SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) APRIL 17, 1996
TEXOIL, INC.
------------------------------------
(Exact name of Registrant as specified in its charter)
NEVADA 0-12633 8-0177083
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) Number)
1600 SMITH STREET
SUITE 4000
HOUSTON, TEXAS 77002
---------------------------------------
(Address of principal executive offices)
Registrant's Telephone Number, including Area Code: (713) 652-5741
Page 1 of 5
Item 5. OTHER EVENTS
On April 17, 1996, Texoil, Inc. ("Texoil") entered into a non-binding letter of
intent with Fortune Petroleum Corporation ("Fortune") for the acquisition of
Texoil by Fortune in a tax-free merger transaction.
In the transaction, Fortune will, at closing, issue to Texoil shareholders one
share of Fortune common stock, par value $.01 per share, for every 3.2 shares of
Texoil common stock, up to a maximum of 1,845,000 Fortune common shares. Prior
to the record date of the transaction, all owners of Texoil's 23,000 shares of
preferred stock will exchange such shares and any accrued dividends into common
stock of Texoil at the market price of such stock on the effective date of the
exchange, in a total aggregate amount of not more than 1,700,000 shares of
Texoil common stock.
On the closing of the transaction, the outstanding principal on all loans from
Texoil shareholders (presently $1,100,000) to Texoil will be converted to
Fortune common stock at the average of the closing market price of such stock on
the ten (10) business days immediately prior to the closing of the transaction.
Fortune shall provide assistance in the liquidation of such shares by ensuring
that such shareholders receive the entire amount of their previously existing
loan amounts within fifteen (15) months of the closing of the transaction,
provided, however, that Fortune shall guarantee the receipt by T. W. Hoehn, Jr.
of the first $200,000 of such proceeds during the two-week period following the
closing and the balance of such proceeds within one year following the closing.
Fortune and Hoehn will reconcile the accounting of such liquidation so as to
provide for the proportionate return to Fortune of any amounts received by Hoehn
insofar as Fortune was required to advance funds on its guarantee.
Prior to closing of the transaction, each of the current officers, directors and
principal shareholders of Texoil shall enter into "lock-up" agreements whereby
their ability to trade the Fortune stock (exclusive of the Fortune common to be
issued in conversion of outstanding loans) shall be restricted for a period of
not less than six (6) months nor more than the period required to consummate the
sale of the shares issued in conversion of the outstanding loans, and upon other
mutually-acceptable terms. At the conclusion of the lock-up period, Fortune will
register for resale under Form S-3 those shares previously subject to the
agreement.
The letter of intent states that, subject to further review, the outstanding
options and warrants of Texoil will be assumed by Fortune in accordance with
their terms. The letter of intent states that the parties will enter into a
definitive merger agreement not later than April 26, 1996. The parties expect
that the transaction will close on or before August 15, 1996.
Upon closing of the transaction, Walter L. Williams, the Chairman and Chief
Executive Officer of Texoil, will be appointed to Fortune's board of directors,
and T. W. Hoehn, III will be appointed to Fortune's executive committee. It is
contemplated that Mr. Williams will be elected chairman of the board of Fortune.
Further, Fortune believes that a continuity of Texoil's professional staff is a
desirable component of the transaction contemplated hereby. Fortune intends to
devote further review to the feasibility of extending offers of employment to
certain of Texoil's professional staff.
During the interim period between the signing of the definitive merger agreement
and closing or earlier termination of the merger, Fortune has agreed to lend to
Texoil on a secured basis Texoil's working interest share of the costs of
Texoil's Raceland, Greens Lake and Laurel Grove prospects.
