UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED
PURSUANT TO 13d-1(a) AND AMENDMENTS THERETO FILED
PURSUANT TO 13d-2(a)
TEXOIL, INC.
(Name of Issuer)
Common Stock, par value $.01 per share
(Title of Class of Securities)
882906 20 9
(CUSIP Number)
Marion A. Cowell, Jr.
Executive Vice President, Secretary and General
Counsel
First Union Corporation
One First Union Center
Charlotte, North Carolina 28288-0013
(704) 374-6828
with a copy to:
Kevin J. Roche
Senior Vice President
First Union Capital Partners, Inc.
One First Union Center
301 S. College Street - 5th Floor
Charlotte, North Carolina 28288-0732
(704) 374-4768
(Name, Address and Telephone Number of Persons
Authorized to Receive Notices and Communications)
December 31, 1997
(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 Rule 13d-1(b)(3) or (4),
check the following box: .
Page 1 of 63 Pages
<PAGE>
CUSIP No. 882906 20 9
13D
Page 2 of 63 Pages
1 NAME OF REPORTING PERSON
S.S. or I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSON
First Union Capital Partners, Inc.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A
GROUP*
(a)
(b)X
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
VIRGINIA
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH
REPORTING PERSON WITH (7-10)
7 SOLE VOTING POWER 0
8 SHARED VOTING POWER 3,375,621
9 SOLE DISPOSITIVE POWER 0
10 SHARED DISPOSITIVE POWER 3,375,621
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
3,375,621
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW
(11)
9.2%
14 TYPE OF REPORTING PERSON*
CO
* SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 882906 20 9
13D
Page 3 of 63 Pages
1 NAME OF REPORTING PERSON
S.S. or I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSON
First Union National Bank
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A
GROUP*
(a)
(b) X
3 SEC USE ONLY
4 SOURCE OF FUNDS*
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS
REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
National Association
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH
REPORTING PERSON
WITH (7-10)
7 SOLE VOTING POWER
0
8 SHARED VOTING POWER
3,375,621
9 SOLE DISPOSITIVE POWER
0
10 SHARED DISPOSITIVE POWER
3,375,621
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
3,375,621
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW
(11)
9.2%
14 TYPE OF REPORTING PERSON*
BK
* SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 882906 20 9
13D
Page 4 of 63 Pages
1 NAME OF REPORTING PERSON
S.S. or I.R.S. IDENTIFICATION NOS. OF ABOVE
PERSON
First Union Corporation
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A
GROUP*
(a)
(b) X
3 SEC USE ONLY
4 SOURCE OF FUNDS*
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e)
6 CITIZENSHIP OR PLACE OF ORGANIZATION
NORTH CAROLINA
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH
REPORTING PERSON WITH (7-10)
7 SOLE VOTING POWER
0
8 SHARED VOTING POWER
3,375,621
9 SOLE DISPOSITIVE POWER
0
10 SHARED DISPOSITIVE POWER
3,375,621
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
3,375,621
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW
(11)
9.2%
14 TYPE OF REPORTING PERSON*
HC
* SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Item 1. Security and Issuer.
This statement relates to the Common Stock,
$.01 par value per share (the "Texoil Common
Stock"), of Texoil, Inc. (the "Company"). The principal
executive offices of the Company are located at
1600 Smith Street, Suite 400, Houston, Texas
77002.
Item 2. Identity and Background.
(a) This Statement is being jointly filed by
First Union Capital Partners, Inc., a Virginia
corporation ("FUCP"), by virtue of its direct
beneficial ownership of Texoil Common Stock, and
First Union National Bank, a national association
("FUNB"), and First Union Corporation, a North
Carolina corporation ("FTU"), by virtue of their
indirect beneficial ownership of Texoil Common
Stock through their direct and indirect ownership
of FUCP. The foregoing entities are collectively
referred to herein as the "Reporting Persons."
Information with respect to each of the
Reporting Persons is given solely by such
Reporting Person, and no Reporting Person assumes
responsibility for the accuracy or completeness of
information furnished by another Reporting Person.
Certain information required by this
Item 2 concerning the directors and executive
officers of the Reporting Persons is set forth on
Schedule A attached hereto, which is incorporated
herein by reference.
(b) The address of the principal business
and principal office of FUCP is One First Union
Center, 301 South College Street, 5th Floor,
Charlotte, North Carolina 28288-0732. The address
of the principal business and principal office of
FUNB and FTU is One First Union Center, 301 South
College Street, Charlotte, North Carolina
28288-0732.
(c) FUCP, a wholly-owned subsidiary of FUNB,
is engaged principally in the business of venture
capital investing. FUNB, which is engaged
principally in the business of banking, is a
wholly-owned subsidiary of FTU. FTU is a bank
holding company which is principally engaged in
the business of banking through its subsidiaries.
(d) During the past five years, none of the
Reporting Persons nor, to the best knowledge of
such persons, any of the persons named in Schedule
A to this Statement, has been convicted in a
criminal proceeding (excluding traffic violations
or similar misdemeanors).
(e) During the past five years, none of the
Reporting Persons nor, to the best knowledge of
such persons, any of the persons named in Schedule
A to this Statement, was a party to a civil
proceeding of a judicial or administrative body of
competent jurisdiction as a result of which such
person was or is subject to a judgment, decree or
final order enjoining future violations of, or
prohibiting or mandating activity subject to,
federal or state securities laws or finding any
violation with respect to such laws.
(f) Not applicable.
<PAGE>
Item 3. Source and Amount of Funds or Other
Consideration.
On June 2, 1997, FUCP purchased from
Cliffwood Oil & Gas Corp., a privately held
corporation ("Cliffwood"), (a) 333,334 shares
of Class B Non-Voting Common Stock of
Cliffwood (the "Cliffwood Class B Common Stock")
and (b) presently exercisable warrants to purchase
167,500 shares of Cliffwood Class B Common Stock.
FUCP paid an aggregate cash purchase price of
$1,000,000 for such shares and warrants.
Funds for such cash purchase price were provided
from the working capital of FUCP and its affiliates.
On December 31, 1997, Texoil Acquisition,
Inc., a Texas corporation and wholly-owned subsidiary of the
Company ("Texoil Sub"), the Company and Cliffwood
executed an Agreement and Plan of Merger (the
"Merger Agreement") pursuant to which Texoil Sub
was merged with and into Cliffwood, with Cliffwood
surviving as a wholly-owned subsidiary of the
Company (the "Merger"). Pursuant to the Merger
Agreement, the shareholders of Cliffwood were
issued approximately 6.74 shares of Texoil Common
Stock for every share of issued and outstanding
Cliffwood Class A Common Stock and Cliffwood Class
B Common Stock. The total consideration issued to
the Cliffwood shareholders in the Merger comprised
25,450,179 shares of Texoil Common Stock,
representing approximately 70% of the shares of
Texoil Common Stock currently outstanding. In
addition, the Company issued replacement warrants
and options to holders of warrants and options to
purchase shares of Cliffwood Class A Common Stock
and Cliffwood Class B Common Stock.
In the Merger, FUCP was issued 2,246,671
shares of Texoil Common Stock and presently
exercisable warrants to purchase an additional
1,128,950 shares of Texoil Common Stock.
Item 4. Purpose of Transaction.
FUCP purchased the shares of Cliffwood Class
B Common Stock solely for investment purposes. As
of the date of this Statement, and as a result of
the Merger, FUCP is the direct beneficial owner of
(a) 2,246,671 shares of Texoil Common Stock and
(b) presently exercisable warrants to purchase an
additional 1,128,950 shares of Texoil Common Stock
at an exercise price of approximately $.63 per
share, which together represent approximately 9.2%
of the shares of Texoil Common Stock currently
outstanding. Depending on market conditions and
other factors (including evaluation of the
Company's businesses and prospects, availability
of funds, alternative uses of funds and general
economic conditions), FUCP may from time to time
purchase additional securities of the Company or
FUCP may actively seek to dispose of all or a
portion of its investment in the Company
(w) through sales to other institutional or
accredited investors in privately negotiated
transactions, (x) through sales pursuant to Rule
144 under the Securities Act of 1933, (y) by
exercise of its rights to require the Company to
register shares of Texoil Common Stock held by it
under the Securities Act of 1933 or (z) through
its right to sell its shares of (and warrants to
purchase shares of) Texoil Common Stock to the
Company described in Item 6.
<PAGE>
Pursuant to a Common Stock and Warrant
Purchase Agreement dated May 30, 1997 between
Cliffwood and FUCP (the "Purchase Agreement"),
FUCP was granted certain demand and piggyback
registration rights with respect to its shares of
(and warrants to purchase shares of) Cliffwood
Class B Common Stock. Such registration rights
extend to securities issued with respect to FUCP's
shares of (and warrants to purchase shares of)
Cliffwood Class B Common Stock in connection with
a merger or other consolidation. It is the
position of FUCP that the obligations of Cliffwood
under the Purchase Agreement continue to be the
obligations of Cliffwood following the Merger by
operation of law. On December 31, 1997, Cliffwood
and its President, Frank A. Lodzinski
("Lodzinski"), executed a letter agreement,
acknowledged by the Company (the "Letter
Agreement"), whereby Cliffwood and Lodzinski have
agreed to use their best efforts to cause the
Company to execute an additional agreement by
February 14, 1998 pursuant to which the Company
will assume the material obligations of Cliffwood
under the Purchase Agreement, including the
obligation to register the shares of Texoil Common
Stock issued to FUCP in the Merger.
Except as set forth in this Item 4 and
elsewhere in this Statement, neither the Reporting
Persons nor, to the best knowledge of such
Reporting Persons, any of the persons named in
Schedule A to this Statement, has any plans or
proposals which relate to or would result in (a)
the acquisition by any person of additional
securities of the Company, or the disposition of
securities of the Company, (b) an extraordinary
corporate transaction, such as a merger,
reorganization, or liquidation, involving the
Company or any of its subsidiaries, (c) a sale or
transfer of a material amount of assets of the
Company or any of its subsidiaries, (d) any change
in the present board of directors or management of
the Company, including any plans or proposals to
change the number or term of directors or to fill
any existing vacancies on the board, (e) any
material change in the present capitalization or
dividend policy of the Company, (f) any other
material change in the Company's business or
corporate structure, (g) changes in the Company's
charter or bylaws or other actions which may
impede the acquisition of control of the Company
by any person, (h) causing a class of securities
of the Company to be delisted from a national
securities exchange or cease to be authorized to
be quoted in an inter-dealer quotation system of a
registered national securities association, (i) a
class of equity securities of the Company becoming
eligible for termination of registration pursuant
to Section 12(g)(4) of the Securities Exchange Act
of 1934 (the "Exchange Act"), or (j) any action
similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer.
(a) After giving effect to the transactions
described in Item 5(c) below, FUCP is the
beneficial owner of (i) 2,246,671 shares of Texoil
Common Stock and (ii) presently exercisable
warrants to purchase an additional 1,128,950
shares of Texoil Common Stock, which together
represent approximately 9.2% of the shares of
Texoil Common Stock currently outstanding.
By virtue of the relationship between FUCP
and FUNB described in Item 2, FUNB may be deemed
to be the indirect beneficial owner of the
2,246,671 shares of Texoil Common Stock and the
warrants to purchase an additional 1,128,950
shares of Texoil Common Stock beneficially owned
by FUCP.
<PAGE>
By virtue of the relationship between FUCP,
FUNB and FTU described in Item 2, FTU may be
deemed to be the indirect beneficial owner of the
2,246,671 shares of Texoil Common Stock and the
warrants to purchase an additional 1,128,950
shares of Texoil Common Stock beneficially owned
by FUCP.
The percentages calculated in this Item 5 are
based upon 37,836,568 shares of Texoil Common
Stock outstanding immediately after giving effect
to the Merger (including warrants to purchase
1,128,950 shares of Texoil Common Stock held by
First Union, in accordance with the last sentence
of rule 13d-3(d)(1)(i) under the Exchange Act).
(b) FUCP has the power to vote or direct the
vote and the power to dispose of or direct the
disposition of the 2,246,671 shares of Texoil
Common Stock (and any shares issuable upon the
exercise of warrants to purchase shares of Texoil
Common Stock) and the power to dispose of or
direct the disposition of the warrants to purchase
an additional 1,128,950 shares of Texoil Common
Stock beneficially owned by FUCP.
By virtue of the relationship between FUCP
and FUNB described in Item 2, FUNB may be deemed
to indirectly share the power to vote or direct
the vote and indirectly share the power to dispose
of or direct the disposition of the 2,246,671
shares of Texoil Common Stock (and any shares
issuable upon the exercise of warrants to purchase
shares of Texoil Common Stock) and the power to
dispose of or direct the disposition of the
warrants to purchase an additional 1,128,950
shares of Texoil Common Stock beneficially owned
by FUCP.
By virtue of the relationship between FUCP,
FUNB and FTU described in Item 2, FTU may be
deemed to indirectly share the power to vote or
direct the vote and indirectly share the power to
dispose of or direct the disposition of the
2,246,671 shares of Texoil Common Stock (and any
shares issuable upon the exercise of warrants to
purchase shares of Texoil Common Stock) and the
power to dispose of or direct the disposition of
the warrants to purchase an additional 1,128,950
shares of Texoil Common Stock beneficially owned
by FUCP.
(c) Other than as described below, none of
the Reporting Persons, nor to the best knowledge
of the Reporting Persons, any of the persons named
in Schedule A to this Statement, has effected any
transaction in shares of Common Stock during the
past 60 days.
On December 31, 1997, Texoil Sub merged with
and into Cliffwood, with Cliffwood surviving as a
wholly-owned subsidiary of the Company. Pursuant
to the Merger Agreement, the shareholders of
Cliffwood were issued approximately 6.74 shares of
Texoil Common Stock for every share of issued and
outstanding Cliffwood Class A Common Stock and
Cliffwood Class B Common Stock. In addition, the
Company issued replacement warrants and options to
holders of warrants and options to purchase shares
of Cliffwood Class A Common Stock and Cliffwood
Class B Common Stock.
<PAGE>
In the Merger, FUCP was issued 2,246,671
shares of Texoil Common Stock and presently
exercisable warrants to purchase an additional
1,128,950 shares of Texoil Common Stock at an
exercise price of approximately $.63 per share.
After giving effect to the transactions
described in this Item 5(c), the beneficial
ownership of the securities of the Company by the
Reporting Persons is as set forth in Item 5(a)
above.
(d) No person other than the Reporting
Persons has the right to receive or the power to
direct the receipt of dividends from, or the
proceeds from the sale of, the Common Stock.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings
or Relationships with Respect to Securities of the
Issuer.
Pursuant to the Purchase Agreement, FUCP has
the right to sell its shares of (and warrants to
purchase shares of) Cliffwood Class B Common Stock
(including securities issued to FUCP in connection
with a merger or other consolidation) to Cliffwood
under certain circumstances. FUCP may exercise
its right to sell its securities to Cliffwood upon
the earlier to occur of May 27, 2001 or a "change
in control" at Cliffwood (as such term is defined
in the Purchase Agreement). Under the Purchase
Agreement, FUCP has the right to sell its
securities to Cliffwood at a price per share equal
to the "net asset value" of such shares (as such
term is defined in the Purchase Agreement).
FUCP's right to sell expires on May 31, 2005. It
is the position of FUCP that Cliffwood's
obligation to purchase securities owned by FUCP
continues to be the obligation of Cliffwood
following the Merger by operation of law.
