall, upon any disposition of any of the Collateral by Senior Creditor, execute and deliver any and all releases or other documents or agreements requested by Senior Creditor to accomplish the disposition of any of the Collateral free of the Subordinate Interest. SECTION 13. Miscellaneous. Neither Senior Creditor, nor any holder of the Senior Note shall be prejudiced in its rights under this Subordination Agreement by any act or failure to act of Company, any Subsidiary Guarantor or Junior Creditor, or any noncompliance of Company, any Subsidiary Guarantor or Junior Creditor with any agreement or obligation, regardless of any knowledge thereof which Senior Creditor, or any holder of the Senior Note may have, or with which Senior Creditor, or such holder may be charged; and no action permitted hereunder of Senior Creditor, or any holder of the Senior Note shall in any way affect or impair the rights of Senior Creditor, or any holder of the Senior Note, and the obligations of Junior Creditor under this Subordination Agreement. No delay on the part of Senior Creditor, or any holder of the Senior Note in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by Senior Creditor, or any holder of the Senior Note of any right or remedy shall preclude other or further exercise thereof, or the exercise of any other right or remedy; nor shall any modification or waiver of any of the provisions of this Subordination Agreement be binding upon Senior Creditor, or any holder of the Senior Note, except by the express written consent of Senior Creditor set forth in a writing duly signed and delivered on behalf of Senior Creditor. For the purposes of this Subordination Agreement, Senior Obligations shall include all obligations of Company under or in connection with the Senior Note, notwithstanding any right or power of Company or anyone else to assert any claim or defense as to the invalidity or unenforceability of any such obligation, and no such claim or defense shall affect or impair the agreements and obligations of Junior Creditor hereunder. SECTION 14. Addresses for Notices. All notices and other communications provided for hereunder shall be in writing (including telegraphic communication) and, if to Senior Creditor or the Junior Creditor, respectively, addressed, delivered or transmitted to it, at the address or facsimile number set forth below its signature hereto or, as to either party, at such other address or facsimile number as shall be designated by such party in a written notice to each other party complying as to delivery with the terms of this Section 14. Any notice, if mailed and properly addressed and sent by prepaid courier service, shall be deemed given when received; and notice, if transmitted by facsimile, shall be deemed given upon receipt of the confirmation of transmission. -8- 9 SECTION 15. Senior Creditor Appointed Attorney-in-Fact. Junior Creditor hereby appoints Senior Creditor Junior Creditor's attorney-in-fact, with full power of substitution, for the purpose of taking such action and executing agreements, instruments and other documents in the name of Junior Creditor, or otherwise, as Senior Creditor may deem necessary or advisable to accomplish the purposes hereof, which appointment is coupled with an interest and is irrevocable. SECTION 16. Section Captions. Section captions used in this Subordination Agreement are for convenience of reference only, and shall not affect the construction of this Subordination Agreement. SECTION 17. Severability. Wherever possible each provision of this Subordination Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Subordination Agreement shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Subordination Agreement. SECTION 18. Governing Law, Entire Agreement, etc. THIS SUBORDINATION AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO CHOICE OF LAW OR CONFLICTS OF LAW PROVISIONS. This Subordination Agreement constitutes the entire understanding among the parties hereto with respect to the subject matter hereof and supersedes any prior agreements, written or oral, with respect thereto. SECTION 19. Execution in Counterparts. This Subordination Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. SECTION 20. Binding Effect. This Subordination Agreement shall be binding upon Junior Creditor, and upon the successors and assigns of Junior Creditor; and all references herein to Company and to Junior Creditor, respectively, shall be deemed to include any successor or successors, whether immediate or remote, to Company and to Junior Creditor. SECTION 21. Recorded Instruments. In order to effect the subordination described in this Subordination Agreement, Junior Creditor and Senior Creditor agree to execute, acknowledge and deliver such other recordable agreements and instruments as may be reasonably necessary or desirable under the laws of the jurisdictions in which the Junior Collateral and/or the Senior Collateral is or may be located to give notice to third parties of this Subordination Agreement and to otherwise implement this Subordination Agreement. -9- 10 IN WITNESS WHEREOF, this Subordination Agreement has been executed and delivered by Junior Creditor and Senior Creditor as of the date above first written. ENCAP EQUITY 1994 LIMITED PARTNERSHIP, a Texas limited partnership By: EnCap Investments L.C., General Partner By: /s/ GARY R. PETERSON -------------------------------------------- Name: Gary R. Peterson Title: Managing Director Address: 1100 Louisiana Street Suite 3150 Houston, TX 77002 Attention: Gary R. Peterson Facsimile: 713-659-6130 ENERGY CAPITAL INVESTMENT COMPANY PLC, an English investment company By: /s GARY R. PETERSON -------------------------------------------- Name: Gary R. Peterson Title: Director Address: 1100 Louisiana Street Suite 3150 Houston, TX 77002 Attention: Gary R. Peterson Facsimile: 713-659-6130 -10- 11 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association, as agent By: /s/ RICHARD A. BERNARDY -------------------------------------------- Name: Richard A. Bernardy Title: Vice President Address: 333 Clay Street Suite 4550 Houston, TX 77002 Attention: Richard A. Bernardy Facsimile: 713-651-4888 -11- EX-4.13 9 AGREEMENT AND PLAN OF MERGER 1 EXHIBIT 4.13 AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER dated August 14, 1998, is made by and among Bargo Energy Resources, Ltd., a Texas limited partnership ("BARGO"), SCL-CAL Company, a Texas corporation ("SCL"), Future Petroleum Corporation, a Utah corporation ("FUTURE"), and Future CAL-TEX Corporation, a Texas corporation ("FUTURE SUB"). WITNESSETH: WHEREAS, (i) Bargo is the record and beneficial owner of all of the issued and outstanding capital stock of SCL and (ii) Future is the record and beneficial owner of all of the issued and outstanding capital stock of Future Sub; and WHEREAS, the parties hereto have determined that the merger of SCL into Future Sub upon the terms and subject to the conditions set forth herein is desirable and in their mutual best interests; and WHEREAS, the parties hereto desire to set forth certain representations, warranties and covenants made by each to the other as an inducement to the consummation of the merger contemplated hereby; AGREEMENT: NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual covenants and agreements contained herein, Bargo, SCL, Future and Future Sub do hereby agree as follows: ARTICLE I DEFINITIONS, REFERENCES AND CONSTRUCTION SECTION 1.1. CERTAIN DEFINED TERMS. When used in this Agreement, the following terms shall have the respective meanings assigned to them in this Section 1.1 or in the section, subsections or other subdivisions referred to below: "AFFILIATE" shall mean, when used with respect to another Person, any Person directly or indirectly controlling, controlled by or under common control with such other Person. "AGREEMENT" shall mean this Agreement, as hereafter changed, amended or modified in accordance with the terms hereof. "BARGO" shall have the meaning assigned to such term in the introductory paragraph to this Agreement. -1- 2 "BARGO DISCLOSURE SCHEDULE" shall mean a schedule delivered by the Bargo Entities to Future on the date hereof which sets forth additional information regarding the representations and warranties of the Bargo Entities contained herein and information called for hereby. "BARGO ENTITIES" shall mean Bargo and SCL. "BARGO NOMINEES" shall have the meaning assigned to such term in Section 6.11(a). "BARGO REGISTRATION RIGHTS AGREEMENT" shall have the meaning assigned to such term in Section 6.7. "CLOSING" and "CLOSING DATE" shall have the respective meanings assigned to such terms in Section 2.3. "CLOSING OBLIGATIONS" shall mean the obligations of SCL to repay the Sowell Indebtedness and the obligations of SCL to pay certain transaction costs in connection with this Agreement and the acquisition of the Properties. "CODE" shall mean the Internal Revenue Code of 1986, as amended. "COMMISSION" shall mean the Securities and Exchange Commission (or any successor body thereto). "COMMONLY CONTROLLED ENTITY" shall mean any Person which is under common control with Future within the meaning of Section 4001 of ERISA. "CONSOLIDATED" shall refer to the consolidation of any Person, in accordance with GAAP, with its properly consolidated subsidiaries. References herein to a Person's Consolidated financial statements, financial position, financial condition, liabilities, etc. refer to the consolidated financial statements, financial position, financial condition, liabilities, etc. of such Person and its properly consolidated subsidiaries. "CURRENT DEBT AMOUNT" shall mean $5,800,000, which is the indebtedness of SCL in connection with the Closing Obligations. "DIRECTOR EFFECTIVE DATE" shall mean 10 days after the date on which Future filed with the Commission and transmitted to its stockholders the information required to be so filed and transmitted under Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. "EFFECTIVE TIME" shall have the meaning assigned to such term in Section 2.2. "EMISSION CREDITS" shall mean the emission credits described more particularly in Section 1.1(f) of the MOC Agreement. -2- 3 "EMPLOYMENT AGREEMENT" shall have the meaning assigned to such term in Section 6.5. "ENCAP FUND I" shall mean EnCap Equity 1994 Limited Partnership and Energy Capital Investment Company PLC. "ENCAP REGISTRATION RIGHTS AGREEMENT" shall have the meaning assigned to such term in Section 6.7. "ENVIRONMENTAL LAWS" shall mean any and all laws relating to the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment including ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations thereunder. "EXCHANGE ACT" shall mean the U.S. Securities Exchange Act of 1934, as amended, and all rules and regulations under such act. "FUTURE" shall have the meaning assigned to such term in the introductory paragraph to this Agreement. "FUTURE STOCK" shall mean the shares of common stock of Future, $0.01 par value per share, and any shares issued or issuable with respect thereto by way of a stock split or in connection with a combination of shares, recapitalization, merger, consolidation or reorganization. "FUTURE DISCLOSURE SCHEDULE" shall mean a schedule delivered by the Future Entities to the Bargo Entities on the date hereof which sets forth additional information regarding the representations and warranties of the Future Entities contained herein and information called for hereby. "FUTURE ENTITIES" shall mean Future and Future Sub. "FUTURE SUB" shall have the meaning assigned to such term in the introductory paragraph to this Agreement. "GAAP" shall mean those generally accepted accounting principles and practices which are recognized as such by the Financial Accounting Standards Board (or any generally recognized successor). -3- 4 "MATERIAL ADVERSE EFFECT" shall mean with respect to any Person, a material adverse effect on the financial condition, results of operations, business or prospects of such Person and its consolidated subsidiaries, taken as a whole. "MERGER" shall have the meaning assigned to such term in Section 2.1. "MERGER SHARES" shall have the meaning assigned to such term in Article III. "MOC" shall have the meaning assigned to such term in Section 4.7. "MOC AGREEMENT" shall have the meaning assigned to such term in Section 4.7. "PARTNER" shall mean each general or limited partner of Bargo. "PERSON" shall mean an individual, corporation, partnership, limited liability company, association, joint stock company, trust or trustee thereof, estate or executor thereof, unincorporated organization or joint venture, or any other legally recognizable entity. "PLAN" shall mean, at any time, any employee benefit plan which is covered by ERISA and in respect of which Future or any Commonly Controlled Entity is (or if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "PRICE GROUP" shall mean Carl Price, Don Wm. Reynolds, Christie Price, Robert Price and Charles D. Laudeman. "PRICE OPTIONS" means the options to purchase up to 250,000 shares of Future Stock issued to Carl Price pursuant to the Employment Agreement and Future's 1993 Stock Incentive Plan. "PRICE REGISTRATION RIGHTS AGREEMENT" shall have the meaning assigned to such term in Section 6.7. "PROPERTIES" shall mean the "Assets," as such term is defined in the MOC Agreement, exclusive of the Emission Credits. "RETURNS" shall mean all returns, reports, estimates, declarations and statements of any nature regarding Taxes prior to the Closing required to be filed by the taxpayer relating to its income, properties or operations. "SCL" shall have the meaning assigned to such term in the introductory paragraph to this Agreement. "SCL STOCK" shall mean the shares of common stock, par value $0.01 per share, of SCL. -4- 5 "SECURITIES ACT" shall mean the U.S. Securities Act of 1933, as amended, and all rules and regulations under such Act. "SENIOR CREDIT FACILITY" shall have the meaning assigned to such term in Section 6.8. "SHAREHOLDERS' AGREEMENT" shall have the meaning assigned to such term in Section 6.10. "SOWELL INDEBTEDNESS" shall mean that certain indebtedness of Bargo to James E. Sowell in the original principal amount equal to $5,700,000, as secured by the Sowell Mortgage. "SOWELL