Page 2 of 5
Texoil's share of those costs over the next six months is projected to be
approximately $1,000,000. In addition, Fortune will lend amounts up to $150,000
to Texoil to assist Texoil in paying other reasonable and necessary expenses of
conducting its business during the interim period. The determination of
"reasonable and necessary costs" will be determined solely by Fortune. Any
amounts loaned by Fortune to cover reasonable and necessary expenses of Texoil
over and above $150,000 will reduce the purchase price to be paid by Fortune for
Texoil. Specifically, to the extent that such amounts, along with any other
increase in the total of the net working capital deficit and other liabilities
exceed Texoil's total net working capital deficit and other liabilities, as of
March 31, 1996, by more than $150,000, the purchase price will be reduced
accordingly. At the time of the first delivery of such funds by Fortune to
Texoil, Texoil will be required to execute and deliver to Fortune a security
interest in the three prospects named above, including, but not limited to, all
seismic data, seismic options, and leasehold interests.
In the event that Texoil is acquired by a third party which thereafter
repudiates the transaction contemplated by the letter of intent, or in the event
that Texoil, due to acquisition or merger discussions with a third party,
repudiates or materially impairs the ability of either party to proceed with the
transaction, Fortune shall be entitled to (i) the repayment within two (2)
business days of the amounts loaned to Texoil together with interest at 18% per
annum, plus (ii) an assignment of the greater of 10% of the total working
interest in each of the prospects named above on the same basis as Texoil holds
its interest, or 50% of Texoil's interest in each of the three prospects,
proportionally adjusted as provided below.
In the event that Fortune, due to acquisition or merger discussions with a third
party, repudiates or materially impairs the ability of either party to proceed
with the transaction, Fortune shall only be entitled to the return, within one
year, of the amounts loaned to Texoil, without interest.
In the event that consummation of the merger is enjoined by a court of competent
jurisdiction, the obligations of the parties shall be terminated and Fortune
shall receive within ninety (90) days from the date such injunction becomes
final, (i) the return of the amounts loaned to Texoil by Fortune, together with
interest at 18% per annum, plus (ii) an assignment from Texoil of a working
interest in each of the three prospects equal to five percent (5%) of the total
working interest in each of the prospects, proportionally adjusted as provided
below.
In the event that the merger is not consummated due to the failure of any
representations or warranties made by Texoil, or the breach by Texoil of any of
the terms and provisions of the merger agreement, or for any other reason
attributable to Texoil's failure or inability to proceed (except as provided
above), Fortune shall have the right to receive, at its election, either (i) the
return within thirty (30) days after termination of the transaction of all
amounts loaned to Texoil, together with interest at 18% per annum, or (ii) an
assignment of working interest equal to an unpromoted 50% of Texoil's total
interest in each of the three prospects under the same terms and conditions as
Texoil owns the interests, proportionally adjusted as provided below.
In the event the merger is not consummated due to the failure of any of the
representations or warranties made by Fortune, or the breach by Fortune of any
of the terms or provisions of the agreement between the parties, or for any
other reason attributable to Fortune's failure or inability to proceed (except
as provided above), Fortune shall have the right to receive, at Texoil's
election, either (i) the return within ninety (90) days after termination of the
transaction, of all of the amounts loaned by Fortune to Texoil, together with
interest at 18% per annum, or (ii) an assignment
Page 3 of 5
of working interest equal to an unpromoted 50% of Texoil's total interest in
each of the three prospects, proportionally adjusted as provided below.
The proportionate adjustment referred to above shall be a fraction, the
numerator of which shall be the total of amounts loaned by Fortune to Texoil,
and the denominator of which shall be 1,208,000, subject to a possible revision
in the denominator based upon any future sale of a portion of Texoil's interest
in the Laurel Grove Prospect. The fraction may be greater than one.
The parties will each continue to operate their businesses and operations from
the date hereof through the closing of the transaction contemplated hereby in a
reasonable and prudent manner so as to not cause or allow a material loss or
decline in the value, use, or contemplated benefit of their respective assets or
any portion thereof. Further, neither party shall take any action to enter into
any agreement prior to the closing of the transaction contemplated hereby for
the issuance of significant additional shares of stock or securities convertible
into stock or otherwise take steps to alter their capital structure without the
prior written consent of the other. Texoil will not sell or encumber, or enter
into any agreement to sell or encumber, any of its properties, leases,
prospects, or other assets without the prior written approval of Fortune.