Cliffwood and Lodzinski have agreed in the Letter
Agreement to use their best efforts to cause the
Company to expressly assume the material
obligations of Cliffwood under the Purchase
Agreement (including the obligation of Cliffwood
to purchase securities from FUCP) by February 14,
1998.
See Item 4 for a discussion of FUCP's
registration rights with respect to its shares of
Texoil Common Stock.
Item 7. Material to Be Filed as Exhibits.
1. Agreement relating to Filing of Joint
Acquisition Statements.
2. Common Stock and Warrant Purchase
Agreement dated May 30, 1997 between Cliffwood and
FUCP.
3. Agreement and Plan of Merger dated
December 31,1997 among the Company, Texoil Sub and
Cliffwood.*
* Filed as an Exhibit to the Company's Current
Report on Form 8-K filed January 9, 1998.
<PAGE>
4. Letter Agreement dated December 31, 1997
executed by Cliffwood and Frank A. Lodzinski and
acknowledged by the Company.
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of the
undersigned's knowledge and belief, the
undersigned certifies (on behalf of itself and
each of First Union National Bank and First Union
Corporation) that the information set forth in
this statement is true, complete and correct.
January 27, 1998
FIRST UNION CAPITAL PARTNERS, INC.
By: /s/ Kevin J. Roche
Name: Kevin J. Roche
Title: Senior Vice President
<PAGE>
SCHEDULE A
INFORMATION AS TO DIRECTORS AND EXECUTIVE
OFFICERS OF THE REPORTING PERSONS
NAME
BUSINESS (B) OR RESIDIENCE (R) ADDRESS
OCCUPATION OR EMPLOYMENT, NAME OF EMPLOYER,
BUSINESS OF EMPLOYER, ADDRESS OF EMPLOYER
FIRST UNION CAPITAL PARTNERS, INC.
DIRECTORS
Robert T. Atwood
(1)
Executive Vice President, Chief Financial Officer,
FTU (1)
Marion A. Cowell, Jr.
(1)
Executive Vice President, GeneralCounsel &
Secretary,
FTU (1)
EXECUTIVE OFFICERS
W. Barnes Hauptfuhrer
(1)
President (1)
Robert T. Atwood
(1)
Executive Vice President (1)
Robert F. Burtges
(1)
Senior Vice President
David B. Carson
(1)
Senior Vice President (1)
Jay M. Chernosky
(1)
Senior Vice President (1)
James C. Cook
(1)
Senior Vice President (1)
Amiel David
(1)
Senior Vice President (1)
Frederick W. Eubank, III
(1)
Senior Vice President (1)
Ted A. Gardner
(1)
Senior Vice President (1)
L. Watts Hamrick, III
(1)
Senior Vice President (1)
James H. Hatch
(1)
Senior Vice President & Treasurer (1)
Kent S. Hathaway
(1)
Senior Vice President & Secretary (1)
James M. Kipp
(1)
Senior Vice President (1)
David Neal Morrison
(1)
Senior Vice President (1)
Scott B. Perper
(1)
Senior Vice President (1)
Kevin J. Roche
(1)
Senior Vice President (1)
Kenneth R. Stancliff
(1)
Senior Vice President (1)
<PAGE>
FIRST UNION NATIONAL BANK
DIRECTORS
Edward E. Crutchfield
(2)
Chairman and Chief Executive Officer, FTU
John R. Georgius
(2)
President, FTU
Marion A. Cowell, Jr.
(2)
Executive Vice President, Secretary and General
Counsel, FTU
Robert T Atwood
(2)
Executive Vice President and Chief Financial
Officer, FTU
G. Kennedy Thompson
(2)
Executive Vice President, FTU
EXECUTIVE OFFICERS
Edward E. Crutchfield
(2)
Chairman and Chief Executive Officer
John R. Georgius
(2)
President
Marion A. Cowell, Jr.
(2)
Executive Vice President and Secretary
Robert T. Atwood
(2)
Chief Financial Officer and Executive Vice
President
FIRST UNION CORPORATION (3)
DIRECTORS
A. Dano Davis
(R) 4861 Ortega Blvd., Jacksonville, FL 32210
Chairman & Principal Executive Officer
Winn-Dixie Stores, Inc., retail grocery stores
5050 Edgewood Court, Jacksonville, FL 32254
Roddy Dowd, Sr.
(R) 1242 Queens Road West, Charlotte, NC 28207
Chairman, Charlotte Pipe and Foundry Company,
a manufacturer of pipe and fittings
P O Box 35430, Charlotte NC 28235
<PAGE>
William H. Goodwin, Jr.
(R) 6701 River Road, Richmond, VA 23229
Chairman, CCA Industries, a manufacturer of sports
and other equipment and diversified holding
company
901 East Cary Street, Suite 1400, Richmond, VA
23219
Jack A. Laughery
(R) 1750 Hunter Hill Road, Rocky Mount, NC 27804
Chairman, Laughery Investments, a restaurant
developer
800 Tiffany Boulevard, Suite 305, Rocky Mount, NC
27804
Radford D. Lovett
(R) 129 Ponte Vedra Blvd., Ponte Vedra Beach, FL
32082
Chairman, Commodores Point Terminal Corp., an
operator of a marine terminal and a real estate
management company
1600 Independent Square, Jacksonville, FL 32202
Randolph N. Reynolds
(R) 860 S River Road, Richmond, VA 23229
Vice Chairman, Reynolds Metals Company, an
aluminum manufacturer
6601 W. Broad Street, Richmond, VA 23261
John D. Uible
(B) 225 Water Street, Ste. 840, Jacksonville, FL
32202
Investor
G. Alex Bernhardt, Sr.
(R) 7120 Green Hill Circle, Blowing Rock, NC 28605
Chairman and Chief Executive Officer,
Bernhardt Furniture Company, furniture manufacturing
P O Box 740, Lenoir, NC 28645
W. Waldo Bradley
(R) Sylvan Island, Savannah, GA 31404
Chairman, Bradley Plywood Corporation, wholesale
distributor of building materials
P O Box 1408, Savannah, GA 31402-1408
<PAGE>
Howard H. Haworth
(R) 1340 Scotland Avenue, Charlotte, NC 28201
President, The Hayworth Group and The Haworth
Foundation, Inc., investments
P O Box 15369, Charlotte, NC 28211
Leonard G. Herring
(R) 310 Coffey Street, North Wilkesboro, NC 28659
Investor
P O Box 427, North Wilkesboro, NC 28659
Mackey J. McDonald
(R) 1821 Museum Road, Wyomissing, PA 19610
President & Chief Executive Officer, VF
Corporation, apparel manufacturing
1047 North Park Road, Wyomissing, PA 19610
Lanty L. Smith
(R) 1401 Westridge Road, Greensboro, NC 27401
Chairman and Chief Executive Officer, Precision
Fabrics Group, Inc., a manufacturer of technical,
high-performance textile products
301 North Elm Street, Ste. 600, Greensboro, NC
27401
Dewey L. Trogdon
(R) P O Box 1477, Banner Elk, NC 28604
Chairman, Cone Mills Corporation, a textile
manufacturer
3101 North Elm Street, P.O. Box 26540, Greensboro,
NC 27415-6540
Robert J. Brown
(R) 1129 Pennywood Drive, High Point, NC 27265
Chairman, President and Chief Executive Officer,
B&C Associates, Inc., a public relations and
marketing research firm
P O Box 2636, High Point, NC 27261
Edward E. Crutchfield, Jr.
(4)
Chairman and Chief Executive Officer, First Union
Corporation (4)
<PAGE>
R. Stuart Dickson
(R) 2235 Pinewood Circle, Charlotte, NC 28211
Chairman of the Executive Committee, Ruddick
Corporation, a diversified holding company
2000 Two First Union Center, Charlotte, NC 28282
B. F. Dolan
(B) 1990 Two First Union Center, Charlotte, NC
28282
Investor
John R. Georgius
(4)
Vice Chairman, First Union Corporation (4)
Max Lennon
(R) President's Home, Mars Hill College, Mars
Hill, NC 28754
President, Mars Hill College
50 Marshall Street, Mars Hill, NC 28754
Ruth G. Shaw
(R) 288 Avinger Lane, Davidson, NC 28036
Senior Vice President, Corporate Resources and
Chief Administrative Officer, Duke Power Company,
an investor-owned electric utility
422 S. Church Street,PB04G, Charlotte, NC 28242
B. J. Walker
(4)
Vice Chairman, First Union Corporation (4)
Edward E. Barr
(R) 560 Illingworth Avenue, Englewood, NJ 07631
Chairman, President & Chief Executive Officer, Sun
Chemical Corporation, a graphic arts materials
manufacturer
222 Bridge Plaza South, Fort Lee, NJ 07024
Arthur M. Goldberg
(R)P O Box 71856, Las Vegas, NV, 89170-1836
Executive Vice President & President of Gaming
Operations, Hilton Hotels Corporation, lodging and
casinos
Beverly Hills, CA
<PAGE>
Frank M. Henry
(R) 753 Ransom Road, Dallas, PA 18612
Chairman, Frank Martz Coach Company, bus
transportation
P O Box 1007, Wilkes-Barre, PA 18773
Joseph Neubauer
(R) 210 Rittenhouse Square, W., Apt. 3106,
Philadelphia, PA 19103
Chairman, President & Chief Executive Officer,
ARAMARK Corporation, provider or manager of food,
leisure, uniform, health education & distribution
services
ARA Tower, 1101 Market St., Philadelphia, PA 19107
Charles M. Shelton, Sr.
(R) 4417 Fox Brook Lane, Charlotte, NC 28211
General Partner, The Shelton Companies,
investments
301 S. College St., Suite 3600, Charlotte, NC
28202
Anthony P. Terracciano
(4)
Formerly President, First Union Corporation (4)
Malcolm S. McDonald
(B) P O Box 25970, Richmond, VA, 23260-5970
Chairman & CEO, First Union - VA/MD/DC
* The business addresses for such persons are
provided in the next column.
(1) All of the FUCP executive officers and
directors can be reached c/o First Union Capital
Partners, Inc., One First Union Center, 301 South
College Street, 5th Floor, Charlotte, North
Carolina 28222-0732.
(2) Correspondence to such director or
executive officer of FUNB may be sent c/o First
Union National Bank, One First Union Center, 301
South College Street, 5th Floor, Charlotte, North
Carolina 28222-0732.
(3) All of the FTU executive officers are
listed elsewhere in this Schedule A.
(4) First Union Corporation is registered as
a bank holding company, and the address of its
principal executive office is One First Union
Center, Charlotte, North Carolina 28288 (which is
the business address of such director or executive
officer).
<PAGE>
CITIZENSHIP: All of the directors and executive
officers of each of the Reporting Persons are U.S.
citizens.
<PAGE>
EXHIBIT INDEX
Exhibit Description Page
1 Agreement relating to filing of 20
Statements
2 Common Stock and Warrant 21
Purchase Agreement dated May 30,
1997 between Cliffwood and FUCP
3 Agreement and Plan of Merger dated *
December 31, 1997 among the Company,
Texoil Sub and Cliffwood
4 Letter Agreement dated December 62
31,1997 executed by Cliffwood and
Frank A. Lodzinski and acknowledged
by the Company.
* Filed as an Exhibit to the Company's Current
Report on Form 8-K filed January 9, 1998.
<PAGE>
Exhibit 1
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(f)(1)
promulgated under the Securities and Exchange Act
of 1934, as amended, the undersigned hereby agrees
to the joint filing with each other on behalf of
each of them a statement on Schedule 13D with
respect to the shares of Common Stock of Texoil,
Inc. and warrant to purchase shares of Common
Stock of Texoil, Inc. beneficially owned by each
of them. This Joint Filing Agreement shall be
included as an exhibit to such Schedule 13D.
IN WITNESS WHEREOF, the undersigned have
executed this Joint Filing Agreement as of the
27th day of January, 1998.
FIRST UNION CAPITAL PARTNERS, INC.
By: /s/ Kevin J. Roche
Name: Kevin J. Roche
Title: Senior Vice President
FIRST UNION NATIONAL BANK
By: /s/ Stephen J. Antal
Name: Stephen J. Antal
Title: Senior Vice President
FIRST UNION CORPORATION
By: /s/ Kevin J. Roche
Name: Kevin J. Roche
Title: Senior Vice President
<PAGE>
Exhibit 2
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
THIS COMMON STOCK AND WARRANT PURCHASE
AGREEMENT (this "Agreement") is dated as of May
30, 1997, between CLIFFWOOD OIL & GAS CORP., a
Texas corporation (the "Company") and FIRST UNION
CAPITAL PARTNERS, INC., a Virginia corporation
(the "Purchaser").
Statement of Purpose
The Company proposes to issue to the
Purchaser shares of its Class B Non-Voting Common
Stock and warrants to purchase additional shares
of its Class B Non-Voting Common Stock, all for an
aggregate purchase price of $1,000,000 and on the
other terms and conditions contained herein.
NOW, THEREFORE, in consideration of the
mutual covenants and agreements contained herein
and for other good and valuable consideration, the
receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as
follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. For the purposes of this
Agreement, in addition to the terms defined
elsewhere in this Agreement, the following terms
shall have the meanings set forth below:
"Affiliate" means, with respect to a Person, any
other Person (other than a Subsidiary) which
directly or indirectly through one or more
intermediaries, controls, or is controlled by, or
is under common control with, such Person. The
term "control" means (a) the power to vote 10% or
more of the securities or other equity interests
of a Person having ordinary voting power, or (b)
the possession, directly or indirectly, of any
other power to direct or cause the direction of
the management and policies of a Person, whether
through ownership of voting securities, by
contract or otherwise.
"Agreement" means this Common Stock and Warrant
Purchase Agreement, as amended or supplemented
from time to time.
"Articles of Incorporation" means the Amended and
Restated Articles of Incorporation of the Company
as in effect on the date hereof, a copy of which
is attached hereto as Exhibit A, as amended from
time to time.
<PAGE>
"Business Day" means any day other than a
Saturday, Sunday or other day on which commercial
banks in Houston, Texas are authorized or required
by law or executive order to close.
"Bylaws" means the Bylaws of the Company as in
effect on the date hereof, a copy of which is
attached hereto as Exhibit B, as amended from time
to time.
"Calculated Market Value" has the meaning assigned
thereto in Section 9.3(b) hereof.
"Cash-Out Transaction" means any transaction in
which (a) all of the holders of Common Stock are
offered the opportunity to sell at least 75% of
their shares of Common Stock to a third Person
which is not an Affiliate of the Company; (b) the
Purchaser may elect to sell all of its shares and
may further elect to receive cash in payment for
its shares; (c) all of the holders of Common Stock
are offered the same per share consideration; and
(d) at least 75% of the shares of Common Stock, on
a fully diluted basis, are actually sold to the
offeror.
"Change in Control" means a transaction pursuant
to which (i) a Person or group of Persons (within
the meaning of Section 13(d) of the Exchange Act)
other than V & C Energy Limited Partnership or
Energy Resource Associates, Inc. acquires directly
or indirectly and in one or a series of
transactions all or substantially all of the
assets of the Company or any Subsidiary, (ii) a
Person or group of Persons (within the meaning of
Section 13(d) of the Exchange Act) other than V &
C Energy Limited Partnership or Energy Resource
Associates, Inc. acquires directly or indirectly
and in one or a series of transactions more than
50% of the capital stock of the Company, on a
fully diluted basis (whether by merger,
consolidation or sale or transfer of the Company's
capital stock), (iii) Frank A. Lodzinski (A)
ceases to own directly or indirectly a minimum of
200,000 shares of Common Stock (excluding shares
issuable upon the exercise of such options but
not yet issued), (B) ceases to own, directly or
indirectly, more than 50% of the capital stock and
voting interests of Energy Resource Associates,
Inc. or the general partnership interest in V & C
Energy Limited Partnership or (C) ceases to have
the title and responsibilities of the Chief
Executive Officer of the Company, or (iv) Senior
Management of the Company in the aggregate ceases
to own directly or indirectly a minimum of 300,000
shares of Common Stock (excluding shares issuable
upon the exercise of such options but not yet
issued). The minimum share requirements in
clauses (iii)(A) and (iv) above shall be adjusted
proportionately in the event of any stock split or
stock dividend by the Company after the Closing
Date.