MORTGAGE" shall mean that certain Mortgage, Deed of Trust, Assignment of Production and Security Agreement by and between Bargo and James E. Sowell covering the Properties. "SUBORDINATION AGREEMENT" shall have the meaning assigned to such term in Section 6.9. "SUBSIDIARY" means the following entities which are subsidiaries of Future: Future Petroleum Corporation, a Texas corporation; Future Energy Corporation, a Nevada corporation; Future Acquisition 1995, Ltd., a Texas limited partnership; BMC Development No. 1 Limited Partnership, a Texas limited partnership; NCI-Shawnee Limited Partnership, a Texas limited partnership; and Future Sub. "SURVIVING CORPORATION" shall have the meaning assigned to such term in Section 2.1. "TAXES" shall mean any federal, state, local, foreign or other taxes (including, without limitation, income, alternative minimum, franchise, property, sales, use, lease, excise, premium, payroll, wage, employment or withholding taxes), fees, duties, assessments, withholdings or governmental charges of any kind whatsoever (including interest, penalties and additions to tax). "TBCA" shall have the meaning assigned to such term in Section 2.1. "WARRANT" shall have the meaning assigned to such term in Article III. SECTION 1.2. REFERENCES AND CONSTRUCTION. (a) All references in this Agreement to articles, sections, subsections and other subdivisions refer to corresponding articles, sections, subsections and other subdivisions of this Agreement unless expressly provided otherwise. -5- 6 (b) Titles appearing at the beginning of any of such subdivisions are for convenience only and shall not constitute part of such subdivisions and shall be disregarded in construing the language contained in such subdivisions. (c) The words "this Agreement", "this instrument", "herein", "hereof", "hereby", "hereunder" and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. (d) Words in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires. Pronouns in masculine, feminine and neuter genders shall be construed to include any other gender. (e) Unless the context otherwise requires or unless otherwise provided herein, the terms defined in this Agreement which refer to a particular agreement, instrument or document also refer to and include all renewals, extensions, modifications, amendments or restatements of such agreement, instrument or document, provided that nothing contained in this subsection shall be construed to authorize such renewal, extension, modification, amendment or restatement. (f) Examples shall not be construed to limit, expressly or by implication, the matter they illustrate. (g) The word "or" is not intended to be exclusive and the word "includes" and its derivatives means "includes, but is not limited to" and corresponding derivative expressions. (h) No consideration shall be given to the fact or presumption that one party had a greater or lesser hand in drafting this Agreement. (i) Unless otherwise indicated, all references herein to "$" or "dollars" shall refer to U.S. Dollars. (j) Exhibits III(b), 4.8, 6.5, 6.6, 6.7-1, 6.7-2, 6.7-3, 6.9, 6.10, 7.1(e) and 7.2(e) are attached hereto. Each such Exhibit is incorporated herein by reference for all purposes and references to this Agreement shall also include such Exhibit unless the context in which used shall otherwise require. ARTICLE II THE MERGER SECTION 2.1. THE MERGER. At the Effective Time, and on the terms and subject to the conditions set forth in this Agreement, SCL shall be merged with and into Future Sub (the "MERGER"), Future Sub shall continue its corporate existence under the Texas Business Corporation Act (the "TBCA") as the surviving entity in the Merger (sometimes referred to -6- 7 herein as the "SURVIVING CORPORATION"), and the separate corporate existence of SCL shall cease. SECTION 2.2. EFFECTIVE TIME OF THE MERGER. Provided that the conditions set forth in Article VII have been fulfilled or waived in accordance with this Agreement, as soon as practicable on the Closing Date, Future Sub and SCL shall cause the Merger to be consummated by filing with the Secretary of State of Texas articles of merger in such form as required by, and executed in accordance with the relevant provisions of, the TBCA. The Merger shall become effective at the time the articles of merger are duly filed with the Secretary of State of Texas (the "EFFECTIVE TIME"). SECTION 2.3. CLOSING. The closing of the Merger (the "CLOSING") shall take place (i) at the offices of Thompson & Knight, P.C., located at 1700 Chase Tower, 600 Travis, Houston, Texas 77002, 10:00 a.m., local time, on August 14, 1998, or (ii) at such other time or place or on such other date as the parties hereto shall agree. The date on which the Closing occurs is herein referred to as the "CLOSING DATE". SECTION 2.4. EFFECTS OF THE MERGER. The Merger shall have the effects set forth in the applicable provisions of the TBCA. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the real estate and other properties, rights, privileges, powers, and franchises of Future Sub and SCL shall vest in the Surviving Corporation, without any transfer or assignment having occurred, and all debts, liabilities, obligations and duties of Future Sub and SCL shall become the debts, liabilities, obligations and duties of the Surviving Corporation. SECTION 2.5. CERTIFICATE OF INCORPORATION. The Articles of Incorporation of Future Sub, as in effect immediately prior to the Effective Time, shall be the Articles of Incorporation of the Surviving Corporation, until thereafter amended in accordance with its terms and as provided by the TBCA. SECTION 2.6. BYLAWS. The Bylaws of Future Sub, as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation, until thereafter amended in accordance with its terms and as provided by the TBCA. SECTION 2.7. DIRECTORS. The directors of Future Sub at the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation and until his or her successor is duly elected and qualified in accordance with the TBCA or until his or her earlier death, resignation or removal. SECTION 2.8. OFFICERS. The officers of Future Sub at the Effective Time shall be the initial officers of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation and until his or her successor is duly elected and qualified in accordance with the TBCA or until his or her earlier death, resignation or removal. -7- 8 SECTION 2.9. TAKING OF NECESSARY ACTION. Each of the parties hereto shall use its reasonable best efforts to take all such action as may be necessary or appropriate in order to effectuate the Merger under the TBCA as promptly as possible. ARTICLE III CONVERSION OF SECURITIES; APPROVAL OF MERGER SECTION 3.1. CONVERSION OF SHARES. At the Effective Time, by virtue of the Merger and without any action on the part of Bargo, SCL, Future, Future Sub or any holder of any of the following securities: (a) Each share of SCL Stock held in the treasury of SCL shall be canceled and retired and no payment shall be made with respect thereto. (b) All of the outstanding shares of SCL Stock shall be converted into (i) 4,694,859 fully paid and non-assessable shares of Future Stock (the "MERGER SHARES") and (ii) a warrant to purchase 250,000 shares of Future Stock, which warrant shall be substantially in the form of that certain Stock Purchase Warrant attached hereto as Exhibit III(b) (the "WARRANT"). SECTION 3.2. APPROVAL OF MERGER AGREEMENT AND MERGER. By execution of this Agreement, each of Future, as the sole shareholder of Future Sub, and Bargo, as the sole shareholder of SCL, hereby adopts, ratifies and approves the Merger and the Merger Agreement. SECTION 3.3. WAIVER OF DISSENTER'S RIGHTS OF APPRAISAL. Each of Future, as the sole shareholder of Future Sub, and Bargo, as the sole shareholder of SCL, hereby waives any dissenter's rights of appraisal or similar rights it may have, including the rights under Section 5.11 of the TBCA. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BARGO ENTITIES Each of the Bargo Entities represents and warrants to the Future Entities as follows: SECTION 4.1. ORGANIZATION AND EXISTENCE. Bargo is a limited partnership duly formed and validly existing under the laws of the State of Texas. SCL is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas. Each Bargo Entity has the power to carry on its business as it is now being conducted or currently proposed to be conducted. Each Bargo Entity is duly qualified to do business, and is in good standing, in each jurisdiction where the character of its properties owned or held under lease or the nature of its -8- 9 activities make such qualification necessary, except where the failure to be so qualified will not, alone or in the aggregate, have a Material Adverse Effect. SECTION 4.2. POWER AND AUTHORITY. Bargo has full partnership power and partnership authority, and SCL has full corporate power and corporate authority, to execute, deliver, and perform this Agreement and each other agreement, instrument, or document executed or to be executed by it in connection with the transactions contemplated hereby to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution, delivery, and performance by each of the Bargo Entities of this Agreement and each other agreement, instrument, or document executed or to be executed by it in connection with the transactions contemplated hereby to which it is a party, and the consummation by it of the transactions contemplated hereby and thereby, have been duly authorized by all necessary partnership action, in the instance of Bargo, and all necessary corporate action, in the instance of SCL. SECTION 4.3. VALID AND BINDING AGREEMENT. This Agreement has been duly executed and delivered by each of the Bargo Entities and constitutes, and each other agreement, instrument, or document executed or to be executed by a Bargo Entity in connection with the transactions contemplated hereby to which it is a party has been, or when executed will be, duly executed and delivered by such Bargo Entity and constitutes, or when executed and delivered will constitute, a valid and legally binding obligation of such Bargo Entity, enforceable against it in accordance with their respective terms, except that such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally and (b) equitable principles which may limit the availability of certain equitable remedies (such as specific performance) in certain instances. SECTION 4.4. NON-CONTRAVENTION. The execution, delivery, and performance by a Bargo Entity of this Agreement and each other agreement, instrument, or document executed or to be executed by such Bargo Entity in connection with the transactions contemplated hereby to which it is a party and the consummation by it of the transactions contemplated hereby and thereby do not and will not (a) conflict with or result in a violation of any provision of (i) in the instance of Bargo, its partnership agreement or other governing instruments or (ii) in the instance of SCL, its articles of incorporation, bylaws and other governing instruments, (b) conflict with or result in a violation of any provision of, or constitute (with or without the giving of notice or the passage of time or both) a default under, or give rise (with or without the giving of notice or the passage of time or both) to any right of termination, cancellation, or acceleration under, any bond, debenture, note, mortgage, indenture, lease, contract, agreement, or other instrument or obligation to which such Bargo Entity is a party or by which it or any of its properties may be bound, (c) result in the creation or imposition of any lien or other encumbrance upon the properties of such Bargo Entity, or (d) violate any applicable law, rule or regulation binding upon such Bargo Entity. SECTION 4.5. APPROVALS. No consent, approval, order, or authorization of, or declaration, filing, or registration with, any court or governmental agency or of any third party -9- 10 is required to be obtained or made by each Bargo Entity in connection with the execution, delivery, or performance by it of this Agreement and each other agreement, instrument, or document executed or to be executed by it in connection with the transactions contemplated hereby to which it is a party or the consummation by it of the transactions contemplated hereby and thereby other than the filing by SCL of a certificate of merger with the Secretaries of State of Nevada and Texas in accordance with the Nevada Statute and the TBCA, respectively. SECTION 4.6. PENDING LITIGATION. Except as otherwise set forth in the Bargo Disclosure Schedule, there are no pending suits, actions, or other proceedings in which a Bargo Entity is a party which affect the Properties in any material respect, or affecting the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby or that would, if determined adversely to such Bargo Entity, (a) result in the impairment or loss of SCL's title to the Properties, (b) hinder or impede the operation of all or any portion of any Property or (c) restrain, prohibit or impose damage on a Future Entity or a Bargo Entity with respect to the transactions contemplated hereby. SECTION 4.7. MARATHON AGREEMENT. Bargo has delivered to Future a true and correct copy of that certain Purchase and Sale Agreement made and entered into as of May 11, 1998, by and between Marathon Oil Company ("MOC") and Bargo Operating Company, Inc., and all amendments, modifications or supplements thereto (the "MOC AGREEMENT"). Bargo has delivered to Future true and correct copies of all written disclosures given by MOC to Bargo or its representatives which pertain to, or otherwise qualify, modify or limit the representations, warranties, covenants and agreements made by MOC in the MOC Agreement. The representations and warranties of MOC in the MOC Agreement are true and correct in all material respects. All covenants and agreements to be performed by the "Purchaser" under the MOC Agreement either prior to or at the closing of the transactions contemplated by the MOC Agreement have been complied with or performed in all material respects or otherwise waived in accordance with the terms of the MOC Agreement. SECTION 4.8. ASSETS AND LIABILITIES OF SCL. During its existence, SCL has owned or otherwise held no