Fortune shall, prior to the sale, acquisition, or encumbrance of any assets,
advise Texoil of its intention and shall provide it with the details of the
transaction.
While the letter of intent is non-binding, Fortune and Texoil each acknowledge
in the letter of intent that by entering into the letter of intent, the parties
will begin to expend considerable sums in due diligence, preparing and
negotiating a definitive merger agreement, and preparing and filing appropriate
documents with the Securities and Exchange Commission ("SEC"). Such expenditures
are being made pursuant to explicit representations and warranties made, each to
the other by Fortune and Texoil, that majorities of each parties directors, and
shareholders representing a majority of all outstanding Texoil shares have each
been notified of and approved the transaction in substantially the form set out
in the letter of intent. In the event that the board of directors of either
party fails to approve a definitive merger agreement in substantially the form
set forth in the letter of intent, the parties have agreed that the resulting
damages would be impracticable or extremely difficult to ascertain. Because of
these difficulties, the parties have agreed that in the event of such a breach,
the party which fails to approve the definitive merger agreement shall pay the
sum of $50,000 to the other as liquidated damages. Except for the specific
representations and warranties set forth in this paragraph, neither party is
bound to any of the terms and provisions set forth in the letter of intent.
The transaction is subject to a number of contingencies, including completion of
due diligence by Texoil and Fortune, execution of a definitive merger agreement,
effectiveness of a registration statement for the Fortune shares, listing of the
Fortune shares that will be issued on the American Stock Exchange, approval of
the merger by the directors and shareholders of both companies, and to the
receipt by Texoil of a favorable opinion regarding the fairness of the proposed
transaction from a financial point of view from an investment banking firm or
other person suitable to both Texoil and Fortune.
Page 4 of 5
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of business acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
2.1 Letter of Intent dated April 17, 1996.
99. Press release dated April 18, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
TEXOIL, INC.
Date: APRIL 22, 1996 By: /S/ WALTER L. WILLIAMS
-------------- Walter L. Williams
Chairman
Page 5 of 5
EXHIBIT 99
PRESS RELEASE
For Immediate Release Contact: Walter L. Williams
Chairman and
Chief Executive Officer
TEXOIL, INC. ANNOUNCES INTENT TO MERGE
WITH FORTUNE PETROLEUM CORPORATION
FORTUNE TO ACQUIRE TEXOIL FOR STOCK
APRIL 18, 1996 - HOUSTON, TEXAS - TEXOIL, INC. (NASDAQ SCM: TXLI) announced
today that it has entered into a letter of intent with Fortune Petroleum
Corporation (ASE: FPX) for the merger of Texoil into Fortune.
In the transaction, expected to close on or before August 15, 1996, Texoil
shareholders would receive one share of Fortune common for every 3.2 Texoil
shares, up to a maximum of 1,845,000 Fortune common shares. Texoil's preferred
shareholders will exchange for Texoil common prior to the merger and be part of
the transaction. Approximately $1.1 million of debt owed to certain Texoil
shareholders will be converted to Fortune common. Walter L. Williams, the
Chairman and Chief Executive Officer of Texoil, will join Fortune's board of
directors following the merger.
The transaction is subject to a number of contingencies, including completion of
due diligence, execution of a definitive merger agreement, SEC effectiveness of
a registration statement for the Fortune shares, listing of the Fortune shares
that will be issued on the AMEX and approval of the merger by the shareholders
of both companies.
Texoil's assets include producing properties in South Louisiana, three large
exploration prospects on which 3-D seismic surveys are pending in Louisiana and
Texas, and working and overriding royalty interests in certain areas of the
Louisiana exploration program of Texas Meridian Resources Corporation.