"Class A Common" means the Class A Voting Common
Stock of the Company as described in the Articles
of Incorporation.
"Class B Common" means the Class B Non-Voting
Common Stock of the Company as described in the
Articles of Incorporation.
"Closing" has the meaning assigned thereto in
Section 2.4 hereof.
"Closing Date" has the meaning assigned thereto in
Section 2.4 hereof.
<PAGE>
"Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute thereto.
"Commission" means the Securities and Exchange
Commission or any similar agency then having
jurisdiction to enforce the Securities Act.
"Common Stock" means collectively, the Class A
Common and the Class B Common, or any other
capital stock of the Company into which such stock
is reclassified or reconstituted.
"Company Indemnified Party" has the meaning
assigned thereto in Section 11.3 hereof.
"Contractual Obligations" means, with respect to a
Person, any provision of any security issued by
such Person or of any agreement, undertaking,
contract, indenture, mortgage, deed of trust or
other instrument to which such Person is a party
or by which it or any of its property is bound.
"Co-Sale Agreement" means the agreement to be
entered into between the Company and the Purchaser
in substantially the form attached hereto as
Exhibit E.
"Demand Registration" has the meaning assigned
thereto in Section 10.1 hereof.
"Earlier Time" has the meaning assigned thereto in
Section 9.1 hereof.
"Eligible Offering" has the meaning assigned
thereto in Section 8.1 hereof.
"Environmental Laws" means any and all federal,
state and local laws, statutes, ordinances, rules,
regulations, permits, licenses, approvals,
interpretations and orders of courts or
Governmental Authorities, relating to the
protection of human health or the environment,
including but not limited to, requirements
pertaining to the manufacture, processing,
distribution, use, treatment, storage, disposal,
transportation, handling, reporting, licensing,
permitting, investigation or remediation of
Hazardous Materials.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
"Exchange Act" means the Securities Exchange Act
of 1934, as amended, and the rules and regulations
promulgated thereunder.
"Exercise Notice" has the meaning assigned thereto
in Section 9.2 hereof.
"Fiscal Year" means the fiscal year of the Company
and its Subsidiaries ending on December 31.
"GAAP" means generally accepted United States
accounting principles set forth in the opinions
and pronouncements of the Accounting Principles
Board of the American Institute of Certified
Public Accountants and statements and
pronouncements of the Financial Accounting
Standards Board that are applicable to the
circumstances as of the date of determination.
<PAGE>
"Governmental Authority" means the government of
any nation, state, city, locality or other
political subdivision of any thereof, any entity
having jurisdiction and exercising executive,
legislative, judicial, regulatory or
administrative functions of or pertaining to
government, and any corporation or other entity
owned or controlled, through stock or capital
ownership or otherwise, by any of the foregoing.
"Hazardous Materials" means any substances or
materials (a) which are or become defined as
hazardous wastes, hazardous substances,
pollutants, contaminants or toxic substances under
any Environmental Law, (b) which are toxic,
explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise
harmful to human health or the environment and are
or become regulated by any Governmental Authority,
(c) the presence of which require investigation or
remediation under any Environmental Law or common
law, (d) the discharge or emission or release of
which requires a permit or license under any
Environmental Law or other Governmental Approval
or (e) which are deemed to constitute a nuisance,
a trespass or pose a health or safety hazard to
persons or neighboring properties.
"Holder Indemnified Party" has the meaning
assigned thereto in Section 11.2 hereof.
"Hydrocarbons" means oil, gas and/or other liquid
and gaseous hydrocarbons or any combination
thereof.
"Indemnified Party" has the meaning assigned
thereto in Section 11.1 hereof.
"Interests" means the collective reference to:
(a) the Oil and Gas Interests; and
(b) all of the Company's or applicable
Subsidiary's rights, titles and interests, whether
direct or indirect, in and to all of the property,
rights and interests incident to the Oil and Gas
Interests, including without limitation all of the
Company's or such Subsidiary's rights, titles and
interests in and to all Oil and Gas Contracts,
leases, rights-of-way, easements, options, orders
and rulings of any applicable Governmental
Authority, wells, lease and well equipment,
machinery, production facilities, processing
facilities, gathering systems, transportation
systems, disposal systems, fixtures and other
items of personal property and improvements now or
as of the Closing Date appurtenant to the Oil and
Gas Interests or with the production, treatment,
sale or disposal of Hydrocarbons or water produced
therefrom or attributable thereto.
"Investment Agreement" means the Investment
Agreement, dated as of September 27, 1996, by and
among the Company, Energy Capital Investment
Company PLC, an English investment company, and
EnCap Equity 1996 Limited Partnership, a Texas
limited partnership, as amended or supplemented
from time to time.
<PAGE>
"Investors Agreement" means the Investors
Agreement, dated as of September 27, 1996, by and
among V & C Energy Limited Partnership, a Michigan
limited partnership, Energy Resource Associates,
Inc., a Texas corporation, Energy Capital
Investment Company PLC, an English investment
company, and EnCap Equity 1996 Limited
Partnership, a Texas limited partnership, as
amended or supplemented from time to time.
"Leases" means oil, gas and mineral leases, oil
and gas leases, oil leases, gas leases, other
mineral leases, subleases, assignments of
operating rights and similar agreements, and any
extensions or renewals thereof.
"Liabilities" has the meaning assigned thereto in
Section 11.1 hereof.
"Lien" means any lien, mortgage, pledge, security
interest, charge or encumbrance of any kind.
"Material Contract" means (a) any contract or
other agreement, written or oral, of the Company
or any of its Subsidiaries involving monetary
liability of, or to such Person in an amount in
excess of $100,000 per annum, (b) any contract
between or among the Company or any Subsidiary and
any security holders of the Company or such
Subsidiary or (c) any other contract or agreement,
written or oral, of the Company or any Subsidiary
the failure to comply with which could have a
material adverse effect on the business,
operations, properties, assets or condition
(financial or otherwise) of the Company or any
Subsidiary.
"Net Asset Value" has the meaning assigned thereto
in Section 9.3(b) hereof.
"Net Revenue Interest" means the decimal interest
in and to all production of the Hydrocarbons
produced and saved or sold from the Oil and Gas
Interests after giving effect to all valid
lessors' royalties, overriding royalties and/or
other non-expense bearing burdens against
production.
"Oil and Gas Contracts" means all Leases, permits,
licenses, farm-out or farm-in agreements, bottom
hole or acreage contribution agreements, operating
agreements, unit agreements, water flood
agreements, declarations or orders, joint venture,
exploration, participation or acquisition
agreements, division orders, production, sales,
purchase, exchange, processing or transportation
agreements and all other contracts and agreements
in effect or in existence on the date hereof and
affecting or relating to the ownership or
operation of the Interests or the disposition of
the Hydrocarbons produced therefrom.
"Oil and Gas Interests" means (a) all of the
Company's and any of its Subsidiaries' rights,
titles and interests, whether direct or indirect,
in and to the Wells described on Schedule 1.1 and
in and to the leases and lands (whether or not
described on Schedule 1.1) upon which such Wells
have been drilled or which have been pooled or
unitized with Leases upon which such Wells have
been drilled, and (b) all of the Company's and any
of its Subsidiaries' rights, titles and interests,
including leasehold interests, whether direct or
indirect, in and to the non-producing lands and
Leases described on Schedule 1.1.
<PAGE>
"Person" means any individual, firm, corporation,
partnership, trust, limited liability company,
incorporated or unincorporated association, joint
venture, joint stock company, Governmental
Authority or other entity of any kind, and shall
include any successor (by merger or otherwise) of
such entity.
"Piggyback Registration" has the meaning assigned
thereto in Section 10.2 hereof.
"Public Offering" means a public offering of the
Common Stock pursuant to a registration statement
declared effective under the Securities Act,
underwritten on a firm commitment basis by an
investment banking firm acceptable to the Company.
"Purchase Price" has the meaning assigned thereto
in Section 2.3 hereof.
"Put Securities" means the Shares, the Warrants,
any shares of Common Stock issued upon conversion
or exercise of the Shares or Warrants, and any
securities issued or issuable with respect to the
foregoing securities by way of a stock dividend or
stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or
other reorganization.
"Qualified Public Offering" means a Public
Offering resulting in gross proceeds to the
Company of at least $20,000,000.
"Registrable Securities" means the Shares, the
Warrant Shares, any securities issued upon
conversion of the Shares or Warrant Shares, and
any securities issued or issuable with respect to
the foregoing securities by way of a stock
dividend or stock split or in connection with a
combination of shares, recapitalization, merger,
consolidation or other reorganization.
"Registration Expenses" means all expenses
incident to the Company's performance of or
compliance with the registration rights granted
hereunder, including (without limitation) all
registration and filing fees, fees and expenses of
compliance with securities and blue sky laws,
printing and engraving expenses, messenger,
telephone and delivery expenses, and fees and
disbursements of counsel for the Company and
reasonable fees and disbursements of a single
attorney or firm representing the Purchaser, all
independent certified public accountants and
underwriters (excluding discounts and
commissions); provided, that Registration Expenses
shall not include any Selling Expenses.
"Regulatory Requirement" has the meaning assigned
thereto in Section 12.13 hereof.
"Requirements of Law" means with respect to a
Person, the articles of incorporation and bylaws
or other organizational or governing documents of
such Person, and any law, treaty, rule,
regulation, right, privilege, qualification,
license or franchise or determination of an
arbitrator or a court or other Governmental
Authority, in each case applicable to or binding
upon such Person or any of its property or to
which such Person or any of its property is
subject or pertaining to any or all of the
transactions contemplated or referred to herein.
<PAGE>
"Reserve Report" means the report and property
evaluation of the type specified in Section
7.1(d)(i) hereof effective as of December 31,
1996.
"Sales Agreements" has the meaning assigned
thereto in Section 5.14(d) hereof.
"Securities Act" means the Securities Act of 1933,
as amended, and the rules and regulations
promulgated thereunder.
"Selling Expenses" means underwriting discounts or
commissions and any selling commissions and stock
transfer taxes attributable to sales of
Registrable Securities.
"Senior Loan Agreement" means the Credit Agreement
dated as of September 17, 1996 by and among the
Company, Cliffwood Energy Company, Cliffwood
Production Co. and Comerica Bank - Texas, as
amended or supplemented from time to time.
"Senior Loan Documents" means the Senior Loan
Agreement and each other document and instrument
executed pursuant thereto, as amended or
supplemented from time to time.
"Senior Management" means the Chief Executive
Officer, President, Secretary, Treasurer, Chief
Operating Officer,Chief Financial Officer, Chief
Legal Officer, and any Vice-President of the
Company, and any other management position in the
Company occupied by Jerry M. Crews, Francis M.
Mury or Peggy C. Simpson.
"Shareholders' Agreement" means the Shareholders'
Agreement dated as of May 21, 1996 by and among
the Company and certain shareholders of the
Company, as amended or supplemented from time to
time.
"Shares" has the meaning assigned thereto in
Section 2.1 hereof.
"Subsidiary" means, with respect to a Person, (i)
a corporation or other entity of which more than
50% of the voting power of the equity securities
or other equity interests is owned, directly or
indirectly, by such Person and (ii) any general
partnership, limited partnership or limited
liability company in which such Person or an
entity specified in clause (i) above is a managing
partner, manager or otherwise exercises any
controlling influence over such general
partnership, limited partnership or limited
liability company. Unless otherwise qualified,
all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a
Subsidiary or Subsidiaries of the Company.
"Transaction Documents" means, collectively, this
Agreement, the Warrants, the Articles of
Incorporation, the Bylaws, the Shareholders'
Agreement and the Co-Sale Agreement.
"Warrant Shares" means the shares of Class B
Common issuable upon exercise of the Warrants and
the shares of Class A Common issuable upon
conversion thereof.
"Warrants" mean the common stock purchase warrants
issued by the Company to the Purchaser pursuant to
this Agreement substantially in the form attached
hereto as Exhibit C.
<PAGE>
"Wells" means the wells set forth on Schedule 1.1.
1.2 Accounting Terms; Financial Statements. All
accounting terms used herein not expressly defined
in this Agreement shall have the respective
meanings given to them in accordance with sound
accounting practice. The term "sound accounting
practice" shall mean such accounting practice as,
in the opinion of the independent certified public
accountants regularly retained by the Company,
conforms at the time to GAAP applied on a
consistent basis except for changes with which
such accountants concur. If any changes in
accounting principles are hereafter occasioned by
promulgation of rules, regulations, pronouncements
or opinions of or are otherwise required by, the
Financial Accounting Standards Board or the
American Institute of Certified Public Accountants
(or successors thereto or agencies with similar
functions), and any of such changes results in a
change in the method of calculation of, or affects
the results of such calculation of, any of the
financial covenants, standards or terms found
herein, then the parties hereto agree to enter
into and diligently pursue negotiations in order
to amend such financial covenants, standards or
terms so as to reflect fairly and equitably such
changes, with the desired result that the criteria
for evaluating the Company's financial condition
and results of operations shall be the same after
such changes as if such changes had not been made.
ARTICLE 2
PURCHASE AND SALE OF COMMON STOCK AND WARRANTS
2.1 Purchase and Sale of Common Stock. Subject
to the terms and conditions hereof, the Company
agrees to issue to the Purchaser, and the
Purchaser agrees that it will purchase from the
Company, on the Closing Date, 333,334 shares of
Class B Common (the "Shares"). The Shares shall
have all the powers, rights and preferences of
Class B Common as set forth in the Articles of
Incorporation.
2.2 Purchase and Sale of Warrants. Subject to
the terms and conditions hereof, the Company
agrees to issue to the Purchaser and the Purchaser
agrees that it will purchase from the Company, on
the Closing Date, in the form attached hereto as
Exhibit C, warrants to purchase 167,500 shares of
Class B Common (the "Warrants").
2.3 Purchase Price. The aggregate purchase price
of the Shares and Warrants (the "Purchase Price")
shall be $1,000,000.
2.4 Closing. The issuance and purchase of the
Shares and the Warrants shall take place at the
closing (the "Closing") to be held at such time
and place as mutually agreed upon by the Company
and the Purchaser, (the "Closing Date"). At the
Closing, the Company shall deliver to the
Purchaser the Shares and the Warrants against
delivery to the Company by the Purchaser of the
Purchase Price therefor by wire transfer of
immediately available funds.
<PAGE>
2.5 Reservation of Shares. The Company shall at
all times reserve and keep available out of its
authorized Class A Common and Class B Common,
solely for the purpose of issue or delivery upon
conversion of the Class B Common as provided in
the Articles of Incorporation and the exercise of
the Warrants as provided therein, the maximum
number of shares of Class A Common and Class B
Common that may be issuable or deliverable upon
such conversion or exercise. Such shares of Class
A Common and Class B Common shall, when issued or
delivered in accordance with the provisions of the
Articles of Incorporation or the Warrants, as the
case may be, be duly and validly issued and fully
paid and non-assessable. The Company shall issue
such Class A Common and Class B Common in
accordance with the provisions of the Articles of
Incorporation and the Warrants, and shall
otherwise comply with the terms thereof.