properties or other assets (tangible or intangible) other than (a) the rights of the "Purchaser" under the MOC Agreement, (b) the Properties and (c) its rights under this Agreement. SCL has no liabilities or obligations, contingent or otherwise, other than (i) the liabilities or obligations incurred or assumed by the "Purchaser" under the terms of the MOC Agreement, exclusive of any liabilities or obligations arising or otherwise attributable to the Emission Credits, and (ii) the Current Debt Amount and (iii) its liabilities and obligations under this Agreement. Attached hereto as Exhibit 4.8 is a true, correct and complete copy of a Subscription Agreement, and all amendments or modifications thereto, whereunder Bargo subscribed for SCL Stock and conveyed, assigned and contributed the Properties to SCL. SECTION 4.9. SOWELL INDEBTEDNESS. Bargo has delivered to Future a true and correct copy of all documents or other instruments evidencing the Sowell Indebtedness. SECTION 4.10. CAPITALIZATION OF SCL. The authorized capital stock of SCL consists of 100 shares of SCL Stock. As of the date hereof, 100 shares of SCL Stock were validly issued -10- 11 and outstanding, fully paid, and nonassessable, and Bargo is the record and beneficial owner of such shares, free and clear of all liens or other encumbrances. There are no bonds, debentures, notes or other indebtedness issued or outstanding having the right to vote on any matters on which SCL's stockholders may vote. Other than as contemplated by this Agreement, there are no options, warrants, calls, convertible securities or other rights, agreements or commitments presently outstanding obligating SCL to issue, deliver or sell shares of its capital stock or debt securities, or obligating SCL to grant, extend or enter into any such option, warrant, call or other such right, agreement or commitment. SECTION 4.11. ARTICLES OF INCORPORATION AND BY-LAWS; CORPORATE RECORDS. SCL has delivered to Future true and complete copies of its Articles of Incorporation and Bylaws, as amended or restated through the date of this Agreement. The minute book of SCL contains reasonably complete and accurate records of all corporate actions of the shareholders and board of directors of SCL, including committees of the board. The stock transfer records of SCL contain complete and accurate records of all issuances and redemptions of stock by SCL. Neither SCL nor, to the knowledge of SCL, any of its Affiliates, is a party to any agreement with respect to the capital stock of SCL other than this Agreement. SECTION 4.12. INVESTMENT EXPERIENCE. Bargo and each Partner is an "accredited investor" as defined in Rule 501(a) of the Securities Act. SECTION 4.13. PURCHASE FOR OWN ACCOUNT. The Merger Shares and Warrant to be acquired by Bargo and, pursuant to Rule 145 under the Securities Act, deemed acquired by the Partners, pursuant to this Agreement are being acquired for their own account and with no intention of distributing or reselling the Merger Shares, the Warrant or the shares of Future Stock issuable upon exercise of the Warrant (the "WARRANT SHARES"), or any part thereof, in any transaction that would be in violation of the securities laws of the United States of America, or any state, without prejudice, however, to the rights of the Bargo and the Partners at all times to sell or otherwise dispose of all or any part of the Merger Shares, the Warrant or the Warrant Shares under an effective registration statement under the Securities Act, or under an exemption from such registration available under the Securities Act, and subject, nevertheless, to the disposition of Bargo's and each Partner's property being at all times within its control. If Bargo or a Partner should in the future decide to dispose of any of the Merger Shares, the Warrant or the Warrant Shares, Bargo and each Partner understands and agrees that it may do so only in compliance with the Securities Act and applicable state securities laws, as then in effect, and that stop-transfer instructions to that effect, where applicable, will be in effect with respect to the Merger Shares, the Warrant and the Warrant Shares. Bargo and each Partner agrees to the imprinting, so long as required by law, of a legend on the certificates representing the Merger Shares, the Warrant and the Warrant Shares, substantially as follows in all material respects: [THE SECURITIES REPRESENTED BY THIS CERTIFICATE] [THIS WARRANT AND THE SECURITIES TO BE RECEIVED UPON THE EXERCISE OF THIS WARRANT] HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY -11- 12 STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH LAWS. SECTION 4.14. NO SOLICITATION. Neither Bargo or any Partner was at any time solicited by any leaflet, public promotional meeting, circular, newspaper or magazine article, radio or television advertisement, or any other form of general advertising or solicitation in connection with the offer, sale or purchase of the Merger Shares, the Warrant or the Warrant Shares under this Agreement. SECTION 4.15. DISCLAIMER OF WARRANTIES. Other than those expressly set out in this Article IV, each Bargo Entity hereby expressly disclaims any and all representations or warranties with respect to the Properties or the transaction contemplated hereby, and the Future Entities agree that the Properties are being transferred "where is" and "as is". Specifically as a part of (but not in limitation of) the foregoing, each Future Entity acknowledges that no Bargo Entity has made, and each Bargo Entity hereby expressly disclaims, any representation or warranty (express, implied, under common law, by statute or otherwise) (a) except to the limited extent set forth in Section 4.7, as to the condition of the Properties (INCLUDING WITHOUT LIMITATION, EACH BARGO ENTITY DISCLAIMS ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS), (b) as to the compliance by the Bargo Entities with Environmental Laws, (c) as to the status of title to the Properties, or (d) as to the extent of oil, gas and/or other mineral reserves, the recoverability of or the cost of recovering any of such reserves, the value of reserves, prices (or anticipated prices) at which production has been or will be sold and the ability to sell oil or gas production from the Properties. ARTICLE V REPRESENTATIONS AND WARRANTIES OF FUTURE ENTITIES Each of the Future Entities hereby represents and warrants to the Bargo Entities as follows: SECTION 5.1. ORGANIZATION AND EXISTENCE. Each Future Entity is a corporation duly organized, legally existing and in good standing under the laws of (a) in the instance of Future, the State of Utah, and (b) in the instance of Future Sub, the laws of the State of Nevada. Future has the power to carry on its business as it is now being conducted or currently proposed to be conducted. Future is duly qualified to do business, and is in good standing, in each jurisdiction where the character of its properties owned or held under lease or the nature of its activities make such qualification necessary, except where the failure to be so qualified -12- 13 will not, alone or in the aggregate, have a Material Adverse Effect on Future and its Subsidiaries, taken together. SECTION 5.2. POWER AND AUTHORITY. Each Future Entity has full corporate power and corporate authority to execute, deliver, and perform this Agreement and each other agreement, instrument, or document executed or to be executed by such Future Entity in connection with the transactions contemplated hereby to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution, delivery, and performance by each Future Entity of this Agreement (including the issuance of the Merger Shares and the Warrant) and each other agreement, instrument, or document executed or to be executed by such Future Entity in connection with the transactions contemplated hereby to which it is a party, and the consummation by it of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action of such Future Entity. SECTION 5.3. VALID AND BINDING AGREEMENT. This Agreement has been duly executed and delivered by each Future Entity and constitutes, and each other agreement, instrument, or document executed or to be executed by such Future Entity connection with the transactions contemplated hereby to which it is a party has been, or when executed will be, duly executed and delivered by such Future Entity and constitutes, or when executed and delivered will constitute, a valid and legally binding obligation of such Future Entity, enforceable against it in accordance with their respective terms, except that such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally and (b) equitable principles which may limit the availability of certain equitable remedies (such as specific performance) in certain instances. SECTION 5.4. NON-CONTRAVENTION. The execution, delivery, and performance by each Future Entity of this Agreement and each other agreement, instrument, or document executed or to be executed by such Future Entity in connection with the transactions contemplated hereby to which it is a party and the consummation by it of the transactions contemplated hereby and thereby do not and will not (a) conflict with or result in a violation of any provision of the charter or bylaws or other governing instruments of such Future Entity, (b) conflict with or result in a violation of any provision of, or constitute (with or without the giving of notice or the passage of time or both) a default under, or give rise (with or without the giving of notice or the passage of time or both) to any right of termination, cancellation, or acceleration under, any bond, debenture, note, mortgage, indenture, lease, contract, agreement, or other instrument or obligation to which such Future Entity is a party or by which such Future Entity or any of its properties may be bound, (c) result in the creation or imposition of any lien or other encumbrance upon the properties of such Future Entity, or (d) violate any applicable law, rule or regulation binding upon such Future Entity. SECTION 5.5. APPROVALS. No consent, approval, order, or authorization of, or declaration, filing, or registration with, any court or governmental agency or of any third party is required to be obtained or made by a Future Entity in connection the execution, delivery, or performance by such Future Entity of this Agreement (including the issuance of the Merger Shares and the Warrant as contemplated hereby) and each other agreement, instrument, or -13- 14 document executed or to be executed by such Future Entity in connection with the transactions contemplated hereby to which it is a party or the consummation by it of the transactions contemplated hereby and thereby, other than (i) the filing by Future Sub of a certificate of merger with the Secretaries of State of Nevada and Texas in accordance with the Nevada Statute and the TBCA, respectively, and (ii) compliance with any applicable requirements of the Securities Act and any applicable state securities laws. SECTION 5.6. PENDING LITIGATION. There are no pending suits, actions, or other proceedings to which Future or its Subsidiaries is a party or, to the knowledge of Future, threatened to be made a party which, if decided adversely to Future or its Subsidiaries, could have a Material Adverse Effect. SECTION 5.7. CAPITALIZATION. (a) The authorized capital stock of Future consists of 30,000,000 shares of Future Stock, and 200,000 shares of Preferred Stock, par value $.01 per share (in this Section, the "PREFERRED STOCK"). As of August 11, 1998, 6,157,015 shares of Future Stock were validly issued and outstanding, fully paid, and nonassessable, and no shares of Preferred Stock were issued and outstanding and there have been no changes in such numbers through the date of this Agreement. As of the date of this Agreement, there are no bonds, debentures, notes or other indebtedness issued or outstanding having the right to vote on any matters on which Future's stockholders may vote. As of the date of this Agreement, other than as set forth in the Future Disclosure Schedule, there are no options, warrants, calls, convertible securities or other rights, agreements or commitments presently outstanding obligating Future to issue, deliver or sell shares of its capital stock or debt securities, or obligating Future to grant, extend or enter into any such option, warrant, call or other such right, agreement or commitment, and, except for exercises thereof, there have been no changes in the number of such securities through the date of this Agreement; provided, that it is contemplated Future will issue to EnCap Fund I up to 2,844,859 shares of Future Stock at Closing in connection with EnCap Fund I's agreement to enter into the Subordination Agreement. All of the Merger Shares to be issued in accordance with this Agreement will be, when so issued, duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights and shall be delivered free and clear of all liens, claims, charges and encumbrances of any kind or nature whatsoever. Future has duly reserved for issuance pursuant to the exercise of the Warrant, the Warrant Shares. (b) The authorized capital stock of Future Sub consists of 1,000,000 shares of common stock, par value $0.01 per share ("FUTURE SUB STOCK"). As of the date hereof, 1,000 shares of Future Sub Stock were validly issued and outstanding, fully paid, and nonassessable, and Future is the record and beneficial owner of such shares, free and clear of all liens or other encumbrances. There are no bonds, debentures, notes or other indebtedness issued or outstanding having the right to vote on any matters on which Future Sub's stockholders may vote. Other than as contemplated by this Agreement, there are no options, warrants, calls, convertible securities or other rights, agreements or commitments presently outstanding obligating Future Sub to issue, deliver or sell shares of its capital stock or debt securities, or -14- 15 obligating Future Sub to grant, extend or enter into any such option, warrant, call or other such right, agreement or commitment. SECTION 5.8. SUBSIDIARIES. Each Subsidiary is a corporation, partnership or other entity (as indicated on the Future Disclosure Schedule) duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has