Pending the execution of a definitive merger agreement, Fortune has agreed to
lend to Texoil on a secured basis Texoil's share of the 3-D seismic costs on
Texoil's three large exploration prospects. Texoil's share of those costs over
the next six months is projected to be approximately one million dollars.
Walter L. Williams, Chairman and Chief Executive Officer of Texoil stated: "We
believe this merger will be very beneficial for our shareholders. They will have
better liquidity, broad exposure to Fortune's inventory of exploration prospects
while maintaining exposure to Texoil's own projects, and capital for furtherance
of the Texoil projects."
Texoil, Inc. is an independent energy company engaged in oil and gas exploration
and production, primarily in South Louisiana. The Company's common stock and its
Class A and Class B common stock purchase warrants trade on the NASDAQ Small-Cap
Market under the symbols "TXLI", "TXLIW" and "TXLIZ", respectively.
For further information, contact:
Texoil, Inc. Shimmerlik Corporate Communications, Inc.
Walter L. Williams Warren Shimmerlik
Chairman and CEO 212/247-5200
713/652-5741 or 800/742-1665
EXHIBIT 2.1
FORTUNE PETROLEUM CORPORATION
April 17, 1996
Mr. Walter Williams
Mr. T. W. Hoehn, III
Texoil, Inc.
1600 Smith Street, Suite 4000
Houston, TX 77002
Gentlemen:
This letter of intent shall set forth the current understandings and
initial agreements which have been reached between Fortune Petroleum Corporation
("Fortune") and Texoil, Inc. ("Texoil") pursuant to which Texoil and Fortune
contemplate entering into a transaction, more fully discussed below, in which
Texoil will be acquired through merger by Fortune in a tax-free transaction.
Through our mutual discussions, we have agreed that, in consideration
for the acquisition of Texoil, Fortune will, at the closing of the transaction
contemplated herein, issue to the shareholders of record of common stock of
Texoil one (1) share of the $.01 par value common stock of Fortune (the "Fortune
Stock") in exchange for each three and two tenths (3.2) shares of the common
stock of Texoil, not to exceed 1,845,000 shares of Fortune common stock. Subject
to the additional contingencies discussed below, such merger shall be subject to
approval by the boards of directors of both Fortune and Texoil, the receipt by
Texoil, prior to the signing of a definitive merger agreement, of a "fairness
opinion" concerning the terms of the transaction from an investment banking firm
or other person acceptable to the parties, the filing by Fortune and
effectiveness of a Registration Statement under the Securities Act of 1933, and
approval of this transaction by the shareholders of Texoil and Fortune.
Prior to the record date of the transaction described above, all owners
of Texoil's preferred stock shall exchange such shares and any accrued dividends
into common stock of Texoil at the market price of such stock on the effective
date of the exchange, in a total aggregate amount of not more than 1,700,000
shares of Texoil common stock.
On the closing of the transaction contemplated hereby, the outstanding
principal on all loans from Texoil shareholders to Texoil shall be converted to
Fortune common stock at the average of the closing market price of such stock on
the ten (10) business days immediately prior to the closing of the transaction
contemplated hereby (such shares are referred to herein as the "Liquidation
Shares"). Thereafter, Fortune shall provide assistance in the liquidation of the
Liquidation Shares by ensuring that such shareholders (who Fortune understands
consist of T. W. Hoehn, Jr. and the Walter Williams family) receive the entire
amount of their previously-existing loan amounts within fifteen (15) months of
Mr. Walter Williams
Mr. T. W. Hoehn, III
April 17, 1996
Page 2
the closing of the transaction contemplated hereby; provided, however, that
Fortune shall guarantee the receipt by T. W. Hoehn, Jr. ("Hoehn") of the first
$200,000 of such proceeds during the two-week period following the closing and
the balance of such proceeds within one year following the closing. Fortune and
Hoehn shall reconcile the accounting of such liquidation so as to provide for
the proportionate return to Fortune of any amounts received by Hoehn insofar as
Fortune was required to advance funds on its guarantee.