ARTICLE 3
CONDITIONS TO THE OBLIGATION OF THE PURCHASER TO
CLOSE
The obligation of the Purchaser to purchase
the Shares and the Warrants, to pay the Purchase
Price therefor at the Closing and to perform any
obligations hereunder shall be subject to the
satisfaction as determined by the Purchaser of the
following conditions on or before the Closing
Date:
3.1 Representations and Warranties. The
representations and warranties of the Company
contained in Section 5 hereof shall be true and
correct on and as of the Closing Date as if made
on and as of such date.
3.2 Compliance with this Agreement. The Company
shall have performed and complied with all of its
agreements and conditions set forth or
contemplated herein that are required to be
performed or complied with by the Company on or
before the Closing Date.
3.3 Officers' Certificate. The Purchaser shall
have received a certificate dated as of the
Closing Date from the President and any Vice
President of the Company, in form and substance
satisfactory to the Purchaser, to the effect that
(a) all representations and warranties of the
Company contained in this Agreement are true,
correct and complete, (b) neither the Company nor
any Subsidiary is in violation of any of the
covenants contained in this Agreement, and (c)
all conditions precedent to the Closing of this
Agreement to be performed by the Company have been
duly performed.
3.4 Secretary's Certificate. The Purchaser shall
have received a certificate from the Company,
dated the Closing Date and signed by the Secretary
or an Assistant Secretary of the Company,
certifying (a) that the attached copies of the
Articles of Incorporation and Bylaws of the
Company (and the appropriate charter or other
governing documents for each Subsidiary of the
Company which is a corporation), and resolutions
of the Board of Directors of the Company approving
this Agreement and the transactions contemplated
hereby, are all true, complete and correct and
remain unamended and in full force and effect and
(b) as to the incumbency and specimen signature of
each officer of the Company executing this
Agreement and any other document delivered in
connection herewith on behalf of the Company.
Attached to such certificate shall be certificates
of good standing and qualification or
authorization to do business of the Company and
its Subsidiaries which are corporations from their
respective states of organization and, except with
respect to the qualification of Cliffwood Energy
Company, a California corporation, in the State of
Texas, each other jurisdiction where any such
Person is required to be so qualified or
authorized.
<PAGE>
3.5 Transaction Documents. The Purchaser shall
have received true, complete and correct copies of
the Transaction Documents and such other documents
as it may reasonably request in writing in
connection with or relating to the sale of the
Shares and the Warrants and the transactions
contemplated hereby, all in form and substance
reasonably satisfactory to the Purchaser.
3.6 Financial Matters.
(a) Financial Statements. The Purchaser
shall have received financial statements,
certificates and other information concerning the
Company and its Subsidiaries, and each predecessor
thereto, as set forth on Schedule 3.6 hereto,
including a copy of the Reserve Report.
(b) Payment at Closing. There shall have
been paid by the Company to the Purchaser any
reasonable accrued and unpaid fees due hereunder
(including, without limitation, legal fees and
expenses), and to any other Person such amount as
may be due, including all taxes, fees and other
charges in connection with the execution,
delivery, recording, filing and registration of
any of the Transaction Documents.
3.7 Purchase Permitted by Applicable Laws. The
acquisition of and payment for the Shares and the
Warrants to be acquired by the Purchaser hereunder
and the consummation of the transactions
contemplated hereby (a) shall not be prohibited by
any Requirement of Law, (b) shall not subject the
Purchaser to any penalty or other onerous
condition under or pursuant to any Requirement of
Law, and (c) shall be permitted by all
Requirements of Law to which it or the
transactions contemplated by or referred to herein
are subject and the Purchaser shall have received
such certificates or other evidence as it may
reasonably request to establish compliance with
this condition.
3.8 Approval of Counsel to the Purchaser. All
actions and proceedings hereunder and all
documents required to be delivered by the Company
or any of its Subsidiaries hereunder or in
connection with the consummation of the
transactions contemplated hereby, and all other
related matters, shall be in form and substance
acceptable to Kennedy Covington Lobdell & Hickman,
L.L.P., counsel to the Purchaser, in its
reasonable judgment.
3.9 Consents and Approvals. All consents,
exemptions, authorizations or other actions by, or
notices to, or filings with, Governmental
Authorities and other Persons in respect of all
Requirements of Law and with respect to
Contractual Obligations of the Company and its
Subsidiaries necessary, desirable or required in
connection with the execution, delivery or
performance by, or enforcement against, the
Company of this Agreement and the other
Transaction Documents shall have been obtained and
be in full force and effect, and the Purchaser
shall have been furnished with appropriate
evidence thereof, and all waiting periods shall
have lapsed without extension or the imposition of
any conditions or restrictions.
<PAGE>
3.10 SBA Documents. The Company shall have
executed and delivered to the Purchaser forms and
information required by the rules and regulations
of the United States Small Business
Administration, including without limitation, a
Size Status Declaration on SBA Form 480 and an
Assurance of Compliance on SBA Form 652 and
information necessary for the preparation of a
Portfolio Financing Report on SBA Form 1031.
3.11 Articles of Incorporation and Bylaws, etc.
The Articles of Incorporation and Bylaws of the
Company (and the appropriate charter or other
governing documents for each Subsidiary of the
Company) shall be in form and substance reasonably
satisfactory to the Purchaser.
3.12 Amendment to Shareholders' Agreement. The
Company shall have (i) delivered to the Purchaser
a copy of the Shareholders' Agreement, a copy of
which is attached hereto as Exhibit D, amended and
restated to include the Purchaser as a signatory,
such copy to be executed by Frank A. Lodzinski and
V & C Energy Limited Partnership, and (ii)
provided the Purchaser with evidence that such
Shareholders' Agreement has been circulated to
each other party thereto requesting their
signatures.
3.13 Co-Sale Agreement. The Company and the
Purchaser shall have executed the Co-Sale
Agreement, a copy of which is attached hereto as
Exhibit E.
3.14 Insurance. The Company shall have delivered
to the Purchaser (a) a detailed list of all
insurance maintained by the Company as of the
Closing Date, stating the names of the insurance
companies, the amounts and rates of the insurance,
the dates of expiration thereof and the properties
and risks covered thereby and (b) certificates of
insurance relating to all insurance referenced on
such list.
3.15 Disbursement Instructions. The Purchaser
shall have received written instructions from the
Company to the Purchaser directing the payment of
the proceeds of the Shares and the Warrants that
are to be paid on the Closing Date.
3.16 No Material Adverse Change. On and prior to
the Closing Date, no event or change shall have
occurred which could reasonably be expected to
have a material adverse effect on the business,
operations, properties, assets or condition
(financial or otherwise) of the Company or any
Subsidiary or otherwise could reasonably be
expected to impair the ability of the Company or
any Subsidiary to perform its obligations under
this Agreement or any of the other Transaction
Documents.
3.17 Opinion of Counsel. The Purchaser shall have
received an opinion of Stephenson & Snokhous,
dated the Closing Date, in the form attached
hereto as Exhibit F.
<PAGE>
ARTICLE 4
CONDITIONS TO THE OBLIGATION OF THE COMPANY TO
CLOSE
The obligations of the Company to issue and
sell the Shares and the Warrants and to perform
its other obligations hereunder shall be subject
to the satisfaction as determined by the Company
of the following conditions on or before the
Closing Date:
4.1 Representations and Warranties True. The
representations and warranties of the Purchaser
contained in Section 6 hereof shall be true and
correct on and as of the Closing Date as if made
on and as of such date.
4.2 Compliance with this Agreement. The
Purchaser shall have performed and complied with
all of the agreements and conditions set forth or
contemplated herein that are required to be
performed or complied with by the Purchaser on or
before the Closing Date.
4.3 Issuance Permitted by Applicable Laws. The
issuance of the Shares and the Warrants hereunder
and the consummation of the transactions
contemplated hereby (a) shall not be prohibited by
any Requirement of Law, (b) shall not subject the
Company to any penalty or, in its reasonable
judgment, other onerous condition under or
pursuant to any Requirement of Law and (c) shall
be permitted by all Requirements of Law to which
the Company is subject.
4.4 Approval of Counsel to the Company. All
actions and proceedings hereunder and all
documents required to be delivered by the
Purchaser hereunder or in connection with the
consummation of the transactions contemplated
hereby, and all other related matters, shall be in
form and substance acceptable to Stephenson &
Snokhous, counsel to the Company, in its
reasonable judgment.
4.5 Consents and Approvals. All consents,
exemptions, authorizations or other actions by, or
notices to, or filings with, Governmental
Authorities and other Persons in respect of all
Requirements of Law necessary or required in
connection with the execution, delivery or
performance by the Purchaser or enforcement
against the Purchaser of this Agreement shall have
been obtained and be in full force and effect, and
the Company shall have been furnished with
appropriate evidence thereof.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to
the Purchaser before and after giving effect to
the transactions contemplated by this Agreement
and the other Transaction Documents as follows:
<PAGE>
5.1 Corporate Existence and Power. Except as
indicated on Schedule 5.1, each of the Company and
those Subsidiaries listed on Schedule 5.1 (a) is
duly organized, validly existing and in good
standing under the laws of the State of Texas and
(b) has all requisite power and authority to own,
lease and operate its assets, properties and
business and to conduct the business in which it
is currently, or is currently proposed to be,
engaged. The Company has the power and authority
to execute, deliver and perform its obligations
under this Agreement and each other Transaction
Document to which it is or will be a party.
5.2 Corporate Authorization; No Contravention.
The execution, delivery and performance by the
Company of this Agreement and each other
Transaction Document to which it is or will be a
party and the transactions contemplated hereby and
thereby, including, without limitation, the
issuance of the Shares and the Warrants (a) have
been duly authorized by all necessary corporate,
and if required, stockholder action, (b) do not
contravene the terms of the Articles of
Incorporation or Bylaws of the Company (or any
charter or other governing document for any
Subsidiary of the Company), and (c) will not
violate, conflict with or result in any breach or
contravention of or the creation of any Lien
under, any Contractual Obligation of the Company,
or any Requirement of Law applicable to the
Company or any of its Subsidiaries.
5.3 Capitalization. As of the Closing Date, the
authorized capital stock of the Company consists
of 25,000,000 shares of Common Stock, including
20,000,000 shares of Class A Common and 5,000,000
shares of Class B Common, and 10,000,000 shares of
Preferred Stock. As of the Closing Date, and
after giving effect to the transactions
contemplated by this Agreement, (a) 2,505,588
shares of Class A Common will be issued and
outstanding, (b) at least 500,834 shares of Class
A Common will be reserved for issuance upon
conversion of the Class B Common, (c) 333,334
shares of Class B Common will be issued and
outstanding, (d) at least 167,500 shares of Class
B Common will be reserved for issuance upon
exercise of the Warrants, and (e) no shares of
Preferred Stock will be issued and outstanding,
all as shown on Schedule 5.3 hereto. As of the
Closing Date, and upon the consummation of the
transactions contemplated by this Agreement, (i)
all outstanding shares of Common Stock of the
Company will be duly authorized and (ii) all
outstanding shares of Common Stock of the Company
will be, and the shares of Common Stock issuable
upon exercise of the Warrants, when issued, will
be, validly issued, fully paid, nonassessable and
free and clear of any Lien. Except as described
in Schedule 5.3, no other class of capital stock
or other ownership interests of the Company are
authorized or outstanding and the Company does not
have outstanding any rights (either preemptive or
other) or options to subscribe for or purchase
from the Company, or any warrants or other
agreements providing for or requiring the issuance
by the Company of, any of its capital stock or any
securities convertible into or exchangeable for
its capital stock.
5.4 Subsidiaries. Each Subsidiary of the Company
is listed on Schedule 5.4. The capitalization of
all Subsidiaries consists of the number of shares
or other equity interests, authorized, issued and
outstanding, of such classes and series, with or
without par value, described on Schedule 5.4. All
such outstanding shares or other equity interests
have been duly authorized and validly issued and
are fully paid and nonassessable. The
shareholders or other owners of the Subsidiaries
and the number of shares or other equity interests
owned by each are described on Schedule 5.4.
There are no outstanding stock purchase warrants,
subscriptions, options, securities, instruments or
other rights of any type or nature whatsoever,
which are convertible into, exchangeable for or
otherwise provide for or permit the issuance of
capital stock or other equity interests of the
Subsidiaries, except as described on Schedule 5.4.
<PAGE>
5.5 Governmental Authorization; Third Party
Consents. Except as contemplated by the
Transaction Documents, no approval, consent,
compliance, exemption, authorization or other
action by, or notice to, or filing with, any
Governmental Authority or any other Person in
respect of any Requirement of Law or Contractual
Obligation, and no lapse of a waiting period under
any Requirement of Law or Contractual Obligation,
is necessary or required in connection with the
execution, delivery or performance by, or
enforcement against, the Company of this Agreement
and the other Transaction Documents or the
transactions contemplated hereby or thereby.
5.6 Binding Effect. This Agreement and each of
the other Transaction Documents to which the
Company is a party will, upon the due execution
and delivery thereof by the Company, constitute
the legal, valid and binding obligation of the
Company enforceable against the Company in
accordance with their respective terms except as
enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of
creditors' rights generally and by general
principles of equity relating to enforceability.
5.7 Litigation. There are no legal actions,
suits, proceedings, claims or disputes pending, or
to the knowledge of the Company, threatened, at
law, in equity, in arbitration or before any
Governmental Authority against or affecting the
Company or any Subsidiary (a) with respect to this
Agreement or any of the other Transaction
Documents, or any of the transactions contemplated
hereby or thereby, or (b) which would, if
adversely determined, have an adverse effect on
the ability of the Company or any Subsidiary to
perform its obligations under this Agreement or
any of the other Transaction Documents. No
injunction, writ, temporary restraining order,
decree or any order of any nature has been issued
by any court or other Governmental Authority
purporting to enjoin or restrain the execution,
delivery or performance of this Agreement or any
of the other Transaction Documents.
5.8 No Default or Breach. Neither the Company
nor any Subsidiary is in default under or with
respect to any Contractual Obligation in any
respect, which, individually or together with all
such defaults, could have a material adverse
effect on the condition of the Company or any
Subsidiary, or which could adversely affect the
ability of the Company or any Subsidiary to
perform its obligations under this Agreement or
any of the other Transaction Documents.
5.9 ERISA. The execution and delivery of this
Agreement and each of the other Transaction
Documents, the purchase and sale of the Shares and
the Warrants hereunder and the consummation of the
transactions contemplated hereby and thereby will
not result in any prohibited transaction within
the meaning of Section 406 of ERISA or Section
4975 of the Code or any other violation of ERISA
or any other Requirement of Law related thereto.
<PAGE>
5.10 Small Business Concern. The Company,
together with its "affiliates" (as that term is
defined in 13 C.F.R. Part 121), is a "small
business concern" within the meaning of the Small
Business Investment Act of 1958, as amended, and
the regulations thereunder, including 13 C.F.R.
Part 121. The information set forth in the
documents provided to the Purchaser pursuant to
Section 3.10 is true, correct and complete.
5.11 Disclosure.
(a) Agreement and Other Documents. This
Agreementand the documents and certificates
furnished to the Purchaser by the Company on or
prior to the Closing do not contain any untrue
statement of a material fact or omit to state a
material fact necessary in order to make the
statements contained herein or therein, in the
light of the circumstances under which they were
made, not misleading.