the corporate or similar power to carry on its business as it is now being conducted or currently proposed to be conducted. Each Subsidiary is duly qualified to do business, and is in good standing, in each jurisdiction where the character of its properties owned or held under lease or the nature of its activities makes such qualification necessary except where the failure to be so qualified, when taken together with all such failures, has not had, and would not reasonably be expected to have, a Material Adverse effect on Future and its Subsidiaries, taken together. The Future Disclosure Schedule sets forth, with respect to each Subsidiary, its name and jurisdiction of organization and, with respect to each Subsidiary that is not wholly-owned, the number of issued and outstanding shares of capital stock or share capital and the number of shares of capital stock or share capital owned by Future or a Subsidiary. All the outstanding shares of capital stock or share capital of each Subsidiary are validly issued, fully paid and nonassessable, and, except as otherwise set forth in the Future Disclosure Schedule, those owned by Future or by a Subsidiary of Future are owned free and clear of any liens, claims or encumbrances. There are no existing options, warrants, calls, convertible securities or other rights, agreements or commitments of any character relating to the issued or unissued capital stock or other securities of any of the Subsidiaries of Future. Future does not directly or indirectly own any interest in any other corporation, partnership, joint venture or other business association or entity or have any obligation, commitment or undertaking to acquire any such interest other than joint ventures of the type customarily entered into in the oil and gas industry. SECTION 5.9. PERMITS. Each of Future and its Subsidiaries has all permits, approvals, licenses and franchises from governmental authorities required to conduct its business as now being conducted, except for such permits, approvals, licenses and franchises the absence of which would not, individually or in the aggregate, have a Material Adverse Effect. SECTION 5.10. KNOWLEDGEABLE PURCHASER. Each Future Entity is a knowledgeable purchaser, owner and operator of oil and gas properties, has the ability to evaluate (and in fact has evaluated) the Properties for purchase, and is acquiring the Properties for its own account and not with the intent to make a distribution within the meaning of the Securities Act of 1933 (and the rules and regulations pertaining thereto) or a distribution thereof in violation of any other applicable securities laws. SECTION 5.11. CERTIFICATES FOR MERGER SHARES. The certificates delivered to Bargo at the Closing representing the Merger Shares will conform to the requirements of the Utah Business Corporation Act. SECTION 5.12. SEC FILINGS. Except as otherwise disclosed to Bargo, Future is current in its obligations to file all periodic reports and proxy statements with the Commission required -15- 16 to be filed under the Exchange Act. Future's Annual Report on Form-10KSB for the year ended December 31, 1997, Future's Form 8-K/A filed on February 27, 1998, and Future's Quarterly Report on Form-10QSB for the quarter ending March 31, 1998 (collectively, the "SEC DOCUMENTS") are all of the documents the Future was required to file with the Commission since January 1, 1998. As of their respective dates, the SEC Documents complied as to form in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission thereunder applicable to such SEC Documents. The SEC Documents do not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of circumstances then existing. The audited Consolidated financial statements and unaudited Consolidated interim financial statements of Future included in the SEC Documents comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the Commission with respect thereto; present fairly in all material respects, in conformity with GAAP applied on a consistent basis, the Consolidated financial position of Future as of the dates thereof and its Consolidated results of operations and changes in financial position for the periods then ended (subject to normal year-end adjustments in the case of the unaudited interim financial statements and the fact that certain information and notes have been condensed or omitted in accordance with the Exchange Act and the rules promulgated thereunder); and are in all material respects in accordance with the books of account and records of Future and its subsidiaries. There are no material liabilities of Future (contingent or otherwise), other than as disclosed in the SEC Documents and the financial statements included therein. SECTION 5.13. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the SEC Documents filed prior to the date of this Agreement or in the Future Disclosure Schedule, since December 31, 1997, Future and its Subsidiaries have operated their respective businesses in the ordinary course of business consistent with past practice and there has not been (a) any transaction, commitment, dispute or other event or condition (financial or otherwise) of any character (whether or not in the ordinary course of business) which, alone or in the aggregate, has had, or would reasonably be expected to have, a Material Adverse Effect; (b) any damage, destruction or loss, whether or not covered by insurance, which has had, or would reasonably be expected to have, a Material Adverse Effect; (c) any declaration, setting aside or payment of any dividend or distribution (whether in cash, stock or property) with respect to the capital stock of the Future Entities or any Subsidiary (other than dividends or distributions between Future and its wholly-owned Subsidiaries); (d) any material change in Future's accounting principles, practices or methods; (e) any repurchase or redemption with respect to Future's capital stock; (f) any stock split, combination or reclassification of any of Future's capital stock or the issuance or authorization of any issuance of any other securities in respect of, in lieu of or in substitution for, shares of Future's capital stock; (g) any grant of or any amendment of the terms of any option to purchase shares of capital stock of Future; or (h) any agreement (whether or not in writing), arrangement or understanding to do any of the foregoing. SECTION 5.14. SECTION 61-6-2 OF UTAH CODE. The Utah Control Shares Acquisition Act will not apply to acquisitions from time to time, in the open market and otherwise, by Bargo and the Partners, of the shares of Future. -16- 17 SECTION 5.15. ARTICLES OF INCORPORATION AND BY-LAWS; CORPORATE RECORDS. Future and Future Sub have delivered to Bargo true and complete copies of their respective Certificate or Articles of Incorporation and Bylaws, as amended or restated through the date of this Agreement. The minute books of each of Future and its Subsidiaries contain reasonably complete and accurate records of all corporate actions of the equity owners of the various entities and of the boards of directors or other governing bodies, including committees of such boards or governing bodies. The stock transfer records of Future are maintained by its transfer agent and registrar and, to the knowledge of Future, contain complete and accurate records of all issuances and redemptions of stock by Future. The stock transfer records of Future Sub contain complete and accurate records of all issuances and redemptions of stock by Future Sub. Except as set forth in the Future Disclosure Schedule, neither Future nor, to the knowledge of Future, any of its Affiliates, is a party to any agreement with respect to the capital stock of Future other than this Agreement. SECTION 5.16. CONTRACTS. (a) The Future Disclosure Schedule sets forth, as of the date hereof, a list of all of the following material contracts and other agreements to which any of Future or its Subsidiaries is a party or by which any of them or any material portion of their properties or assets are bound or subject (other than those set forth in any other portion of the Future Disclosure Schedule): (i) contracts, severance agreements and other agreements with any current or former officer, director, employee, consultant, agent or other representative; (ii) contracts and other agreements with any labor union or association representing any employee of the Future or its Subsidiaries; (iii) contracts, agreements or other agreements relating to Future and its Subsidiaries between any of the Future or its Subsidiaries, on the one hand, and any stockholder or any of his, her or its Affiliates on the other hand; (iv) joint venture agreements; (v) contracts and other agreements under which any of Future or its Subsidiaries agrees to indemnify any party; (vi) contracts and other agreements relating to the borrowing of money; or (vii) any other material contract or other agreement whether or not made in the ordinary course of business. There have been delivered or made available to Bargo true and complete copies of all such contracts and other agreements described above that are referenced in the Future Disclosure Schedule. -17- 18 (b) All contracts, agreements and understandings of the type described above and referenced in the Future Disclosure Schedule are valid and binding and are in full force and effect and enforceable in accordance with their respective terms other than contracts, agreements or understandings which are by their terms no longer in force or effect. Except as set forth in the Future Disclosure Schedule, (i) no approval or consent of, or notice to, any Person is needed in order that such contract, agreement or understanding shall continue in full force and effect in accordance with its terms without penalty, acceleration or rights of early termination following the consummation of the transactions contemplated by this Agreement, and (ii) none of the Future or its Subsidiaries is in violation or breach of or default under any such contract, agreement or understanding nor, to the knowledge of Future, is any other party to any such contract, agreement or understanding. SECTION 5.17. OIL AND GAS PROPERTIES. (a) Each of Future and its Subsidiaries has good and defensible title to all of its material oil and gas properties and assets, free and clear of all liens other than as disclosed in the Future Disclosure Schedule; provided, that no representation or warranty is made with respect to any oil, gas or mineral property or interest to which no proved oil or gas reserves are properly attributed. All proceeds from the sale of each Future's and its Subsidiaries' share of the hydrocarbons being produced from its oil and gas properties are currently being paid in full to the Future or its Subsidiaries by the purchasers thereof on a timely basis and none of such proceeds are currently being held in suspense by such purchaser or any other party. (b) Future has delivered to Bargo a copy of the reserve report (in this Section, the "RESERVE REPORT") dated as of August 1, 1998, prepared by T.J. Smith & Company, Inc, independent reserve engineers (in this Section, the "RESERVE ENGINEERS"), relating to the oil and gas reserves of Future and its Subsidiaries. The factual information underlying the estimates of the reserves of Future and its subsidiaries, which was supplied by Future to the Reserve Engineers for the purpose of preparing the Reserve Report, including, without limitation, production, volumes, sales prices for production, contractual pricing provisions under oil or gas sales or marketing contracts under hedging arrangements, costs of operations and development, and working interest and net revenue information relating to Future's and its Subsidiaries' ownership interests in properties, was true and correct in all material respects on the date of such Reserve Report; the estimates of future capital expenditures and other future exploration and development costs supplied to the Reserve Engineers were prepared in good faith and with a reasonable basis; the information provided to the Reserve Engineers for purposes of preparing the Reserve Report was prepared in accordance with customary industry practices; the Reserve Engineers were, as of the date of the Reserve Report prepared by it, and are, as of the date hereof, independent petroleum engineers with respect to Future and its Subsidiaries; other than normal production of the reserves and intervening oil and gas price fluctuations, Future is not as of the date hereof and as of the date of Closing will not be, aware of any facts or circumstances that would result in a materially adverse change in the reserves in the aggregate, or the aggregate present value of future net cash flows therefrom, as described in the Reserve Report; estimates of such reserves and the present value of the future net cash -18- 19 flows therefrom in the Reserve Report comply in all material respects to the applicable requirements of Regulation S-X and Industry Guide 2 under the Securities Act. SECTION 5.18. ENVIRONMENTAL AND SAFETY MATTERS. Except as set forth in the Future Disclosure Schedule and except for such of the following as would not, individually or in the aggregate, have a Material Adverse Effect with respect to Future and its Subsidiaries: (a) each of Future and its Subsidiaries is in compliance with all applicable Environmental Laws; (b) neither Future nor any of its Subsidiaries has received a notice, report or information regarding any liabilities (whether accrued, absolute, contingent, unliquidated or otherwise), or any corrective, investigatory or remedial obligations, arising under applicable Environmental Laws with respect to its past or present operations or properties; (c) Future or a Subsidiary has obtained, and is and has been in compliance with all terms and conditions of, all permits, licenses and other authorizations required pursuant to Environmental Laws for its occupation of the real property owned by Future and its Subsidiaries (in this Section, an "OWNED PROPERTY") the property leased by the Future and its Subsidiaries (in this Section, a "LEASED PROPERTY") and the other assets and operations of the Future and its Subsidiaries and the conduct of their