Prior to the closing of the transaction contemplated hereby, each of
the current officers, directors and principal shareholders of Texoil shall enter
into "lock-up" agreements, whereby their ability to trade the Fortune Stock
(exclusive of the Fortune common stock to be issued in conversion of outstanding
loans) to be issued to each, shall be restricted for a period of not less than
six (6) months nor more than the period required to consummate the sale of the
Liquidation Shares and upon other mutually-acceptable terms. All such stock
shall bear appropriate legend regarding the terms of the lock-up agreement. At
the conclusion of the lock-up period, Fortune shall register under Form S-3
those shares previously subject to the agreement.
In the definitive merger agreement to be entered into by the parties,
the terms and conditions for the assumption and adjustment of the terms of
outstanding warrants and stock options of Texoil shall be addressed. It is
currently contemplated, subject to further review, that the outstanding options
and warrants will be assumed by Fortune in accordance with their terms.
The parties hereto contemplate that, following their mutual approval of
this letter, they will, in good faith, enter into a period of completing due
diligence reviews and will commence the drafting and preparation of the
documents, agreements, applications, proxies, and registration statements
necessary for carrying out their mutual intent hereunder. The parties
contemplate that this transaction will require the approval of the shareholders
of Texoil and Fortune pursuant to proxy statements calling special meetings of
shareholders. Such proxy statements will be included in the registration
statement to be filed with the Securities and Exchange Commission ("SEC")
covering all of the shares of Fortune common stock which are contemplated to be
issued in this transaction. Each party will bear and pay its own costs and
expenses which may be incurred in connection with this transaction and the
preparation of the documents and agreements associated with it.
The parties contemplate that each will move forward in good faith
toward finalizing their respective due diligence, preparing the definitive
merger agreement and other necessary closing documents, and obtaining the
approval of their respective boards of directors and shareholders. Upon approval
of the transaction contemplated hereby by each
Mr. Walter Williams
Mr. T. W. Hoehn, III
April 17, 1996
Page 3
board of directors, the parties will, not later than April 26, 1996, enter into
a definitive merger agreement and, as quickly thereafter as possible, file the
proposed Registration Statement with the SEC. The Registration statement shall
include the recommendation of the board of directors of each of the parties to
their respective shareholders for approval of the transaction contemplated
hereby. It is anticipated that the shareholders of each party will be asked to
approve this transaction not later than August 15, 1996.
Upon closing of the transaction contemplated herein, Fortune will
appoint Walter Williams to its board of directors and T. W. Hoehn, III to its
executive committee. It is contemplated that Mr. Williams will be elected
chairman of the board of Fortune. Further, Fortune believes that a continuity of
Texoil's professional staff is a desirable component of the transaction
contemplated hereby. Accordingly, Fortune intends to devote further review to
the feasibility of extending offers of employment to such staff.
The definitive merger agreement covering the transaction contemplated
hereby will include standard forms of representations and warranties,
substantially alike for Fortune and Texoil in those instances where necessary or
required, appropriate for transactions of a similar nature, including, but not
limited to, disclosure of all material liabilities, principal shareholder
lock-ups, and good title to the assets of Texoil and Fortune. Texoil recognizes,
however, that the nature of the transaction contemplated hereby necessitates
that all provisions contained in a definitive merger agreement may not be
reciprocal.
During the interim period between the signing of the definitive merger
agreement and closing or earlier termination of the merger (the "Due Diligence
Period"), Fortune will provide the capital required (the "Prospect Costs") to
fund Texoil's working interest shares of the costs of its Raceland, Greens Lake
and Laurel Grove prospects (the "Prospects"). In addition, Fortune will
contribute amounts up to $150,000, to Texoil to assist Texoil in paying other
reasonable and necessary, determined solely at Fortune's discretion, expenses of
conducting its business during the Due Diligence Period (the "Other Funded
Costs"). Texoil will endeavor to minimize the Other Funded Costs during the Due
Diligence Period by reducing its overhead. Texoil will endeavor to obtain
agreements, subject to Fortune's review, from attorneys, accountants, and other
consultants to perform their work on the merger on a turnkey basis. Any amounts
contributed by Fortune to Texoil or paid by Fortune on behalf of Texoil for
Other Funded Costs shall reduce the purchase price to the extent that such Other
Funded Costs along with any other increase in the total of the net working
capital deficit and other liabilities exceed the total of the net working
capital deficit and other liabilities, as of March 31, 1996, by more than
$150,000. Fortune shall not be required to pay any Other Funded Costs or
Prospect Costs (hereinafter collectively referred to as "Reimbursable Costs")
until the parties have executed a definitive merger agreement.