(b) Material Adverse Effect. Other than
general market conditions affecting companies
similar to the Company, there is no fact known to
the Company which the Company has not disclosed to
the Purchaser in writing (such written disclosure
to include, without limitation, the Reserve
Report, financial statements set forth on Schedule
3.6, Exhibits A, B, D, E and F hereto, the
Transaction Documents, the Investment Agreement,
the Senior Loan Documents, the Investors
Agreement, any document defined herein or in the
Transaction Documents or in the exhibits or
schedules hereto), which materially adversely
affects, or in sofar as the Company can reasonably
foresee could materially adversely affect, the
ability of the Company or any of its Subsidiaries
to perform its obligations under this Agreement or
any other Transaction Document, or any document
contemplated thereby.
5.12 Private Offering. No form of general
solicitation or general advertising was used by
the Company or its representatives in connection
with the offer or sale of the Shares, the Warrants
or other securities. No registration of the
Shares, the Warrants, or the Common Stock issuable
upon conversion or exercise thereof pursuant to
the provisions of the Securities Act or any state
securities or "blue sky" laws will be required by
the offer, sale or issuance of the Shares and the
Warrants pursuant to this Agreement.
5.13 Broker's, Finder's or Similar Fees. There
are no brokerage commissions, finder's fees or
similar fees or commissions payable in connection
with the transactions contemplated hereby or any
other Transaction Document to which the Company is
a party, based on any agreement, arrangement or
understanding with the Company or any action taken
by the Company.
5.14 Oil and Gas Matters.
(a) Oil and Gas Contracts and Leases.
Except as set forth on Schedule 5.14(a):
(i) All of the material Leases included
in the Oil and Gas Interests are in full force and
effect (insofar as such Leases cover the lands and
depths described on Schedule 1.1) and are the
valid and legally binding obligations of the
parties to those agreements and are enforceable in
all material respects in accordance with their
respective terms, except as limited by bankruptcy,
insolvency, reorganization, moratorium, or other
similar laws affecting creditors' rights generally
and by general principles of equity relating to
enforceability;
<PAGE>
(ii) Neither the Company nor any
Subsidiary is in breach or default with respect to
any of its material representations, warranties or
obligations pursuant to any of the Oil and Gas
Contracts or with respect to any regulations
incorporated in or governing the Oil and Gas
Contracts;
(iii) No lessor under any of the
Leases included in the Oil and Gas Interests has
notified the Company that such lessor considers
any lease to be terminated or in default or other
jeopardy because of lessee's failure to perform.
To the Company's best knowledge, all payments
(including without limitation royalties, delay
rentals, shut-in royalties, payments due under
unit or operating agreements) due under the Leases
included in the Oil and Gas Interests and relating
to the lands described on Schedule 1.1 have been
properly and timely made (except to the extent
that the failure to make any such payment would
not have a material adverse affect on the
ownership, use or value of such Interest), all
conditions necessary to keep such Leases in force
as to the lands and depths described on Schedule
1.1 have been fully performed and no notices have
been received by the Company or any Subsidiary of
any claim to the contrary;
(iv) To the Company's best knowledge,
there are no material obligations to engage in
continuous development operations in order to
maintain any Lease included in the Oil and Gas
Interests in full force and effect as to the lands
and depths described on Schedule 1.1;
(v) The execution and delivery of this
Agreement and the other Transaction Documents and
the consummation of the transactions as
contemplated hereby and thereby will not result in
a breach of, constitute a default under, result in
a violation of or entitle any party to a right of
first refusal or preferential right to purchase
under any of the Oil and Gas Contracts relating to
the Oil and Gas Interests; and
(vi) The Company and its Subsidiaries
have fulfilled, or will fulfill within the
applicable time periods, all material requirements
for filings, certificates, disclosures of parties
in interest and other similar matters contained in
(or otherwise, by law, rule or regulation,
applicable to) the Leases included in the Oil and
Gas Interests and are fully qualified to own and
hold all such Leases.
(b) Oil and Gas Operations. Except as set
forth on Schedule 5.14(b):
(i) The Oil and Gas Interests operated
by the Company and its Subsidiaries are being
developed, operated and maintained in material
compliance with the Oil and Gas Contracts and to
the Company's best knowledge, the Oil and Gas
Interests operated by third parties are being
developed, operated and maintained in material
compliance with the Oil and Gas Contracts. In
operating the Interests, the Company and its
Subsidiaries are not dependent on the right to use
the property of others, except under valid and
enforceable agreements, rights or other
arrangements included in the Oil and Gas
Contracts;
<PAGE>
(ii) Since January 1, 1997, neither the
Company nor any of its Subsidiaries has operated
or in any manner dealt with, incurred obligations
with respect to, or undertaken any transactions
relating to, the Oil and Gas Interests other than
in the ordinary course of business consistent with
past practice or other than sales of property in
any single transaction having a value of less than
$100,000, and the Oil and Gas Interests have not
suffered any material destruction, damage, or loss
(except depreciation of equipment through ordinary
wear and tear and depletion through ordinary
production) not covered by insurance;
(iii) There are no outstanding
authorities for expenditures covering work in
progress or work not yet started covering the
Interests other than in the ordinary course of
business of the Company and its Subsidiaries; and
(iv) No condition, obligation or other
circumstance, including any prior overproduction
under a gas balancing agreement, not reflected in
the Reserve Report, exists that could materially
adversely affect the right of the Company or any
Subsidiary to receive its full share of production
and full payment of proceeds from the sale of
Hydrocarbons produced from any Oil and Gas Interests.
(c) No Reversionary Interests. Except as
set forth on Schedule 5.14(c) or as reflected in
the Reserve Report, the Oil and Gas Interests are
not subject to any reversionary, back-in or
similar rights, the exercise of which would reduce
the Net Revenue Interests of the Company or any of
its Subsidiaries to less than the Net Revenue
Interests set forth on Schedule 1.1.
(d) Sales and Transportation Agreements.
Except as set forth on Schedule 5.14(d), (i) there
are no material crude oil and condensate sales,
arrangements or gas purchase and sales agreements
or division orders relating to the Oil and Gas
Interests (collectively "Sales Agreements"), and
no material transportation agreements relating to
the Oil and Gas Interests that cannot be
terminated by the Company or any Subsidiary upon
sixty (60) days' or less notice without penalty or
detriment to the Company and its Subsidiaries and
(ii) there are no Sales Agreements pursuant to
which Hydrocarbons are being sold at less than the
prevailing market price therefor.
(e) Tax Partnerships. The Company and its
Subsidiaries have not filed any federal or state
income tax returns identifying the Interests as
held by any tax partnership other than the
partnerships set forth on Schedule 5.14(e).
(f) Prepayments. Except as set forth on
Schedule 5.14(f) or as reflected in the Reserve
Report, there exists no material imbalance
regarding production taken or marketed from any
Lease included in the Oil and Gas Interests or
otherwise affecting the Company or any Subsidiary
which could result in (i) a portion of its
interest in production therefrom to be taken or
delivered after January 1, 1997 without the
Company or applicable Subsidiary receiving full
payment therefor and at the price it would have
received absent such imbalance, (ii) the Company
and its Subsidiaries being obligated to make
payment to any Person as a result of such
imbalance or (iii) production being shut-in or
curtailed after January 1, 1997 due to
non-compliance with allowables, production quotas,
proration rules or similar orders or regulations
of any applicable Governmental Authority; and
neither the Company nor any of its Subsidiaries is
obligated, by virtue of any prepayment
arrangement, take-or-pay agreement or similar
arrangement, to deliver Hydrocarbons produced from
the Oil and Gas Interests at some future time
without then receiving full payment therefor in
all material respects.
<PAGE>
(g) Gas Contracts. The buyers under all gas
sales contracts pursuant to which the Company or
any Subsidiary is selling natural gas produced
from the Oil and Gas Interests are in compliance
in all material respects with all the material
terms of such contracts. Neither the Company nor
any Subsidiary has received a notice from any such
buyer of such party's intention or desire to
modify, renegotiate or repudiate any such contract
or any of the material terms thereof.
(h) Calls. Except as set forth on Schedule
5.14(h), no person has any call upon, option to
purchase, or similar right to purchase any
material portion of the Hydrocarbons from the Oil
and Gas Interests at a price less than the
prevailing market price therefor.
(i) Reserve Report. Except as set
forth on Schedule 5.14(i), (i) the Company
information utilized in the preparation of the
Reserve Report was true and correct in all
material respects, (ii) the calculations utilized
in the preparation of the Reserve Report are
consistent with generally accepted standards of
petroleum reservoir engineering at the dates of
their preparation, (iii) neither the Company nor
any Subsidiary has any knowledge that the oil,
condensate, natural gas liquids and gas reserves
attributable to the Interests as of the date of
the Reserve Report are materially less than the
estimate of quantities of those reserves shown in
the Reserve Report, (iv) neither the Company nor
any Subsidiary has any knowledge of any change
occurring since the date of the Reserve Report
that would result in a material change in the
information contained in the Reserve Report, and
(v) neither the Company nor any Subsidiary nor the
Interests are subject to any agreements, consents,
orders or regulations that would materially reduce
the rate of production of Hydrocarbons or other
substances from the Interests below that reflected
in the Reserve Report.
(j) Wells.
(i) All of the Wells have been drilled
and completed within the boundaries of the Leases
or within the limits otherwise permitted by the
Oil and Gas Contracts, and by applicable law.
(ii) All drilling and completion of the
Wells and all development and operations of the
Interests have been conducted in material
compliance with all Requirements of Law and
permits, and all judgments, orders and decrees of
any Governmental Authority.
(iii) Except as reflected in the
Reserve Report, no Well is subject to material
penalties on allowable production after the date
of this Agreement because of any overproduction or
any other violation of applicable laws, rules,
regulations or permits or judgments, orders or
decrees of any Governmental Authority that would
prevent any Well from being entitled to its full
legal and regular allowable production from and
after January 1, 1997 as prescribed by any
Governmental Authority.
<PAGE>
(k) No Funds in Suspense. All material
proceeds from the sale of Hydrocarbons produced
from the Oil and Gas Interests are currently being
paid to the Company or a Subsidiary and no portion
of such proceeds is currently being held in
suspense by any purchaser thereof or any other party by whom
proceeds are paid except for immaterial amounts
and with respect to the one well which was
recently completed with no division order yet
issued.
(l) Physical Condition of Facilities. The
physical facilities on the Oil and Gas Interests
(including facilities held under lease) have been
and are in a state of repair that is adequate for
the intended use of such facilities in the
ordinary course of the business conducted thereon.
5.15 Material Contracts. Schedule 5.15 sets forth
a complete and accurate list of all Material
Contracts of the Company and its Subsidiaries
(other than Oil and Gas Contracts and the
Transaction Documents) in effect as of the Closing
Date. Except as set forth on Schedule 5.15, each
such Material Contract is, and after giving effect
to the consummation of the transactions
contemplated by the Transaction Documents will be,
in full force and effect in accordance with the
terms thereof. The Company and each Subsidiary
have delivered to the Purchaser a true and
complete copy of each Material Contract required
to be listed on Schedule 5.15.
5.16 Senior Loan Documents. The Company has
delivered to the Purchaser true, complete and
correct copies of the Senior Loan Documents,
together with all amendments and modifications
thereto. Such documents (including the schedules
and exhibits thereto) comprise a full and complete
copy of all agreements between the parties thereto
with respect to the subject matter thereof and all
transactions related thereto, and there are no
agreements or understandings, oral or written, or
side agreements not contained therein that related
to or modify the substance thereof. The
representations and warranties of the Company made
in Article IV of the Senior Loan Agreement are
true, complete and correct in all material
respects.
5.17 Other Transaction Documents. The Company has
delivered to the Purchaser true, complete and
correct copies of each other Transaction Document
together with all amendments and modifications
thereto. Such documents (including the schedules
and exhibits thereto) comprise a full and complete
copy of all agreements between the parties thereto
with respect to the subject matter thereof and all
transactions related thereto, and there are no
agreements or understandings, oral or written, or
side agreements not contained therein that relate
to or modify the substance thereof. Such
Transaction Documents have been duly authorized by
all necessary corporate action on the part of the
Company and when executed and delivered by the
Company will be the legal, valid and binding
obligations of the Company and its successors,
enforceable in accordance with their terms, except
as limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws
affecting creditors' rights generally and by
general principles of equity relating to
enforceability.
<PAGE>
5.18 Use of Proceeds. The proceeds from the sale
of the Shares and the Warrants will be used for
general corporate purposes of the Company. No
portion of such proceeds will be used for any
purpose prohibited by the Small Business
Investment Act of 1958, as amended, or the
regulations promulgated thereunder including 13
CFR Part 107.
ARTICLE 6
REPRESENTATIONS ANDWARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants
as follows:
6.1 Authorization; No Contravention. The
execution, delivery and performance by the
Purchaser of this Agreement (a) is within the
Purchaser's power and authority and has been
duly authorized by all necessary action, (b) does
not contravene the terms of the Purchaser's
organizational documents or any amendment thereof,
and (c) will not violate, conflict with or result
in any breach or contravention of any material
Contractual Obligation of the Purchaser, or any
material Requirement of Law directly relating to
the Purchaser.
6.2 Binding Effect. This Agreement has been duly
executed and delivered by the Purchaser, and this
Agreement constitutes the legal, valid and binding
obligation of the Purchaser enforceable against it
in accordance with its terms, except as
enforceability may be limited by applicable
bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar
laws affecting the enforcement of creditors'
rights generally or by general equitable
principles relating to enforceability.
6.3 Purchase for Own Account. The Shares, the
Warrants and the shares of Common Stock to be
issued upon conversion or exercise thereof are
being or will be acquired for the Purchaser's own
account and with no intention of distributing or
reselling such securities or any part thereof in
any transaction that would be in violation of the
Securities Act or the securities laws of any
state, without prejudice, however, to the rights
of the Purchaser at all times to sell or otherwise
dispose of all or any part of its Shares, the
Warrants or its shares of Common Stock under an
effective registration statement under the
Securities Act, or under an exemption from such
registration available under the Securities Act.
If the Purchaser should in the future decide to
dispose of any of its Shares, the Warrants or its
shares of Common Stock issued upon the exercise or
conversion thereof, the Purchaser understands and
agrees that it may do so only in compliance with
the Securities Act and applicable state securities
laws as then in effect. The Purchaser agrees to
the imprinting, so long as required by law, of a
legend on certificates representing all of its
Shares, the Warrants and its shares of Common
Stock to be issued upon conversion or exercise
thereof to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
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 PURSUANT TO AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
SUCH ACT AND SUCH LAWS."
<PAGE>
6.4 ERISA. No part of the funds used by such
Purchaser to purchase the Shares or the Warrants
hereunder constitutes assets of any "employee
benefit plan" (as defined in Section 3(3) of
ERISA) or "plan" (as defined in Section 4975 of
the Code).
6.5 Broker's, Finder's or Similar Fees. There
are no brokerage commissions, finder's fees or
similar fees or commissions payable in connection
with the transactions contemplated hereby or by
any other Transaction Document to which the
Purchaser is a party, based on any agreement,
arrangement or understanding with the Purchaser or
any action taken by the Purchaser.
6.6 Governmental Authorization; Third Party
Consent. Except as contemplated by the
Transaction Documents, no approval, consent,
compliance, exemption, authorization or other
action by, or notice to, or filing with, any
Governmental Authority or any other Person in
respect of any Requirement of Law, and no lapse of
a waiting period under any Requirement of Law, is
necessary or required in connection with the
execution, delivery or performance by such
Purchaser or enforcement against such Purchaser of
this Agreement or the transactions contemplated
hereby.