business; and (d) neither Future nor its Subsidiaries has any contingent liability which is material to Future and its Subsidiaries as a whole in connection with the release of any hazardous materials into the environment in violation of any Environmental Law. Future has made available to Bargo true, complete and correct copies of all environmental reports, analyses, tests or monitoring in the possession of the Future during the past two years pertaining to any Owned Property or Leased Property. SECTION 5.19. TAX MATTERS. Each of the following is true with respect to each of Future and its Subsidiaries to the extent applicable to such member: (a) all Returns have been or will be timely filed by Future and its Subsidiaries when due in accordance with all applicable laws; all Taxes shown on the Returns have been or will be timely paid when due; the Returns have been properly completed in compliance with all applicable laws and regulations and completely and accurately reflect the facts regarding the income, expenses, properties, business and operations required to be shown thereon; the Returns are not subject to penalties under Section 6662 of the Code (or any corresponding provision of state, local or foreign tax law); (b) except as set forth in the Future Disclosure Schedule, Future and its Subsidiaries has paid all Taxes required to be paid by it (whether or not shown on a Return) or for which it could be liable (provided that it shall not be considered a breach of this representation if it is ultimately determined that additional tax payments are due but such assessment is based on an adjustment to a return or position, if such member has a reasonable basis for the position taken with respect to such Taxes), whether to taxing authorities or to other persons under tax allocation agreements or otherwise, and the charges, accruals, and reserves for Taxes due, or accrued but not yet due, relating to its income, properties, transactions or operations as reflected on its books (including, -19- 20 without limitation, the balance sheet included in Future's Form 10-QSB for the quarter ended March 31, 1998) are adequate to cover such Taxes; (c) there are no agreements or consents currently in effect for the extension or waiver of the time (i) to file any Return or (ii) for assessment or collection of any taxes relating to the income, properties or operations of Future or its Subsidiaries, nor has Future and its Subsidiaries been requested to enter into any such agreement or consent; (d) there are no liens for Taxes (other than for current Taxes not yet due and payable) upon the assets of Future or its Subsidiaries; and (e) to the knowledge of Future, each of Future and its Subsidiaries has complied in all material respects with all applicable tax laws. SECTION 5.20. ERISA. Future does not maintain nor has it maintained any Plan. Future does not currently contribute to or have any obligation to contribute to or otherwise have any liability with respect to any Plan. SECTION 5.21 FUTURE'S ASSETS. The assets of Future and of its subsidiaries consist solely of (i) reserves of oil, rights to reserves of oil and associated exploration and production assets with a fair market value not exceeding $500 million and (ii) other assets with a fair market value not exceeding $15 million. For purposes of this Section 5.21, the term "ASSOCIATED EXPLORATION AND PRODUCTION ASSETS" shall have the meaning ascribed thereto in Section 802.3 of the Rules promulgated pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976. SECTION 5.22. NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the representations and warranties contained in this Article V, neither Future, Future Sub nor any other Person makes any other express or implied representation or warranty on behalf of Future or Future Sub. ARTICLE VI CERTAIN COVENANTS SECTION 6.1. ACCESS TO INFORMATION. (a) From the date hereof until Closing, each Bargo Entity will use its reasonable best efforts to give Future, and its attorneys and other representatives, access at all reasonable times (i) to the Properties and to any contract files, lease or other title files, production files, well files and other files of the Bargo Entities pertaining to the ownership of the Properties, and (ii) the books and records of SCL, and each Bargo Entity will use its reasonable best efforts to arrange for Future, and its -20- 21 attorneys and other representatives, to have access to any such files or records in the office of Bargo. Each Bargo Entity shall not be obligated to provide Future with access to any records or data which such Bargo Entity cannot provide to Future without, in its reasonable opinion, breaching confidentiality agreements with other parties. Future recognizes and agrees that all materials made available to it (whether pursuant to this Section or otherwise) in connection with the Properties are made available to it as an accommodation and without representation or warranty of any kind as to the accuracy and completeness of such materials. (b) From the date hereof until Closing, Future shall afford to Bargo and to the officers, employees, accountants, counsel, financial advisors and other representatives of Bargo, reasonable access during normal business hours to the premises, books and records of Future and the Subsidiaries and will furnish to the Bargo (i) a copy of each report, schedule, registration statement and other documents filed by it during such period pursuant to the requirements of federal or state securities laws, and (ii) such other information with respect to its business and properties as Bargo reasonably requests. Future shall not be obligated to provide Bargo with access to any records or data which Future cannot provide to Bargo without, in its reasonable opinion, breaching confidentiality agreements with other parties. Bargo recognizes and agrees that all materials made available to it (whether pursuant to this Section or otherwise) are made available to it as an accommodation and without representation or warranty of any kind as to the accuracy and completeness of such materials. SECTION 6.2. CONFIDENTIALITY. (a) Each Receiving Party (as defined below) agrees that all Confidential Information (as defined below) shall be kept confidential by the Receiving Party and shall not be disclosed by the Receiving Party in any manner whatsoever; provided, however, that (i) any of such Confidential Information may be disclosed to such directors, officers, employees, and authorized representatives (including without limitation attorneys, accountants, consultants, and financial advisors) of the Receiving Party (collectively, for purposes of this Section, "RECEIVING PARTY REPRESENTATIVES") as need to know such information for the purpose of evaluating the transactions contemplated hereby (it being understood that each Receiving Party Representative shall be informed by the Receiving Party of the confidential nature of such information and shall be required to treat such information confidentially and that the Receiving Party and a Receiving Party Representative shall be responsible for any breach of this Section by such Receiving Party Representative), (ii) any disclosure of Confidential Information may be made to the extent to which the Disclosing Party (as defined below) consents in writing, (iii) Confidential Information may be disclosed by the Receiving Party or any Receiving Party Representative to the extent that, in the opinion of counsel for the Receiving Party or such Receiving Party Representative, the Receiving Party or such Receiving Party Representative is legally compelled to do so, provided that, prior to making such disclosure, the Receiving Party or such Receiving Party Representative, as the case may be, advises and consults with the Disclosing Party regarding such -21- 22 disclosure and provided further that the Receiving Party or such Receiving Party Representative, as the case may be, discloses only that portion of the Confidential Information as is legally required. The Receiving Party agrees that none of the Confidential Information will be used for any purpose other than in connection with the transactions contemplated hereby. The term "CONFIDENTIAL INFORMATION", as used herein, means all information (irrespective of the form of communication) obtained by or on behalf of the Receiving Party from the Disclosing Party or its representatives pursuant to this Section and all similar information obtained from the Disclosing Party or its representatives by or on behalf of the Receiving Party prior to the date of this Agreement, other than information which (A) was or becomes generally available to the public other than as a result of disclosure by the Receiving Party or any Receiving Party Representative, (B) was or becomes available to the Receiving Party on a nonconfidential basis prior to disclosure to the Receiving Party by the Disclosing Party or its representatives, or (C) was or becomes available to the Receiving Party from a source other than the Disclosing Party and its representatives, provided that such source is not known by the Receiving Party (after reasonable due inquiry) to be bound by a legal, contractual or fiduciary obligation to the Disclosing Party. As used in this Section, the term "RECEIVING PARTY" shall mean (x) a Future Entity, when the Disclosing Party is a Bargo Entity, and (y) a Bargo Entity, when the Disclosing Party is a Future Entity. As used in this Section, the term "DISCLOSING PARTY" shall mean (xx) a Future Entity, when the Receiving Party is a Bargo Entity , and (yy) a Bargo Entity, when the Receiving Party is a Future Entity. (b) If this Agreement is terminated, the Receiving Party shall promptly return at its expense, and shall cause all Receiving Party Representatives to promptly return at the Receiving Party's expense, all Confidential Information to the Disclosing Party without retaining any copies thereof, provided that such portion of the Confidential Information as consists of notes, compilations, analyses, reports, studies, or other documents prepared by the Receiving Party or the Receiving Party Representatives shall be destroyed (and the Receiving Party and each Receiving Party Representative shall certify such destruction in writing to the Disclosing Party if requested by the Disclosing Party). SECTION 6.3. CONDUCT OF OPERATIONS ON THE PROPERTIES PRIOR TO THE EFFECTIVE TIME. From the date hereof until the Effective Time, SCL will continue its actions as a non-operator of the Properties in the ordinary course of business and will not sell or otherwise dispose of (or release) any portion of the Properties, without Future's written approval. SCL may make sales or other dispositions of oil, gas and other minerals in the ordinary course of business after production (but, in doing so, will not enter into any new marketing arrangements unless the same terminate, or can be terminated, (in either case without penalty or other detriment) upon 31 days written notice or less). SCL will not, without Future's consent, propose the drilling of any additional wells, or propose the deepening, plugging back, reworking or abandoning of any existing wells, or propose the conducting of any other operations which require consent under the applicable operating agreement except, in SCL's sole discretion, necessary to prevent -22- 23 termination or forfeiture of any oil and gas lease. SCL will advise Future of any such proposals made by other parties, and will consult with Future concerning such proposals, and will respond in the manner as required by Future; provided that, if the period for responding to such a proposal extends beyond the Effective Time, SCL will not respond to such proposal unless the Closing does not occur prior to the next to last day allowed to respond (in which case SCL shall respond in the manner required by Future). SCL will not modify any lease or other material agreement included in or relating to the Properties or enter into any new material agreement relating to the Properties without Future's consent, other than production sales contracts, or other marketing related agreements, which terminate, or can be terminated, (in each case without penalty or other detriment) upon 31 days written notice or less. SECTION 6.4. CONDUCT OF FUTURE'S BUSINESS PRIOR TO THE DIRECTOR EFFECTIVE DATE. During the period from the date of this Agreement to the Director Effective Date, Future and its Subsidiaries shall each use its reasonable best efforts to preserve the goodwill of suppliers, general partners, customers and others having business relations with them and to do nothing knowingly to impair their ability to keep and preserve their businesses as it exists on the date of this Agreement. Without limiting the generality of the foregoing, during the period from the date of this Agreement to the Director Effective Date, Future and its Subsidiaries shall not, without the prior written consent of Bargo: (a) declare, set aside, increase or pay any dividend (including any stock dividends), or declare or make any distribution on, or directly or indirectly combine, redeem, reclassify, purchase, or otherwise acquire, any shares of its capital stock or authorize the creation or issuance of, or, other than the Price Options or as contemplated hereby, issue, deliver or sell any additional shares of its capital stock or any securities or obligations convertible into or exchangeable for its capital stock or effect any stock split or reverse stock split or other recapitalization. (b) amend its Certificate of Incorporation or By-laws otherwise than as contemplated by this Agreement; (c) pledge or otherwise encumber any shares of its capital stock, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, or any other voting securities or convertible securities; (d) sell, assign, mortgage, pledge, encumber or otherwise transfer any oil and gas property or other material asset (including sales of oil or gas to be produced in the future) owned by Future or a Subsidiary, other than sales of oil and gas in the ordinary course of business; enter into any material swap, hedge or similar agreement covering a material amount of its future production; -23- 24 (e) merge, consolidate or enter into a share