ARTICLE 7
COVENANTS
Until such time as the Shares, the Warrants
and the Common Stock issued upon the conversion or
exercise thereof are no longer outstanding or the
Purchaser (or its assigns) is no longer the holder
of any of the Shares, the Warrants or the Common
Stock issued upon the conversion or exercise
thereof (provided, that the Purchaser may not
transfer the covenants in Sections 7.9 and 7.13 to
a Person materially active in any of the
businesses described in Section 7.3), the Company
hereby covenants and agrees with the Purchaser as
follows:
7.1 Financial Statements and Other Information.
Except as provided below, the Company shall
deliver to the Purchaser:
(a) Annual Financial Statements. As soon as
available and in any event within 130 days after
the end of each Fiscal Year of the Company, an
audited consolidated and consolidating balance
sheet as at the close of such year, and statements
of profit and loss, cash flow and reconciliation
of surplus of the Company and its Subsidiaries for
such year (including tax financial statements),
audited by independent public accountants selected
by the Company and reasonably satisfactory to the
Purchaser, together with each management letter
provided by such accountants with such financial
statements.
(b) Quarterly Financial Statements. Within
45 days after the end of each fiscal quarter of
the Company, an unaudited consolidated and
consolidating balance sheet as at the end of such
period and statements of profit and loss, cash
flow and surplus of the Company and its
Subsidiaries, for such quarter and for the fiscal
period then ended (including tax financial
statements), certified by an authorized financial
or accounting officer of the Company and compared
to the prior year's fiscal quarter and fiscal
period and applicable budget projections for such
quarter and fiscal period.
<PAGE>
(c) Annual Budget. Within 30 days prior to
any Fiscal Year end, a preliminary twelve month
budget for the succeeding Fiscal Year.
(d) Information Concerning Oil and Gas
Interests.
(i) No later than April 1 of each
Fiscal Year, engineering reports in form and
substance satisfactory to the Purchaser, certified
by any nationally- or regionally- ecognized
independent consulting petroleum engineers
reasonably acceptable to the Purchaser, fairly and
accurately setting forth (A) the proven and
producing, shut-in, behind-pipe, and undeveloped
oil and gas reserves (separately classified as
such) attributable to the Interests as of December
31 of the Fiscal Year for which such reserve
reports are furnished, (B) the aggregate present
value of the future net income with respect to
such Interests, discounted at a stated per annum
discount rate of proven and producing reserves,
(C) projections of the annual rate of production,
gross income, and net income with respect to such
proven and producing reserves, and (D) information
with respect to the "take-or-pay" "prepayment,"
and gas-balancing liabilities of the Company and
its Subsidiaries.
(ii) Should the Company prepare, or
cause to be prepared, engineering reports in
addition to the annual reserve reports described
in Section 7.1(d)(i), the Company shall promptly
provide the Purchaser with copies of such reports.
(iii) Such additional data
concerning pricing, quantities of production from
the Interests, volumes of production sold,
purchasers of production, gross revenues,
expenses, and such other information and
engineering and geological data with respect
thereto as the Purchaser may reasonably request
from time to time.
(e) Other Financial Information. From time
to time, such further information regarding the
business affairs and financial condition of the
Company and its Subsidiaries as the Purchaser may
request.
(f) Notice of Shareholders Meetings.
Deliver to the Purchaser written notice of any
meeting of the shareholders of the Company and its
Subsidiaries at least 10 Business Days in advance
of such meeting.
(g) Compliance Certificate. With each
financial statement which the Company is required
to submit pursuant to Sections 7.1(a) and (b), an
officers' certificate, signed by the President and
any Vice President of the Company, pursuant to
which such officers must certify that such
financial statement fairly and accurately
represents in all material respects the financial
condition of the Company and its Subsidiaries at
the end of the particular accounting period, as
well as the operating results of the Company and
its Subsidiaries during such accounting period,
subject to year-end audit adjustments.
<PAGE>
At any time after a Qualified Public
Offering, so long as the Company has a class of
equity securities registered under Section 12 of
the Exchange Act, the financial reporting
requirements set forth in paragraphs (a) through
(d) of this Section shall be replaced with the
requirement that the Company deliver to the
Purchaser a copy of each document, including
without limitation all reports on Form 10-K and
Form 10-Q, filed with the Commission as soon as
practicable after such filing.
7.2 Notices. The Company shall deliver to the
Purchaser prompt (but in no event later than 5
Business Days after an officer of the Company
obtains knowledge thereof) telephonic and written
notice of: (a) the commencement of all
proceedings and investigations by or before any
Governmental Authority (including any notice of
violation of any Requirement of Law) and all
actions and proceedings in any court or before any
arbitrator against or involving the Company, any
Subsidiary or any of their respective properties,
assets or businesses, in each case involving a
claim or liability in excess of $250,000 and not
fully covered by insurance, (b) any labor
controversy that has resulted in or threatens to
result in, a strike or other work action against
the Company or any Subsidiary, (c) any attachment,
judgment, levy or order exceeding $250,000 that
may be assessed against the Company or any
Subsidiary, (d) any event which constitutes or
which with the passage of time or giving of notice
or both would constitute a default or event of
default under the Senior Loan Agreement and (e)
any act or condition arising under ERISA that
might constitute grounds for the termination of
any Employee Benefit Plan (as defined in Section
3(3) of ERISA) or for the appointment by the
appropriate United States District Court of a
trustee to administer such plan.
7.3 Preservation of Existence and Related
Matters. Each of the Company and its Subsidiaries
shall preserve and maintain its separate existence
and all rights, franchises, licenses and
privileges necessary to the conduct of its
business; and qualify and remain qualified and
authorized to do business in each jurisdiction in
which the character of its properties or the
nature of its business requires such qualification
or authorization. Each of the Company and its
Subsidiaries shall engage only in business
consisting of the businesses in which the Company
is currently engaged, including without limitation
Hydrocarbon acquisition, exploration,
exploitation, development, gathering,
transmission, processing and marketing and the
acquisition of Persons engaged in such businesses,
or any other business reasonably incidental
thereto.
7.4 Maintenance of Property. Each of the
Company and its Subsidiaries shall protect and
preserve all properties material to its business.
7.5 Maintenance of Insurance. Each of the
Company and its Subsidiaries shall maintain
insurance with responsible insurance companies
against such risks and in such amounts as are
customarily maintained by businesses of similar
size and business activity or as may be required
by any Requirement of Law, and on the Closing Date
and from time to time thereafter deliver to the
Purchaser upon its request a detailed list of the
insurance then in effect, stating the names of the
insurance companies, the amounts and rates of the
insurance, the dates of the expiration thereof and
the properties and risks covered thereby.
<PAGE>
7.6 Payment and Performance of Obligations. Each
of the Company and its Subsidiaries shall perform
all obligations under this Agreement and the other
Transaction Documents, and pay or perform (a) all
material taxes, assessments and other governmental
charges that may be levied or assessed upon it or
any of its property, and (b) all other material
indebtedness, obligations and liabilities in
accordance with customary trade practices
including without limitation all notifications to
lessors; provided, that the Company or such
Subsidiary may contest any item described in
clause (a) or (b) of this Section 7.6 (other than
such notifications) in good faith so long as
adequate reserves are maintained with respect
thereto in accordance with GAAP.
7.7 Accounting Methods and Financial Records.
Each of the Company and its Subsidiaries shall
maintain a system of accounting and keep such
books, records and accounts (which shall be true
and complete in all material respects) as may be
required or as may be necessary to permit the
preparation of financial statements in accordance
with GAAP consistently applied and in compliance
with the regulations of any Governmental Authority
having jurisdiction over it or any of its
properties.
7.8 Visits and Inspections. Each of the Company
and its Subsidiaries shall permit representatives
of the Purchaser, from time to time, as often as
may be reasonably requested, but only during
normal business hours, to visit and inspect its
properties; inspect, audit and make extracts from
its books, records and files, including, but not
limited to, management letters prepared by
independent accountants; and discuss with its
principal officers and its independent
accountants, its business, assets, liabilities,
financial condition, results of operations and
business prospects. Any such visits, inspections
or audits shall be at the Purchaser's sole cost,
risk and expense; provided, that the Purchaser
shall receive the same reimbursement granted to
any shareholder or member of the Board of
Directors of the Company in connection with any
such visit, inspection or audit.
7.9 Board Visitation Rights. The Company shall
permit the Purchaser to designate two advisory
non-voting observers, each of whom shall be an
officer of the Purchaser or any of its Affiliates
and shall be entitled to attend each meeting of
the Board of Directors and Executive Committee of
the Company and its Subsidiaries. Any such
attendance shall be at the Purchaser's sole cost,
risk and expense; provided, that the Purchaser
shall receive the same reimbursement granted to
all members of the Board of Directors and
Executive Committee of the Company and its
Subsidiaries in connection with the attendance of
any meeting of the Board of Directors or Executive
Committee of the Company and its Subsidiaries not
held in Houston, Texas. The Company shall provide
the Purchaser with written notice of any meeting
of the Board of Directors or Executive Committee
of the Company and its Subsidiaries at least 10
Business Days in advance of such meeting.
7.10 Confidentiality. The Purchaser shall keep
all documents, data and information furnished by
the Company or received by the Purchaser pursuant
to this Agreement strictly confidential and shall
not disclose such documents, data or information
to any third party unless such disclosure (i) is
required by applicable laws, (ii) is made with
respect to information generally available to the
public, or (iii) is made to an Affiliate of the
Purchaser. The provisions of this 7.10 shall
survive the expiration or termination of this
Agreement.
<PAGE>
7.11 Compliance with Laws; Environmental
Laws. Each of the Company and its Subsidiaries
shall observe and remain in material compliance
with all Requirements of Law and Contractual
Obligations in each case applicable or necessary
to the conduct of its business. Without
limitation of the foregoing, each of the Company
and its Subsidiaries shall (a) comply in all
material respects with, and use its best efforts
to ensure such compliance by all tenants and
subtenants, if any, with, all applicable
Environmental Laws and obtain and comply with and
maintain, and ensure that all tenants and
subtenants obtain and comply with and maintain,
any and all licenses, approvals, notifications,
registrations or permits required by applicable
Environmental Laws; and (b) conduct and complete
all investigations, studies, sampling and testing,
and all remedial, removal and other actions
required under Environmental Laws, and promptly
comply with all lawful orders and directives of
any Governmental Authority regarding Environmental
Laws.
7.12 Transactions with Affiliates. Except as
contemplated by the Transaction Documents, neither
the Company nor any of its Subsidiaries shall
enter into any transaction with any Affiliate of
the Company or any of its Subsidiaries or any
stockholder (or any Affiliate of such stockholder)
of the Company or any of its Subsidiaries
(including any employee stockholder), except
transactions permitted pursuant to Section 6.10 of
the Senior Loan Agreement as in effect on the date
hereof.
7.13 Capital Expenditures. The Company shall not
alter or amend, or pass any resolution or enter
into any Contractual Obligation inconsistent with,
the Resolutions of the Board of Directors of the
Company dated May 23, 1997 relating to the
authorization of capital expenditures, without the
prior written consent of the Purchaser, which
shall not be unreasonably withheld.
7.14 Coordination of Registration Rights. The
Company shall use its best efforts to cause Energy
Capital Investment Company PLC and EnCap Equity
1996 Limited Partnership to enter into an
agreement with the Purchaser providing for the
coordination of registration rights and procedures
in the event that (i) the Purchaser wishes to
exercise its demand registration rights pursuant
to Section 10.1 of this Agreement or (ii) Energy
Capital Investment Company PLC or EnCap Equity
1996 Limited Partnership wishes to exercise its
demand registration rights pursuant to Section 2
of the Investment Agreement. The Company shall
use its best efforts to cause any future holder of
demand registration rights with respect to
securities of the Company to enter into a letter
agreement with the Purchaser and all other holders
of demand registration rights on terms
substantially similar to those contained in any
such agreement by and among the Purchaser, Energy
Capital Investment Company PLC and EnCap Equity
1996 Limited Partnership.
<PAGE>
7.15 No Inconsistent Agreements. Neither the
Company nor any of its Subsidiaries shall enter
into any Contractual Obligation, or enter into any
amendment or other modification to any currently
existing Contractual Obligation or to the Articles
of Incorporation or Bylaws, which by its terms
restricts or prohibits the ability of the Company
to issue Class B Common upon exercise of the
Warrants or to issue Class A Common upon
conversion of the Class B Common or otherwise
results in a material adverse effect to the
Purchaser or materially impairs any rights of the
Purchaser under any of the Transaction Documents.
7.16 Shareholders' Agreement. The Company shall
use its best efforts to provide the Purchaser with
a fully executed copy of the Shareholders'
Agreement within 30 days after the Closing Date.
ARTICLE 8
PREEMPTIVE RIGHTS
8.1 Eligible Offering. Except as otherwise
provided in Section 8.4, the Company hereby grants
to the Purchaser the right to purchase any future
offering of equity securities of the Company or of
any security or other obligation convertible into
or exchangeable for or carrying rights or options
to purchase equity securities of the Company (an
"Eligible Offering"); provided, that the portion
of any Eligible Offering which the Purchaser may
purchase shall bear the same ratio to the
aggregate amount of securities covered by such
Eligible Offering as the number of shares of
Common Stock owned by the Purchaser, on a fully
diluted basis, bears to the total number of shares
of Common Stock owned by all shareholders of the
Company, on a fully diluted basis, at the time of
such Eligible Offering.
8.2 Notice of an Eligible Offering. Before
issuing any securities pursuant to an Eligible
Offering, the Company shall give written notice
thereof to the Purchaser. Such notice must
specify the security or securities the Company
proposes to issue and the consideration that the
Company intends to receive for such security or
securities. For a period of ten (10) Business
Days following the delivery of such notice, the
Purchaser shall be entitled, by written notice to
the Company, to elect to purchase up to the
portion of the securities being sold in the
Eligible Offering calculated in accordance with
Section 8.1. In the event of a material change in
the terms of such Eligible Offering during the ten
(10) Business Days following such notice, the
Purchaser shall have an additional ten (10)
Business Days following the Purchaser's notice of
such material change to make its election. If any
such election is made by the Purchaser, the
Company shall sell to the Purchaser, and the
Purchaser shall purchase from the Company, for the
consideration and on the terms set forth in the
Company's notice of such Eligible Offering, the
number of securities that the Purchaser has
elected to purchase. The Company may sell the
remainder of the securities to be sold in the
Eligible Offering, if any, pursuant to the
provisions set forth in Section 8.3.
8.3 Sale to Third Parties. If any election to
exercise the rights pursuant to Section 8.1 is not
made with respect to any securities included in an
Eligible Offering within the period of ten (10)
Business Days described in Section 8.2, or if
there remain securities to be sold after the sale
of securities to the Purchaser, then the Company
may issue such securities to third persons, but
only for a consideration not less than that set
forth in the Company's notice and only within a
period of 120 days thereafter.
<PAGE>
8.4 Exceptions to Eligible Offering. The
Purchaser shall not have any preemptive right to
purchase any of the following securities issued by
the Company:
(a) Securities issued to employees of the
Company in the ordinary course of business
pursuant to a stock option plan of the Company;
provided, that the aggregate amount of Common
Stock available for employee stock options shall
not exceed 20% of the outstanding Common Stock
determined on a fully diluted basis; provided,
further, that the exercise price of such options
shall not be less than $3.25 per share;
(b) Securities issued to the acquiree or to
shareholders in connection with any merger,
consolidation or acquisition to which the Company
is a party;
(c) Securities issued for consideration
other than cash;
(d) Securities issued pursuant to a
Qualified Public Offering;
(e) Securities issued pursuant to the
proposal dated May 7, 1997 from the Company to
Belleview Capital Corp., as modified by the
response dated May 13, 1997; or
(f) Securities issued after the Purchaser
(or its assigns) ceases to be a holder of any of
the Shares, the Warrants, or the Common Stock
issued upon the conversion or exercise thereof.
ARTICLE 9
PUT RIGHTS
9.1 Option to Put. Upon the earlier to occur of
(i) May 27, 2001 or (ii) a Change in Control (the
"Earlier Time"), and, in the event of a Change in
Control caused by the death or disability of Frank
A. Lodzinski, through the 90th day after the
Purchaser receives written notice of such Change
in Control, and in all other events, until May 31,
2005, the Purchaser shall have the right to sell
all or a portion of its Put Securities to the
Company, and the Company shall be obligated to
purchase such Put Securities, at a price per share
determined in accordance with Section 9.3 below;
provided, that all of the Purchaser's put rights
under this Article 9 shall expire and terminate
upon the consummation of a Qualified Public
Offering or a Cash-Out Transaction.
9.2 Sale of Put Securities. To exercise its
right to sell all or any portion of the Put
Securities under Section 9.1, the Purchaser shall
give written notice to that effect to the Company,
which notice (the "Exercise Notice") shall also
specify the number of Put Securities the Purchaser
is electing to sell. The Company and the
Purchaser shall consummate any purchase and sale
contemplated under this Article 9 at a place and
time mutually determined by the Company and the
Purchaser, but in any event within fifteen (15)
days after receipt by the Company of the Exercise
Notice. At the closing of any purchase and sale
contemplated under this Article 9, the Company
shall tender immediately available funds to the
Purchaser in an amount equal to the number of the
Put Securities to be sold multiplied by the price
per share determined in accordance with Section
9.3 below and the Purchaser shall deliver to the
Company certificate(s) or instrument(s) evidencing
such securities.
<PAGE>
9.3 Price Per Share.
(a) Purchase Price. The Company shall be
obligated to purchase the Put Securities pursuant
to Sections 9.1 and 9.2 at a price per share equal
to (i) the Net Asset Value less (ii) in the case
of a purchase of all or any portion of the
Warrants, the exercise price per share of such
Warrants.
(b) Net Asset Value. For purposes of this
Article 9, the term "Net Asset Value" shall mean,
as of the date of the Exercise Notice, an amount
determined by dividing X by Y, where "X" is (i)
the total assets of the Company and its
Subsidiaries which would be shown as assets on a
consolidated balance sheet of the Company and its
Subsidiaries as of such time prepared in
accordance with GAAP (exclusive, however, of oil
and gas properties), plus (ii) the "Calculated
Market Value" (as hereinafter defined) of such oil
and gas properties, minus (iii) the total
liabilities of the Company and its Subsidiaries
which would be shown as liabilities on a
consolidated balance sheet of the Company and its
Subsidiaries as of such time prepared in
accordance with GAAP and where "Y" is the total
number of shares of Common Stock outstanding as of
such time determined on a fully diluted basis
(except for options which have not yet vested or
are not immediately exercisable). In computing
Net Asset Value, the "Calculated Market Value" of
oil and gas properties of the Company and its
Subsidiaries shall be the value determined by a
nationally recognized independent engineering firm
acceptable to the Company and the Purchaser, and
calculated in accordance with Section 210.4-10 of
Regulation S-X, as promulgated by the Commission,
with the following adjustments to certain
parameters: (i) applicable future prices for
commodities shall be determined as follows: (A)
for crude oil the beginning price shall be
calculated using the average of one full calendar
year forward prices, and (B) for natural gas the
beginning price shall be calculated using the
average of the first twelve month forward prices,
each as reported on the New York Mercantile
Exchange; provided, that such prices shall be
adjusted for product quality and for basis
differentials resulting from product location, as
determined by the Purchaser by obtaining market
quotes from at least two mutually agreeable major
independent third party dealers for each pipeline
or point of delivery; provided, further, that
such prices shall escalate at 3% per annum
thereafter; (ii) beginning lease operating
expenses, as determined by Section 210.4-10 of
Regulation S-X, shall escalate at 3% per annum
thereafter; (iii) the resulting cashflow stream,
as determined by Section 210.4-10 of Regulation
S-X, after giving effect to the adjustments to
commodity price and lease operating expense
assumptions, shall be discounted for a present
value at a 12% discount rate; and (iv) that in
making such computation, only the following
categories (and portions of such categories) of
reserves shall be utilized: 100% of proved
developed producing reserves; 80% of proved
developed non-producing reserves; and 50% of
proved undeveloped reserves.
<PAGE>
9.4 Limitation on Other Put Rights. The Company
covenants and agrees that, except as provided in
the other Transaction Documents, from and after
the date hereof, so long as the Purchaser holds
Put Securities in respect of which any put rights
provided for in this Article 9 have not
terminated, the Company shall not grant, directly
or indirectly, to any Person or agree to otherwise
become obligated in respect of (i) any rights to
require the Company to purchase or redeem
securities of the Company upon the demand of any
Person or (ii) rights in the nature or
substantially in the nature of those set forth in
Article 9 of this Agreement; in each case, without
the prior written consent of the Purchaser, which
shall not be unreasonably withheld, or unless such
rights are expressly subject and subordinated to
the put rights of the Purchaser pursuant to
Article 9 hereof on terms reasonably satisfactory
to the Purchaser.
ARTICLE 10
REGISTRATION RIGHTS
10.1 Demand Registration
(a) Form of Demand Request. Subject to
paragraphs (b), (c) and (d) below and the other
terms and provisions hereof, until May 31, 2005,
the Purchaser may request at any time a
registration by the Company under the Securities
Act of all or a part of its Registrable Securities
(a "Demand Registration"). Any request made
pursuant to this paragraph (a) will specify the
number of Registrable Securities to be registered
and will specify the intended method of
disposition thereof; provided, that such method of
disposition shall be an underwritten offering if
requested by the Purchaser.
(b) Limitations on Registration Rights of
the Purchaser. Notwithstanding paragraph (a)
above or anything else herein to the contrary, the
Company shall have no obligations under this
Section 10.1 until the earlier of (i) May 1, 2000
or (ii) one year after the date any class of the
Company's Common Stock becomes subject to the
reporting requirements under the Exchange Act.
Notwithstanding paragraph (a) above or anything
else herein to the contrary, in no event shall the
Company be obligated to effect more than one
registration pursuant to this Section 10.1;
provided, that any registration requested pursuant
to this Section 10.1 will not be deemed to have
been effected unless it has become effective and
remained effective until all of the Registrable
Securities have been sold; 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 10.1 solely by reason
of the refusal to proceed of the Purchaser after
having requested the Demand Registration pursuant
to paragraph (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 the Purchaser 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 took place, violate any applicable
state or federal securities law) shall be deemed
to have been effected by the Company at the
request of the Purchaser.
<PAGE>
(c) Inclusion of Other Securities. Neither
the Company nor any of its securityholders (other
than the Purchaser) shall have the right to
include any of the Company's securities in a
registration statement initiated as a Demand
Registration under this Section 10.1 unless (i)
the Purchaser consents to such inclusion and (ii)
if the Demand Registration is an underwritten
offering, (A) the Company and such
securityholders, as applicable, agree in writing
to sell their securities on the same terms and
conditions as apply to the Registrable Securities
being sold and (B) the managing underwriter(s) of
such underwritten offering has reasonably
determined that inclusion of such securities will
not adversely affect the marketability or offering
price of the Registrable Securities to be
included.
(d) Underwriters. If a Demand Registration
is an underwritten offering or a best efforts
underwritten offering, the investment banker or
investment bankers and manager or managers that
will administer the offering shall be selected by
the Purchaser; provided, that such investment
bankers and managers must be reasonably
satisfactory to the Company.
10.2 Piggyback Registration. If, at any time
before May 31, 2005, the Company proposes to
register any of its securities under the
Securities Act for its own account or for the
account of any other holder of its securities
other than (a) under employee compensation or
benefit programs or (b) an exchange offer or an
offering of securities solely to the existing
stockholders or employees of the Company, and the
registration form to be used may be used for the
registration of Registrable Securities, the
Company will give prompt written notice to the
Purchaser 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 fifteen (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
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 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, 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 Purchaser and the Company
shall be first reduced prior to any such reduction
applicable to the Purchaser, 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 Purchaser, as
currently in effect, shall be first reduced prior
to any such pro rata reduction applicable to the
Purchaser.
<PAGE>
(a) Requests for Registration on Form S-3.
After the initial Public Offering of Common Stock
pursuant to an effective registration statement
under the Securities Act and until May 31, 2005,
the Company shall use its best efforts to qualify
to register securities on Form S-3 (or any
successor to such form). After the Company has
qualified for the use of Form S-3, in addition to
the rights contained in the foregoing provisions
of this Agreement, the Purchaser shall have the
right to request the registration of any such
Registrable Securities on Form S-3. All such
requests shall be in writing and shall state the
number of shares of Registrable Securities to be
disposed of and the intended methods of
disposition of such shares by the Purchaser;
provided, that the Company shall not be required
to effect a registration pursuant to this Section
10.3(a) unless the Purchaser proposes to dispose
of Registrable Securities having an aggregate
price to the public (before deducting underwriting
discounts and expenses of sale) of at least
$500,000. Registrations effected pursuant to this
Section 10.3 shall not be counted as a Demand
Registration for purposes of Section 10.1.
(b) Underwriting Procedures. If the
Purchaser so elects, the offering of such
Registrable Securities pursuant to a registration
effected pursuant to Section 10.3(a) shall be in
the form of a firm commitment underwritten
offering and the managing underwriter or
underwriters selected for such offering shall be
selected by the Purchaser in the same manner as
described in Section 10.1(d).
10.4 Registration Procedures.
(a) Whenever the Purchaser has requested
that any Registrable Securities be registered
pursuant to Section 10.1, 10.2 or 10.3, the
Company will use its reasonable best efforts to
effect the registration of and permit the sale of
such Registrable Securities in accordance with the
intended method of disposition thereof, and
pursuant thereto 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
effective (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 the Purchaser);
(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 for a period
which will terminate when Registrable Securities
covered by such registration statement have been
sold (but not before the expiration of the
applicable prospectus delivery period) 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;
<PAGE>
(iii) furnish to the Purchaser 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 the Purchaser;
(iv) 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 the
Purchaser reasonably requests and do any and all
other acts and things which may be reasonably
necessary or advisable to enable the Purchaser to
consummate the disposition in such jurisdictions
of the Registrable Securities owned by the
Purchaser (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);
(v) notify the Purchaser, at any time
when a prospectus relating thereto is required to
be delivered under the Securities Act, of the
happening of any event 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 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 the
Purchaser, the Company will prepare 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;
(vi) 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 or which are
recommended for listing by the Purchaser or any
underwriters;
(vii) enter into such customary
agreements (including, without limitation,
underwriting agreements in customary form,
substance, and scope) and take all such other
actions as the Purchaser or the underwriters, if
any, reasonably request in order to expedite or
facilitate the disposition of such Registrable
Securities;
(viii) otherwise use its reasonable
best efforts to comply with all applicable rules
and regulations of the Commission, and make
generally available to its security holders an
earnings statement no later than 90 days after the
end of the 12 month period beginning with the
first day of the Company's first full calendar
quarter after the effective date of the
registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of
the Securities Act and Rule 158 thereunder;
(ix) 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 disqualification of any common
stock included in such registration statement for
sale in any jurisdiction, the Company will use its
reasonable best efforts promptly to obtain the
withdrawal of such order; and
<PAGE>
(x) 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
Purchaser to consummate the disposition of such
Registrable Securities.
(b) The Purchaser agrees with the Company as
follows:
(i) upon receipt of any notice from the
Company of the happening of any event of the kind
described in Section 10.4(a)(v), the Purchaser
will forthwith discontinue disposition of any
Registrable Securities until the Purchaser
receives copies of the supplemented or amended
prospectus contemplated by Section 10.4(a)(v), or
until it is advised in writing by the Company that
the use of the applicable prospectus may be
resumed, and it has received copies of any
additional or supplemental filings that are
incorporated or deemed to be incorporated by
reference in such prospectus;
(ii) furnish to the Company such
information regarding the Purchaser, the
Registrable Securities held by it 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 that such information has
been furnished to the Company by the Purchaser;
and
(iii) if any Registrable Securities
are being registered in any registration pursuant
to this Agreement, the Purchaser 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.
10.5 Expenses. The Company shall pay all
Registration Expenses in connection with each
registration effected pursuant to Section 10.1,
10.2 and 10.3 and, in any event, shall pay its
internal expenses (including, without limitation,
all salaries and expenses of its officers and
employees performing legal and accounting duties),
the expense of any annual audit and the fees and
expenses incurred in connection with the listing
of the securities to be registered on each
securities exchange on which similar securities
issued by the Company are then listed. All Selling
Expenses incurred in connection with a
registration effected pursuant to the terms hereof
shall be borne by the Purchaser and any other
holder of Registrable Securities participating in
such registration pro rata, based upon the number
of Registrable Securities included in such
registration.
10.6 Limitation on Registration Rights of Others.
The Company covenants and agrees that, except as
provided in the other Transaction Documents, from
and after the date hereof, so long as the
Purchaser holds any Registrable Securities in
respect of which any registration rights provided
for in this Article 10 remain in effect, the
Company will not, directly or indirectly, grant to
any Person or agree to or otherwise become
obligated in respect of rights of Demand
Registration in the nature or substantially in the
nature of those set forth in Section 10.1.
<PAGE>
10.7 Lock-Up Agreements. In the event V & C
Energy Limited Partnership or Energy Resource
Associates, Inc. enters into any "lock-up" or
similar agreement not to dispose of any securities
of the Company during registration, the Purchaser
covenants and agrees to enter into a substantially
similar agreement; provided, that such restrictive
period does not exceed 180 days.
ARTICLE 11
INDEMNIFICATION
11.1 Indemnification. In addition to all other
sums due hereunder or provided for in this
Agreement, the Company agrees to indemnify and
hold harmless the Purchaser and its Affiliates and
their respective officers, directors, agents,
employees, subsidiaries, partners and controlling
persons (each, together with each Holder
Indemnified Party, an "Indemnified Party") to the
fullest extent permitted by law from and against
any and all losses, claims, damages, expenses
(including reasonable fees, disbursements and
other charges of counsel) or other liabilities
(collectively, "Liabilities") resulting from or
arising out of any breach of any representation or
warranty, covenant or agreement of the Company in
this Agreement or in any of the other Transaction
Documents or any legal, administrative or other
actions (including actions brought by the
Purchaser or the Company or any equity holders of
the Company or derivative actions brought by any
Person claiming through or in the Company's name),
proceedings or investigations (whether formal or
informal), or written threats thereof, based upon,
relating to or arising out of this Agreement or
any of the other Transaction Documents; provided,
that (a) the Company shall not be liable under
this Section 11.1 to an Indemnified Party (i) for
any amount paid in settlement of claims without
the Company's consent (which consent shall not be
unreasonably withheld), (ii) to the extent that it
is finally judicially determined that such
Liabilities resulted primarily from the willful
misconduct or gross negligence of such Indemnified
Party or (iii) to the extent that it is finally
judicially determined that such Liabilities
resulted primarily from the material breach by
such Indemnified Party of any representation,
warranty, covenant or other agreement of such
Indemnified Party contained in this Agreement or
in the applicable Transaction Document, and (b) if
and to the extent that such indemnification is
unenforceable for any reason, the Company shall
make the maximum contribution to the payment and
satisfaction of such Liabilities which shall be
permissible under applicable laws. In connection
with the obligation of the Company to indemnify
for expenses as set forth above, the Company
further agrees, upon presentation of appropriate
invoices containing reasonable detail, to
reimburse each Indemnified Party for all such
expenses (including reasonable fees, disbursements
and other charges of counsel) as they are incurred
by such Indemnified Party; provided, that if an
Indemnified Party is reimbursed hereunder for any
expenses, such reimbursement of expenses shall be
refunded to the extent it is finally judicially
determined that the Liabilities in question
resulted primarily from (i) the willful misconduct
or gross negligence of such Indemnified Party or
(ii) the material breach by such Indemnified Party
of any representation, warranty, covenant or other
agreement of such Indemnified Party contained in
this Agreement or any of the other Transaction
Documents.