exchange with another entity other than as contemplated by this Agreement, or liquidate; (f) borrow amounts except amounts under the Senior Credit Facility necessary (i) to pay the Closing Obligations, (ii) to make the payment to EnCap Fund I and Gecko Booty 1994 I Limited Partnership provided by Section 2.1 of the Note Restructuring Agreement and (iii) to pay transaction costs incurred by it in connection with this Agreement, the Credit Facility and the Note Restructuring Agreement and the respective transactions contemplated thereby; (g) commit or omit to do any act which act or omission would cause a breach of any covenant contained in this Agreement or would cause any representation or warranty contained in this Agreement to become untrue, as if each such representation and warranty were continuously made from and after the date hereof; (h) violate any applicable law, statute, rule, governmental regulation or order in any material respect; (i) fail to maintain its books, accounts and records in the usual manner on a basis consistent with that heretofore employed; (j) fail to pay, or to make adequate provision in all material respects for the payment of, all Taxes, interest payments and penalties due and payable (for all periods up to the date of Closing, including that portion of its fiscal year to and including the date of Closing) to any city, parish, county, state, the United States, foreign or any other taxing authority, except those being contested in good faith by appropriate proceedings and for which sufficient reserves have been established, or make any elections with respect to taxes; (k) make any material Tax election that is inconsistent with any corresponding election made on a prior return or settle or compromise any income Tax liability for an amount materially in excess of the liability therefor that is reflected on the Future's consolidated financial statements included in its Form 10-KSB for the fiscal year ended December 31, 1997; (l) other than the Price Options or the Employment Agreement, (1) increase the compensation or fringe benefits of any present or former director, officer or employee of any member of the Future or its Subsidiaries (except for increases in salary or wages in the ordinary course of business consistent with past practice), (2) grant any severance or termination pay to any present or former director, officer or employee of any of the Future or its Subsidiaries , (3) loan or advance any money or other property to any present or former director, officer or employee of any of the Company or its Subsidiaries or (4) establish, adopt, enter into, amend or terminate any Plan or any plan, agreement, -24- 25 program, policy, trust, fund or other arrangement that would be a Plan if it were in existence as of the date of this Agreement; or (m) authorize any of, or agree or commit to do any of, the foregoing actions. SECTION 6.5. EMPLOYMENT AGREEMENT. Future and Carl Price shall enter into an employment agreement at (and subject to the occurrence of) the Closing in substantially the form of the agreement attached hereto as Exhibit 6.5 in all material respects (the "EMPLOYMENT AGREEMENT"). SECTION 6.6. BYLAWS. Future shall amend its Bylaws at (and subject to the occurrence of) the Closing in substantially the form attached hereto as Exhibit 6.6 in all material respects. SECTION 6.7. REGISTRATION RIGHTS AGREEMENTS. Future and Bargo shall enter into a registration rights agreement at (and subject to the occurrence of) the Closing in substantially the form of the agreement attached hereto as Exhibit 6.7-1 in all material respects (the "BARGO REGISTRATION RIGHTS AGREEMENT"). Future and Bargo shall use their reasonable best efforts to cause EnCap Fund I to enter into a registration rights agreement at (and subject to the occurrence of) the Closing in substantially the form of the agreement attached hereto as Exhibit 6.7-2 in all material respects (the "ENCAP REGISTRATION RIGHTS AGREEMENT"). Future and Bargo shall use their reasonable best efforts to cause the members of the Price Group to enter into a registration rights agreement at (and subject to the occurrence of) the Closing in substantially the form of the agreement attached hereto as Exhibit 6.7-3 in all material respects (the "PRICE REGISTRATION RIGHTS AGREEMENT"). SECTION 6.8. CREDIT FACILITY. Future shall use its reasonable best efforts to obtain, and have in place at or prior to Closing, a senior credit facility of not less than $20,000,000 and with an initial borrowing base of at least $10,000,000 (the "SENIOR CREDIT FACILITY"). SECTION 6.9. SUBORDINATION AGREEMENT. Future shall use its reasonable best efforts to cause EnCap Fund I to execute and deliver on or prior to the Closing that certain Master Subordination Agreement in substantially the form of the agreement attached hereto as Exhibit 6.9 (the "SUBORDINATION AGREEMENT"). SECTION 6.10. SHAREHOLDERS' AGREEMENT. Future and Bargo shall enter into a shareholders' agreement at (and subject to the occurrence of) the Closing in substantially the form of the agreement attached hereto as Exhibit 6.10 (the "SHAREHOLDERS' AGREEMENT") and shall use their reasonable best efforts to cause EnCap Fund I and the other parties listed therein to execute and deliver such agreement. -25- 26 SECTION 6.11. DIRECTORS. (a) Future shall cause (i) Robert Price and Don Wm. Reynolds, Jr. to resign as directors of Future effective at the Director Effective Date, (ii) the appointment of Tim J. Goff and Thomas D. Barrow (the "BARGO NOMINEES"), and Gary R. Petersen and D. Martin Phillips as directors of Future effective immediately at the Director Effective Date and (iii) the appointment of Tim J. Goff as Chairman of the Board of Directors of Future effective immediately at the Director Effective Date. (b) Future shall promptly take all actions required pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order to fulfill its obligations under this Section 6.11 and shall promptly distribute to its stockholders an Information Statement pursuant to Section 14(f) providing such information with respect to Bargo and its officers and directors as is required under Section 14(f) and Rule 14f-1 to fulfill such obligations. Bargo shall supply to Future and be solely responsible for any information with respect to Bargo and the Bargo Nominees required by such Section 14(f) and Rule 14f-1. Future represents to Bargo that the Information Statement will comply as to form with all requirements of the Exchange Act and the rules and regulations thereunder, and will not, on the date filed with the Commission and on the Closing Date and the Effective Time, contain an untrue statement of a material fact or omit to state a material fact which, in light of the facts set forth therein, is misleading; provided that Future is not representing as to the accuracy of any statement provided by Bargo in writing to Future for use in the Information Statement. Bargo represents to Future that all information provided by Future in writing to Bargo for inclusion in the Information Statement will not, on the date filed with the Commission and on the Closing Date and at the Effective Time, contain an untrue statement of a material fact or omit to state a material fact which, in light of the facts set forth therein, is misleading. SECTION 6.12. PAYMENT OF THE CLOSING OBLIGATIONS. Immediately following the Closing, Future shall cause the Surviving Corporation to pay (a) the Sowell Indebtedness and use its best efforts to cause the execution and filing of proper releases of the Sowell Mortgage and (b) the difference between the Current Debt Amount and the Sowell Indebtedness to Bargo in immediately available funds by wire transfer to an account specified by Bargo in writing prior to Closing. SECTION 6.13. CERTAIN AFFIRMATIVE POST-CLOSING COVENANTS. Subject to the occurrence of the Closing, the covenants and agreements contained in Sections 6.2 through Section 6.8 of that certain Note Restructuring Agreement of even date herewith by and between Future and Fund I shall be incorporated herein and Future shall be deemed to have made such covenants and agreements with Bargo. -26- 27 ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES; TERMINATION RIGHTS SECTION 7.1. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF FUTURE ENTITIES. The obligations of the Future Entities to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment on or prior to the Closing Date of each of the following conditions (which may be waived by the Future Entities in writing): (a) Each and every representation of the Bargo Entities under this Agreement shall be true and accurate as of the date when made and shall be deemed to have been made again at and as of the time of the Effective Time and the Closing and shall at and as of the Effective Time and such time of Closing be true and accurate in all respects except as to changes specifically contemplated by this Agreement or consented to by Future. (b) The Bargo Entities shall have performed and complied in all material respects with (or compliance therewith shall have been waived by Future) each and every covenant, agreement and condition required by this Agreement to be performed or complied with by them prior to or at the Closing. (c) Future shall have received a certificate executed by the general partner of Bargo, dated the Closing Date, representing and certifying that the conditions set forth in subsections (a) and (b) have been fulfilled. (d) No suit, action or other proceedings shall, on the date of Closing, be pending or threatened before any court or governmental agency seeking to restrain, prohibit, or obtain damages or other relief in connection with the consummation of the transactions contemplated by this Agreement. (e) The Future Entities shall have received an opinion of counsel or counsels reasonably acceptable to Future dated the Closing Date covering the matters described in Exhibit 7.1(e) and in a form reasonably acceptable to Future. (f) Future shall have, on or before the Closing, entered into the Senior Credit Facility on terms and conditions acceptable to Future. (g) Future shall have, on or before the Closing, entered into the Subordination Agreement with EnCap Fund I. (h) EnCap Fund I, Bargo, Carl Price and Don Reynolds shall have executed and delivered the Shareholders' Agreement. -27- 28 (i) Future shall have received (i) a copy of the resolutions of the partners of Bargo authorizing the execution, delivery and performance by Bargo of this Agreement and each other agreement, instrument or document executed or to be executed by Bargo in connection with this Agreement or the transactions contemplated hereby to which it is a party and (ii) a copy of the resolutions of the board of directors and the sole shareholder of SCL authorizing the execution, delivery and performance by SCL of this Agreement and each other agreement, instrument or document executed or to be executed by SCL in connection with this Agreement or the transactions contemplated hereby to which it is a party. (j) EnCap Fund I shall have executed and delivered the EnCap Registration Rights Agreement. (k) Bargo shall have executed and delivered the Bargo Registrations Rights Agreement. (l) Carl Price shall have executed and delivered the Employment Agreement. (m) At least Carl Price shall have executed and delivered the Price Registration Rights Agreement. (n) Bargo shall have delivered its shares of SCL Stock for cancellation. If any such condition on the obligations of the Future Entities under this Agreement is not met as of the Closing Date, or in the event the Closing does not occur on or before the Closing Date, and (in either case) the Future Entities are not in breach of their obligations hereunder in the absence of the Bargo Entities also being in breach of their obligations hereunder, this Agreement may, at the option of the Future Entities, be terminated, in which case the parties shall have no further obligations to one another hereunder (other than the obligations under Sections 6.2 and 11.4 and Article X which will survive such termination). SECTION 7.2. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BARGO ENTITIES. The obligations of the Bargo Entities to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment on or prior to the Closing Date of each of the following conditions (which may be waived by the Bargo Entities in writing): (a) Each and every representation of the Future Entities under this Agreement shall be true and accurate as of the date when made and shall be deemed to have been made again at and as of the Effective Time and the time of Closing and shall at and as of the Effective Time and such time of Closing be true and accurate in all respects except as to changes specifically contemplated by this Agreement or consented to by Bargo. -28- 29 (b) The Future Entities shall have performed and complied in all material respects with (or compliance therewith shall have been waived by Bargo) each and every covenant, agreement and condition required by this Agreement to be performed or complied with by the Future Entities prior to or at the Closing. (c) Bargo shall have received a certificate executed by the president of Future, dated the Closing Date, representing and certifying that the conditions set forth in subsections (a) and (b) have been fulfilled. (d) No suit, action or other proceedings shall, on the date of Closing, be pending or threatened before any court or governmental agency seeking to restrain, prohibit, or obtain damages or other relief in connection with the consummation of the transactions contemplated by this Agreement. (e) The Bargo Entities shall have received an opinion of counsel or counsels reasonably acceptable to Bargo dated the Closing Date covering the matters described in Exhibit 7.2(e) and in a form reasonably acceptable to Bargo. (f) Future shall have, on or before the Closing, entered into the Senior Credit facility on terms and conditions acceptable to Bargo. (g) Future and EnCap Fund I shall have, on or before the Closing, entered into the Subordination Agreement. (h) Future shall have received the resignations of Robert Price and Don Wm. Reynolds, Jr. as directors of Future, such resignations to be effective at the Director Effective Date. (i) Tim J. Goff, Gary R. Petersen, D. Martin Phillips and Thomas D. Barrow shall have been appointed to the Board of Directors of Future, such appointment to be effective immediately at the Director Effective Date. (j) Tim J. Goff shall have been elected as Chairman of the Board of Directors of Future, such election to be effective immediately at the Effective Time. (k) EnCap Fund I, Future, Carl Price and Don Reynolds shall have executed and delivered the Shareholders' Agreement. (l) Future shall have executed and delivered the Bargo Registration Rights Agreement. (m) Future and EnCap Fund I shall have executed and delivered the EnCap Registration Rights Agreement. -29- 30 (n) Future and Carl Price shall have executed and delivered the Employment Agreement. (o) Bargo shall have received (i) a copy of the resolutions of the Board of Directors of Future authorizing the execution, delivery and performance by Future of this Agreement and each other agreement, instrument or document executed or to be executed by Future in connection with this Agreement or the transactions contemplated hereby to which it is a party and (ii) a copy of the resolutions of the Board of Directors and sole shareholder of Future Sub authorizing the execution, delivery and performance by Future Sub of this Agreement and each other agreement, instrument or document executed or to be executed by Future Sub in connection with this Agreement or the transactions contemplated hereby to which it is a party . (p) Bargo shall have received (i) a certificate or certificates evidencing the Merger Shares and (ii) the Warrant. (q) At least Carl Price shall have executed and delivered the Price Registration Rights Agreement. (r) Future shall have adopted the amendment to the Bylaws as contemplated by Section 6.6. If any such condition on the obligations of the Bargo Entities under this Agreement is not met as of the Closing Date, or in the event the Closing does not occur on or before the Closing Date, and (in either case) the Bargo Entities are not in breach of their obligations hereunder in the absence of the Future Entities also being in breach of their obligations hereunder, this Agreement may, at the option of the Bargo Entities, be terminated, in which case the parties shall have no further obligations to one another hereunder (other than the obligations under Sections 6.2 and 11.4 and Article X which will survive such termination). ARTICLE VIII CERTAIN ACCOUNTING ADJUSTMENTS. SECTION 8.1. ADJUSTMENTS. Notwithstanding that for state law purposes the Merger shall be effective as of the Effective Time, the parties hereto agree that for purposes of this Article VIII the Properties will be deemed to have been conveyed and transferred by SCL to Future Sub as of August 1, 1998 (the "EFFECTIVE DATE") and that appropriate accounting adjustments shall be made between the Future Entities and the Bargo Entities so that (a) all expenses (including, without limitation, all drilling costs, all capital expenditures, and all overhead charges under applicable operating agreements, and all other overhead charges actually charged by third parties) which are incurred in the operation of the Properties after the Effective Date will be borne by -30- 31 Future Sub, and all proceeds (net of applicable production, severance, and similar taxes) from sale of oil, gas and/or other minerals produced from the Oil and Gas Properties after the Effective Date will be received by Future Sub, and (b) all expenses which are incurred in the operation of the Properties before the Effective Date will be borne by the Bargo Entities and all proceeds (net of applicable production, severance, and similar taxes) from the sale of oil, gas and/or other minerals produced therefrom before the Effective Date will be received by the Bargo Entities. It is agreed that, in making such adjustments: (i) oil which was produced from the Oil and Gas Properties and which was, on the Effective Date, stored in tanks located on the Oil and Gas Properties (or located elsewhere but used to store oil produced from the Oil and Gas Properties prior to delivery to oil purchasers) and above pipeline connections shall be deemed to have been produced before the Effective Date (it is recognized that such tanks were not gauged on the Effective Date for the purposes of this Agreement and that determination of the volume of such oil in storage will be based on the best available data, which may include estimates), and (ii) ad valorem taxes assessed with respect to a period which the Effective Date splits shall be prorated based on the number of days in such period which fall on each side of the Effective Date (with the day on which the Effective Date falls being counted in the period after the Effective Date), and (iii) no consideration shall be given to the local, state or federal income tax liabilities of any party. SECTION 8.2. CLOSING AND POST-CLOSING ACCOUNTING SETTLEMENTS. (a) At or before Closing, the parties shall determine, based upon the best information reasonably available to them, the amount of the adjustments provided for in Section 8.1. If the amount of adjustments so determined which would result in a credit to Future Sub exceed the amount of adjustments so determined which would result in a credit to the Bargo Entities, Future Sub shall be entitled to receive a cash payment from Bargo by the amount of such excess, and, if the converse is true, Bargo shall be entitled to receive a cash payment from Future by the amount of such excess. If no adjustment of the type contemplated under this subsection (a) is made at or before Closing and Bargo should thereafter receive any net proceeds attributable to oil or gas produced after the Effective Date, Bargo shall promptly remit such net proceeds to Future. (b) On or before 90 days after Closing, Future and Bargo shall review any additional information which may then be available pertaining to the adjustments provided for in Section 8.1, shall determine if any additional adjustments (whether the same be made to account for expenses or revenues not considered in making the adjustments made at Closing, or to correct errors made in such adjustments) should be made beyond those made at Closing, and shall make any such adjustments in the manner provided in subsection (a) above. Following such additional adjustments, no further adjustments shall be made under this Article VIII with respect to the matters contemplated by this Article. -31- 32 ARTICLE IX NOTICES All notices and other communications required under this Agreement shall (unless otherwise specifically provided herein) be in writing and be delivered personally, by recognized commercial courier or delivery service (which provides a receipt), by telecopier (with receipt acknowledged), or by registered or certified mail (postage prepaid), at the following addresses: If to any Bargo Entity: c/o Bargo Energy Resources, Ltd. 700 Louisiana, Suite 3700 Houston, Texas 77002 Attention: Tim J. Goff Fax No.:713-236-9799 If to any Future Entity: c/o Future Petroleum Corporation 2351 West Northwest Highway Suite 2130 Dallas, Texas 75220 Attention: Carl Price Fax No.: 214-350-8382 and shall be considered delivered on the date of receipt. Either a Future Entity, on the one hand, or a Bargo Entity, on the other hand, may specify as its proper address any other post office address within the continental limits of the United States by giving notice to the other, in the manner provided in this Article, at least ten (10) days prior to the effective date of such change of address. A copy of any notice and other communication given by either a Future Entity or a Bargo Entity hereunder shall be sent to EnCap Investments L.C. as follows: EnCap Investments, L.C. 1100 Louisiana, Suite 3150 Houston, Texas 77002 Attention: Gary R. Petersen or Colin Nisbeth Fax No.: 713-659-6130 ARTICLE X COMMISSIONS Bargo agrees to indemnify and hold harmless the Future Entities from and against any and all claims, obligations, actions, liabilities, losses, damages, costs or expenses (including court costs and attorneys fees) of any kind or character arising out -32- 33 of or resulting from any agreement, arrangement or understanding alleged to have been made by, or on behalf of, any Bargo Entity with any broker or finder in connection with this Agreement or the transactions contemplated hereby. Future agrees to indemnify and hold harmless Bargo from and against any and all claims, obligations, actions, liabilities, losses, damages, costs or expenses (including court costs and attorneys fees) of any kind or character arising out of or resulting from any agreement, arrangement or understanding alleged to have been made by, or on behalf of, any Future Entity with any broker or finder in connection with this Agreement or the transactions contemplated hereby. ARTICLE XI MISCELLANEOUS MATTERS SECTION 11.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made herein by the Future Entities and the Bargo Entities shall be continuing and shall be true and correct on and as of the date of Closing and shall survive the Closing. SECTION 11.2. FURTHER ASSURANCES. From time to time after the Closing, at the request of any party hereto and without further consideration, Bargo, on the one hand, and the Future Entities, on the other hand, shall execute and deliver to the requesting party such instruments and documents and take such other action (but without incurring any material financial obligation) as such requesting party may reasonably request in order to consummate more fully and effectively the transactions contemplated hereby. SECTION 11.3. BINDING EFFECT; SUCCESSORS AND ASSIGNS; NO THIRD PARTY BENEFIT. The Agreement shall be binding on the parties hereto and their respective successors and permitted assigns. No party hereto shall have the right to assign its rights under this Agreement without the prior written consent of the other party first having been obtained. Notwithstanding anything contained in this Agreement to the contrary, nothing in this Agreement, either express or implied, is intended to confer on any person other than the parties hereto or their respective successors and permitted assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement. SECTION 11.4. EXPENSES. Each party shall bear and pay all expenses incurred by it in connection with the transactions contemplated by this Agreement. SECTION 11.5. ENTIRE AGREEMENT. This Agreement contains the entire understanding of the parties hereto with respect to subject matter hereof and supersedes all prior agreements, understandings, negotiations, and discussions among the parties with respect to such subject matter. Time is of the essence in this Agreement. -33- 34 SECTION 11.6. PUBLIC STATEMENTS. The Bargo Entities, on the one hand, and the Future Entities, on the other hand, shall consult with each other with regard to all publicity and other releases at or prior to Closing concerning this Agreement and the transactions contemplated hereby and, except as required by applicable law or the applicable rules or regulations of any governmental body or stock exchange, neither the Bargo Entities, on the one hand, nor the Future Entities, on the other hand, shall issue any publicity or other release without the prior consent of the other. SECTION 11.7. INJUNCTIVE RELIEF. The parties hereto acknowledge and agree that irreparable damage would occur in the event any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement, and shall be entitled to enforce specifically the provisions of this Agreement, in any court of the United States or any state thereof having jurisdiction, in addition to any other remedy to which the parties may be entitled under this Agreement or at law or in equity. SECTION 11.8. DECEPTIVE TRADE PRACTICES. To the extent applicable to the transaction contemplated hereby or any portion thereof, FUTURE CAN AND DOES EXPRESSLY WAIVE THE PROVISIONS OF THE TEXAS DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT, SECTION 17.41 ET SEQ., TEXAS BUSINESS & COMMERCE CODE, OTHER THAN SECTION 17.555, WHICH IS NOT WAIVED, AND ALL OTHER CONSUMER PROTECTION LAWS OF THE STATE OF TEXAS, OR ANY OTHER STATE, APPLICABLE TO THIS TRANSACTION THAT MAY BE WAIVED BY THE PARTIES. IN CONNECTION WITH SUCH WAIVER, FUTURE HEREBY REPRESENTS TO THE BARGO ENTITIES THAT IT (a) IS IN THE BUSINESS OF SEEKING OR ACQUIRING BY PURCHASE OR LEASE, GOODS OR SERVICES FOR COMMERCIAL OR BUSINESS USE, (b) HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT ENABLES IT TO EVALUATE THE MERITS AND RISKS OF THE TRANSACTIONS CONTEMPLATED HEREBY, (c) IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION AND (d) HAS ASSETS OF $5,000,000 OR MORE ACCORDING TO ITS MOST RECENT FINANCIAL STATEMENTS. SECTION 11.9. AMENDMENTS. This Agreement may be amended, modified, supplemented, restated or discharged (and provisions hereof may be waived) only by an instrument in writing signed by the parties hereto. SECTION 11.10. INDEMNIFICATION. Bargo agrees to indemnify, defend and hold harmless Future from and against any losses, expenses, claims, damages or liabilities resulting form the failure of the Merger to qualify as a tax-free reorganization under Section 368(a)(2)(D) of the Code, including taxes, interest and attorneys' fees relating thereto. SECTION 11.11. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. -34- 35 SECTION 11.12. COUNTERPARTS. This Agreement may be executed in counterparts, all of which are identical and all of which constitute one and the same instrument. It shall not be necessary for the Future Entities and the Bargo Entities to sign the same counterpart. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -35- 36 IN WITNESS WHEREOF, this Agreement is executed by the parties hereto on the date set forth above. BARGO ENERGY RESOURCES, LTD. By: BARGO OPERATING COMPANY, INC., General Partner By: /s/ TIM J. GOFF ---------------------------------- Tim J. Goff, President SCL-CAL COMPANY By: /s/ TIM J. GOFF ----------------------------------- Tim J. Goff, President FUTURE PETROLEUM CORPORATION By: /s/ CARL PRICE ----------------------------------- Carl Price, President FUTURE CAL-TEX CORPORATION By: /s/ CARL PRICE ----------------------------------- Carl Price, President -36- EX-4.14 10 AGREEMENT DATED 8/14/98 1 EXHIBIT 4.14 THIS AGREEMENT is made and entered into as of this 14th day of August, 1998, by and among Carl Price, Bargo Energy Resources, Ltd., EnCap Equity 1994 Limited Partnership and Energy Capital Investment Company PLC. WHEREAS, the undersigned are shareholders of Future Petroleum Corporation, a Utah corporation ("Future"); and WHEREAS, the undersigned deem it in their mutual best interests to enter into this Agreement; NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants contained herein, the undersigned do hereby agree that, in their capacities as shareholders of Future, the undersigned will cause the Board of Directors to adopt an amendment to the Bylaws of Future substantially in the form of the instrument attached hereto as Exhibit A. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the above date. /s/ CARL PRICE ----------------------------------------------- Carl Price BARGO ENERGY RESOURCES, LTD. By: Bargo Operating Company By: /s/ TIM J. GOFF -------------------------------------------- Tim J. Goff, President ENCAP EQUITY 1994 LIMITED PARTNERSHIP By: EnCap Investments, L.C. By: /s/ GARY R. PETERSEN -------------------------------------------- Gary R. Petersen, Managing Director ENERGY CAPITAL INVESTMENT COMPANY PLC By: /s/ GARY R. PETERSEN -------------------------------------------- Gary R. Petersen, Director 2 Section [ ]. For so long as the Bargo Group is entitled to nominate one or more persons to the Board of Directors of the Company as provided in the Shareholders' Agreement, dated August 14, 1998, among the Company, Bargo Energy Resources, Ltd., a Texas limited partnership ("Bargo"), and certain other shareholders of the Company ("Shareholders' Agreement"), without the approval of one of the directors nominated by the Bargo Group (which shall be in addition to any other corporate action required by the Articles of Incorporation, these By-Laws or by applicable law): (a) The Company will not, and will not permit any Subsidiary thereof, in any manner to owe or be liable for Indebtedness except: (i) the Obligations; (ii) the Senior Credit Facility; (iii) obligations under operating leases entered into in the ordinary course of the Company's or its Subsidiaries' business in arm's length transactions at competitive market rates under competitive terms and conditions in all respects; (iv) Indebtedness owed by the Company or any Subsidiary thereof which is subordinated to the Obligations upon terms and conditions satisfactory to ECIC and EnCap LP in their sole and absolute discretion; (v) purchase money Indebtedness in an aggregate principal amount not to exceed $200,000 at any time, provided that the original principal amount of any such Indebtedness shall not be in excess of the purchase price of the asset acquired thereby and such Indebtedness shall be secured only by the acquired asset; (vi) Indebtedness in the principal amount of approximately $20,000 owed to Bank One Texas on a workover rig; and (vii) Indebtedness in the principal amount of approximately $20,000 owed to Sam Henderson. (b) The Company will not, and will not permit its Subsidiaries to, merge or consolidate with or into any other business entity. Any Subsidiary of the Company may, however, be merged into or consolidated with either the Company or another Subsidiary which is wholly-owned by the Company, so long as the Company or the Subsidiary wholly-owned by the Company is the surviving business entity. The Company will not issue any securities other than shares of its common stock or any options or warrants giving the holders thereof only the right to acquire such shares. No Subsidiary of the Company will issue any additional shares of its capital stock or other securities or any options, warrants or other rights to acquire such additional shares or other securities except to the Company. No Subsidiary of the Company which is a partnership will allow any diminution of the Company's interest (direct or indirect) therein. 3 (c) The Company will not, and will not permit any Subsidiary to, sell, transfer, lease, exchange, alienate or dispose of any Collateral except: (i) equipment which is worthless or obsolete or which is replaced by equipment of equal suitability and value; (ii) inventory (including oil and gas sold as produced and seismic data) which is sold in the ordinary course of business on ordinary trade terms; or (iii) other property which is sold for fair consideration not in the aggregate in excess of $500,000 in any Fiscal Year (commencing with Fiscal Year 1998) (d) The Company will not, and will not permit Subsidiary to, make any expenditure or commitment or incur any obligation or enter into or engage in any transaction except in the ordinary course of business (which ordinary course of business includes the acquisition, directly or indirectly, of oil and gas properties), engage directly or indirectly in any business or conduct any operations except in connection with or incidental to its present businesses and operations, make any acquisitions of or capital contributions to or other investments in any person, other than Permitted Investments, or make any significant acquisitions or investments in any properties other than oil and gas properties. (e) The Company will not, and will not permit any of its Subsidiaries to, engage in any material transaction with any of its Affiliates on terms which are less favorable to it than those which would have been obtainable at the time in arms-length dealing with persons other than such Affiliates, provided that such restriction shall not apply to transactions among the Company and its wholly-owned Subsidiaries. (f) The Company will not, and will not permit any of its Subsidiaries to, declare or make, or incur any liability to declare or make, any Restricted Payment. (g) The Company will not amend, whether by amendment, supplement or renewal, the terms of the Note Documents as they relate to the amortization of Indebtedness under such Note Documents, the principal amount of Indebtedness under such Note Documents or the interest or premium payable with respect to such Indebtedness. Section [ ]. As used in this Article [ ] of the By-Laws, the following terms shall have the meanings set forth below: "Affiliate" shall mean, when used with respect to another person, any person directly or indirectly controlling, controlled by or under common control with such other person. "Amended Security Documents" has the meaning set forth in the Renewal Note Agreement. "Bargo Group" has the meaning set forth in the Shareholders' Agreement. 4 "Collateral" has the meaning set forth in the Renewal Note Agreement. "ECIC" means Energy Capital Investment Company PLC, an English investment company. "EnCap LP" means EnCap Equity 1994 Limited Partnership, a Texas limited partnership. "Fiscal Year" means the 12 month period ending December 31 of any year. "Further Renewal Notes" shall have the meaning set forth in the Renewal Note Agreement. "GAAP" means those generally accepted accounting principles and practices which are recognized as such by the Financial Accounting Standards Board (or generally recognized successor) and which, in the case of the Company and its consolidated subsidiaries, are applied for periods after the date hereof in a manner consistent with the manner in which such principles were applied prior to the date hereof. "Indebtedness" of any person means Liabilities in any of the following categories: (a) Liabilities for borrowed money; (b) Liabilities constituting an obligation to pay the deferred purchase price of property or services; (c) Liabilities evidenced by a bond, debenture, note or similar instrument; (d) Liabilities which would under GAAP be shown on such person's balance sheet as a liability, and is payable more than one year from the date of creation thereof (other than reserves for taxes and reserves for contingent obligations); (e) Liabilities arising under futures contracts, forward contracts, swap, cap or collar contracts, option contracts, hedging contracts, other derivative contracts, or similar agreements; (f) Liabilities constituting principal under leases capitalized in accordance with GAAP; (g) Liabilities arising under conditional sales or other title retention agreements; (h) Liabilities owing under direct or indirect guaranties of Liabilities of any other person or constituting obligations to purchase or acquire or to otherwise protect or insure a creditor against loss in respect of Liabilities of any other person (such as obligations under working capital maintenance agreements, agreements to keep-well, or agreements to purchase Liabilities, assets, goods, securities or services), but excluding endorsements in the ordinary course of business of negotiable instruments in the course of collection; (i) Liabilities (for example, repurchase agreements) consisting of an obligation to purchase securities or other property, if such Liabilities arise out of or in connection with the sale of the same or similar securities or property; (j) Liabilities with respect to letters of credit or applications or reimbursement agreements therefor; (k) Liabilities with respect to payments received in consideration of oil, gas, or other minerals yet to be acquired or produced at the time of payment (including obligations under "take-or-pay" contracts to deliver gas in return for payments already received and the undischarged balance of any production payment created by such person or for the creation of which such person directly or indirectly received payment), or (l) Liabilities with respect to other obligations to deliver goods or services in consideration of advance payments therefor; provided, however, that the "Indebtedness" of any person shall not include Liabilities that were incurred by such person on ordinary trade terms to vendors, suppliers, or other persons providing goods and services for use by such person in the ordinary course of its business, unless and until such Liabilities are outstanding more than 90 days past the original invoice or billing date therefor. 5 "Liabilities" shall mean, as to any person, all indebtedness, liabilities and obligations of such person, whether mature or unmatured, liquidated or unliquidated, primary or secondary, direct or absolute, fixed or contingent, and whether or not required to be considered pursuant to GAAP. "Note Documents" shall mean the Renewal Note Agreement, the Further Renewal Notes and the Amended Security Documents as defined in the Renewal Note Agreement, and all other agreements, certificates, documents, commitments and writings at any time delivered in connection herewith or therewith. "Obligations" shall mean all Liabilities owing ECIC and EnCap LP under or pursuant to the Renewal Note Agreement, the Further Renewal Notes or any of the other Note Documents. "Permitted Investment" shall mean any investment, loan, advance, guaranty or capital contribution by the Company or any Subsidiary in any of the following: (a) properties or assets to be used in the ordinary course of business of the Company and its Subsidiaries; (b) current assets arising from the sale of goods and services in the ordinary course of business of the Company and its Subsidiaries; (c) investments in one or more of the Company's Subsidiaries or in any person that concurrently with such investment becomes a Subsidiary; (d) any marketable obligation maturing not later than one year after the date of acquisition therefor, issued or guaranteed by the United States of America or by any agency of the United States of America which has the full faith and credit of the Untied States of America; (e) commercial paper which is given the highest rating by a credit rating agency of recognized national standing and maturing not more than 270 days from the date of creation thereof; and (f) any demand deposit or time deposit (including certificates of deposit and money market or sweep accounts) with a commercial bank or trust company organized and doing business under the laws of the United States of America or any state thereof which has capital, surplus and undivided profits of at least $250,000,000, provided that such deposit must be either payable on demand or mature not more than twelve months from the date of investment therein. "Renewal Note Agreement" shall mean that certain Note Restructuring Agreement, dated August 14, 1998, among the Company, ECIC, EnCap LP and Gecko Booty 1994 Limited Partnership, a Texas limited partnership, as such agreement may be amended from time to time. "Restricted Payment" shall mean any Distribution (as defined below) in respect of the Company or any Subsidiary thereof (other than on account of capital stock or other equity interests of a Subsidiary owned legally or beneficially by the Company or another Subsidiary), including any Distribution resulting in the acquisition by the Company of securities that would constitute treasury stock. As used in this definition, "DISTRIBUTION" shall mean, in respect of any corporation, partnership or other business entity (a) dividends or other distributions or payments on capital stock or other equity interest of such corporation, partnership or other business entity (except distributions in such stock or other equity interest) and (b) the redemption or acquisition of such stock or other equity interests or of warrants, rights or other options to purchase such stock or other equity interests (except when solely in exchange for such stock or other equity interests). 6 "Senior Credit Facility" has the meaning set forth in the Renewal Note Agreement. "Subsidiary" shall mean with respect to any person, any corporation, association, partnership, joint venture, or other business or corporate entity, enterprise or organization which is directly or indirectly (through one or more intermediaries) controlled by or owned fifty percent or more by such person. Section [ ]. The Utah Control Shares Acquisition Act, section 61-6-1. et seq, Utah Code Annotated, and any amendatory, replacement or successor statute of like tenor or purpose, shall not apply to control share acquisitions of shares of the Corporation. -----END PRIVACY-ENHANCED MESSAGE-----