<PAGE>
11.2 Securities Laws Violations. The Company
shall indemnify and hold harmless, with respect to
any registration statement filed by it, to the
full extent permitted by law, the Purchaser and
each other Person, if any, who controls the
Purchaser within the meaning of Section 15 of the
Securities Act (collectively, "Holder Indemnified
Parties") against all losses, claims, damages,
liabilities and expenses, 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 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; 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, 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, except to the
extent such loss, claim, damage, liability or
expense exceeds the net proceeds paid or payable
to such Holder Indemnified Party in connection
with such transfer of securities. If and to the
extent that such indemnification is unenforceable
for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of
such liabilities which shall be permissible under
applicable laws. 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.
11.3 Indemnification by Purchaser. The Purchaser
shall 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, the "Company Indemnified Parties")
against all losses, claims, damages, liabilities
and expenses to which the 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 the Purchaser'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 the Purchaser for use in the
preparation thereof, or (iii) any violation by the
Purchaser of any federal, state or common law rule
or regulation applicable to the Purchaser and
relating to action of or inaction by such holder
in connection with any such registration, except
to the extent such loss, claim, damage, liability
or expense exceeds the net proceeds paid or
payable to the Purchaser in connection with such
transfer of securities. 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 the Purchaser.
<PAGE>
11.4 Notification. Each Indemnified Party under
this Article 11 will, promptly after the receipt
of notice of the commencement of any action,
investigation, claim or other proceeding against
such Indemnified Party in respect of which
indemnity may be sought from the Company under
this Article 11, notify the Company in writing of
the commencement thereof. The omission of any
Indemnified Party so to notify the Company of any
such action shall not relieve the Company from any
liability which it may have to such Indemnified
Party (a) other than pursuant to this Article 11
or (b) under this Article 11 unless, and only to
the extent that, such omission results in the
Company's forfeiture of substantive rights or
defenses. In case any such action, claim or other
proceeding shall be brought against any
Indemnified Party and it shall notify the Company
of the commencement thereof, the Company shall be
entitled to assume the defense thereof at its own
expense, with counsel satisfactory to such
Indemnified Party in its reasonable judgment;
provided, that any Indemnified Party may, at its
own expense, retain separate counsel to
participate in such defense. Notwithstanding the
foregoing, in any action, claim or proceeding in
which both the Company, on the one hand, and an
Indemnified Party, on the other hand, is, or is
reasonably likely to become, a party, such
Indemnified Party shall have the right to employ
separate counsel at the Company's expense and to
control its own defense of such action, claim or
proceeding if, in the reasonable opinion of
counsel to such Indemnified Party, a conflict or
potential conflict exists between the Company, on
the one hand, and such Indemnified Party, on the
other hand, that would make such separate
representation advisable. The Company agrees that
it will not, without the prior written consent of
the Purchaser, which consent shall not be
unreasonably withheld, settle, compromise or
consent to the entry of any judgment in any
pending or threatened claim, action or proceeding
relating to the matters contemplated hereby (if
any Indemnified Party is a party thereto or has
been actually threatened to be made a party
thereto) unless such settlement, compromise or
consent includes an unconditional release of the
Purchaser and each other Indemnified Party from
all liability arising or that may arise out of
such claim, action or proceeding. The Company
shall not be liable for any settlement of any
claim, action or proceeding effected against an
Indemnified Party without its written consent,
which consent shall not be unreasonably withheld.
The rights accorded to Indemnified Parties
hereunder shall be in addition to any rights that
any Indemnified Party may have at common law, by
separate agreement or otherwise.
<PAGE>
ARTICLE 12
MISCELLANEOUS
12.1 Survival of Representations and Warranties.
All of the representations and warranties made
herein shall survive the execution and delivery of
this Agreement, any investigation by or on behalf
of the Purchaser, acceptance of the Shares and the
Warrants and payment therefor, conversion of the
Shares, and exercise of the Warrants.
12.2 Notices. All notices, demands and other
communications provided for or permitted hereunder
shall be made in writing and shall be by
registered or certified first-class mail,
return receipt requested, telecopy, recognized
overnight courier service or personal delivery:
(a) if to the Company:
Cliffwood Oil & Gas Corp.
110 Cypress Station Drive,
Suite 220
Houston, Texas 77090
Attention: Frank A. Lodzinski
Telephone No.: (281) 537-9920
Telecopy No.: (281) 537-8324
with a copy to:
Stephenson & Snokhous
4544 Post Oak Place, Suite 378
Houston, Texas 77027
Attention: Juli Fournier
Telephone No.: (713) 629-6961
Telecopy No.: (713) 629-9606
<PAGE>
(b) if to the Purchaser:
First Union Capital Partners, Inc.
One First Union Center
301 South College Street, 5th Floor
Charlotte, North Carolina 28202
Attention: Kevin J. Roche
Stephen J. Antal
Telephone No.: (704) 374-4768
Telecopy No.: (704) 374-6711
with a copy to:
First Union Corporation of North
Carolina
1001 Fannin Street, Suite 2255
Houston, Texas 77002-6709
Attention: Jay Chernosky
Telephone No.: (713) 650-6344
Telecopy No.: (713) 650-6354
All such notices and communications shall be
deemed to have been duly given: when delivered
by hand, if personally delivered; when delivered
by courier, if delivered by commercial overnight
courier service; five Business Days after being
deposited in the mail, postage prepaid, if mailed;
and when receipt is acknowledged, if telecopied.
12.3 Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the
successors and permitted assigns of the parties
hereto. Subject to applicable securities laws and
except as otherwise set forth in the Transaction
Documents, the Purchaser may assign any of its
rights under this Agreement. The Company may not
assign any of its rights under this Agreement
without the prior written consent of the
Purchaser. Except as provided in Article 11, no
Person other than the parties hereto and their
successors and permitted assigns is intended to be
a beneficiary of any of the Transaction Documents.
12.4 Amendment and Waiver.
(a) No failure or delay on the part of the
Company or the Purchaser in exercising any right,
power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy
preclude any other or further exercise thereof or
the exercise of any other right, power or remedy.
The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be
available to the Company or the Purchaser at law,
in equity or otherwise.
(b) Any amendment, supplement or
modification of or to any provision of this
Agreement, any waiver of any provision of this
Agreement, and any consent to any departure from
the terms of any provision of this Agreement,
shall be effective (i) only if it is made or given
in writing and signed by the Company and the
Purchaser, and (ii) only in the specific instance
and for the specific purpose for which made or
given. Except where notice is specifically
required by this Agreement, no notice to or demand
in any case shall entitle either party to any
other or further notice or demand in similar or
other circumstances.
<PAGE>
12.5 Counterparts. This Agreement may be executed
in any number of counterparts and by the parties
hereto in separate counterparts, each of which
when so executed shall be deemed to be an original
and all of which taken together shall constitute
one and the same agreement.
12.6 Headings. The headings in this Agreement are
for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.
12.7 GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW OF SUCH STATE.
12.8 Jurisdiction. Each party to this Agreement
hereby irrevocably agrees that any legal action or
proceeding arising out of or relating to this
Agreement or any agreements or transactions
contemplated hereby may be brought in the courts
of the State of Texas or of the United States of
America for the Southern District of Texas and
hereby expressly submits to the personal
jurisdiction and venue of such courts for the
purposes thereof and expressly waives any claim of
improper venue and any claim that such courts are
an inconvenient forum. Each party hereby
irrevocably consents to the service of process of
any of the aforementioned courts in any such suit,
action or proceeding by the mailing of copies
thereof by registered or certified mail, postage
prepaid, to the address set forth in Section 12.2,
such service to become effective 10 days after
such mailing.
12.9 Severability. If any one or more of the
provisions contained herein, or the application
thereof in any circumstance, is held invalid,
illegal or unenforceable in any respect for any
reason, the validity, legality and enforceability
of any such provision in every other respect and
of the remaining provisions hereof shall not be in
any way impaired, unless the provisions held
invalid, illegal or unenforceable shall
substantially impair the benefits of the remaining
provisions hereof.
12.10 Rules of Construction. Unless the
context otherwise requires, "or" is not exclusive,
and references to sections or subsections refer to
sections or subsections of this Agreement. All
pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural,
as the context may require.
12.11 Entire Agreement. This Agreement,
together with the exhibits and schedules hereto
and the other Transaction Documents, is intended
by the parties as a final expression of their
agreement and is intended to be a complete and
exclusive statement of the agreement and
understanding of the parties hereto in respect of
the subject matter contained herein and therein.
There are no restrictions, promises, warranties or
undertakings, other than those set forth or
referred to herein or therein. This Agreement,
together with the exhibits and schedules hereto,
and the other Transaction Documents supersede all
prior agreements and understandings between the
parties with respect to such subject matter.
<PAGE>
12.12 Certain Expenses. The Company will pay
all reasonable legal, accounting and
environmental due diligence expenses of the
Purchasers (including reasonable fees, charges and
disbursements of counsel) in connection with
transactions contemplated by this Agreement and
the other Transaction Documents.
12.13 Regulatory Requirements. In the event
of any reasonable determination by the Purchaser
that, by reason of any existing or future Federal
or state rule, regulation, guideline, order,
request or directive (whether or not having the
force of law and whether or not failure to comply
therewith would be unlawful) (collectively, a
"Regulatory Requirement"), it is effectively
restricted or prohibited from holding any of the
Shares, Warrants, Warrant Shares or shares of
Common Stock issued upon conversion thereof
(including any shares of capital stock or other
securities distributable to the Purchaser in any
merger, reorganization, readjustment or other
reclassification of Shares), the Company shall
take, and shall cause the other stockholders of
the Company to take, such action, at the Company's
expense, as may be deemed reasonably necessary by
the Purchaser to permit the Purchaser to comply
with such Regulatory Requirement. Such action to
be taken may include, without limitation, the
Company's authorization of one or more new classes
of capital stock and the modification or amendment
of the Articles of Incorporation or any other
documents or instruments executed in connection
with the Shares, Warrants, Warrant Shares or
shares of Common Stock issued upon conversion
thereof (including any shares of capital stock or
other securities distributable to the Purchaser in
any merger, reorganization, readjustment or other
reclassification of Shares) held by the Purchaser.
The Purchaser shall give written notice to the
Company and the other stockholders of the Company
of any such determination and the action or
actions necessary to comply with such Regulatory
Requirement, and the Company and such other
stockholders shall take all steps necessary to
comply with such determination as expeditiously as
possible.
12.14 Publicity. Except as may be required by
applicable law, none of the parties hereto shall
issue a publicity release or announcement or
otherwise make any public disclosure concerning
this Agreement or the transactions contemplated
hereby without prior approval by the other parties
hereto. If any announcement is required by law to
be made by any party hereto, prior to making such
announcement such party will deliver a draft of
such announcement to the other parties and shall
give the other parties an opportunity to comment
thereon.
12.15 Further Assurances. Each of the parties
shall execute such documents and perform such
further acts (including, without limitation,
obtaining any consents, exemptions,
authorizations, or other actions by, or giving any
notices to, or making any filings with, any
Governmental Authority or any other Person) as may
be reasonably required or desirable to carry out
or to perform the provisions of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed and delivered
by their respective officers hereunto duly
authorized as of the date first above written.
CLIFFWOOD OIL & GAS CORP.
By: /s/ Frank A. Lodzinski
Name: Frank A. Lodzinski
Title: President
FIRST UNION CAPITAL PARTNERS, INC.
By: /s/ Kevin J. Roche
Name: Kevin J. Roche
Title: Senior Vice President
<PAGE>
Exhibit 4
CLIFFWOOD OIL & GAS CORP.
110 Cypress Station Drive
Houston, Texas 77090
December 31, 1997
First Union Capital Partners, Inc.
One First Union Center
301 South College Street, 5th Floor
Charlotte, North Carolina 28202
Ladies and Gentlemen:
Reference is made (i) to the Common Stock and
Warrant Purchase Agreement dated May 30, 1997 (the
"Purchase Agreement") by and between Cliffwood Oil
& Gas Corp. ("Cliffwood") and First Union Capital
Partners, Inc. ("First Union") and (ii) to the
Agreement and Plan of Merger dated December 31,
1997 (the "Merger Agreement") by and among
Cliffwood, Texoil, Inc. ("Texoil") and Texoil
Acquisition, Inc. ("Texoil Sub"), pursuant to
which Texoil Sub will merge with and into
Cliffwood and Cliffwood will continue after such
merger as a wholly-owned subsidiary of Texoil (the
"Merger").
In connection with the Merger, and for the
purpose of ensuring that First Union will maintain
all of its material rights under the Purchase
Agreement, Cliffwood and I, Frank A. Lodzinski,
President of Cliffwood, hereby undertake to use
our best efforts to cause Texoil to, within 45
days of the date hereof: (i) execute an agreement
whereby Texoil will assume all material
obligations of Cliffwood under the Purchase
Agreement except for such obligations which are
inappropriate for Texoil to assume; (ii) deliver
to First Union a warrant to purchase 1,128,950
shares of Texoil Common Stock with terms
substantially similar to those terms contained in
First Union's warrant to purchase 167,500 shares
of Class B Common Stock of Cliffwood (which will
be converted to a warrant to purchase Texoil
common Stock pursuant to the Merger Agreement),
such terms including, without limitation, an
exercise price of $.63056 per share; and (iii)
enter into an agreement with all Texoil
shareholders holding registration rights with
respect to shares of Texoil Common Stock (or with
respect to shares of Cliffwood Common Stock prior
to the Merger) whereby such registration rights
are coordinated such that, in the event of a
registration of shares by Texoil that triggers
"piggyback" rights among such shareholders, such
shareholders will have the rights to register
their shares on a pro rata basis if the total
number of shares to be registered is cut back by
the managing underwriter; provided, however, that
in the case of a "demand" registration by a
shareholder of Texoil, the shareholder demanding
registration will have priority to register all of
its shares before any shares are registered
pursuant to the "piggyback" rights of other
shareholders (with such "piggyback" shares to be
registered on a pro rata basis in the event of an
underwriter cutback) .
<PAGE>
In addition, in my individual capacity as a
shareholder of Texoil following the Merger, I
agree to use my best efforts to cause the above
undertakings to be performed by Texoil.
Very truly yours,
CLIFFWOOD OIL & GAS CORP.
By:/s/ Frank A. Lodzinski
Frank A. Lodzinski
President
/s/ Frank A. Lodzinski
Frank A. Lodzinski
Acknowledged:
TEXOIL, INC.
By:/s/ Frank A. Lodzinski