Mr. Walter Williams
Mr. T. W. Hoehn, III
April 17, 1996
Page 4
In exchange for Fortune advancing funds for Reimbursable Costs, at the time of
the first such advance, Texoil shall execute and deliver to Fortune a security
interest, sufficient to fully collateralize all Reimbursable Costs, in all of
texoil's interest in the Prospects, including, but not limited to, all seismic
data, seismic options, and leasehold interests.
In the event that Texoil, either voluntarily or involuntarily, is
acquired by a third party which thereafter repudiates the transaction
contemplated hereby, or in the event that Texoil, due to acquisition or merger
discussions with a third party, repudiates or materially impairs the ability of
either party to proceed with the transaction contemplated hereby, Fortune shall
be entitled to (i) the repayment, within two (2) business days, of the
Reimbursable Costs together with interest thereon at the lesser of 18% per annum
or the maximum allowable by law and (ii) an assignment of the greater of 10% of
8/8 in each of the Prospects on the same basis as Texoil holds its interest or
50% of Texoil's interest in each of the Prospects, proportionately adjusted as
provided below. In the event that Fortune, either voluntarily or involuntarily,
is acquired by a third party which thereafter repudiates the transaction
contemplated hereby, or in the event that Fortune, due to acquisition or merger
discussions with a third party, repudiates or materially impairs the ability of
either party to proceed with the transaction contemplated hereby, Fortune shall
only be entitled to the return, within one year, of the Reimbursable Costs. If
the consummation of the merger is enjoined by a court of competent jurisdiction,
the obligations of the parties hereunder shall be terminated and Fortune shall
receive, within ninety (90) days from the date such injunction becomes final,
the return of the Reimbursable Costs plus interest thereon at the lesser of 18%
per annum or the maximum allowable by law and an assignment from Texoil of an
interest equal to five percent (5%) of 8/8 in each of the Prospects
proportionately adjusted as provided below.
If the Merger is not consummated due to the failure of any of the
representations or warranties made by Texoil, or the breach by Texoil of any of
the terms or provisions of the agreement between the parties, or for any other
reason attributable to Texoil's failure or inability to proceed (except as
provided above), Fortune shall have the right to receive, at its election,
either (i) the return, within thirty (30) days after termination of the merger
negotiations, of all the Reimbursable Costs plus interest thereon at the lesser
of 18% per annum or the maximum allowable by law or (ii) an amount of working
interest equal to an unpromoted 50% of Texoil's total interest in the Prospects,
under the same terms and conditions that Texoil owns its interest,
proportionately adjusted as provided below (the "Default Interest"). If the
merger is not consummated due to the failure of any of the representations or
warranties made by Fortune, or the breach by Fortune of any of the terms or
provisions of the agreement between the parties, or for any other reason
attributable to Fortune's failure or inability to proceed (except as provided
above), Fortune
Mr. Walter Williams
Mr. T. W. Hoehn, III
April 17, 1996
Page 5
shall have the right to receive, at Texoil's election, either (i) the return,
within ninety (90) days after termination of the merger negotiations, of all of
the Reimbursable Costs plus interest thereon at the lesser of 18% per annum or
the maximum allowable by law or (ii) the Default Interest. The proportionate
adjustment referred to above shall be a fraction, the numerator of which shall
be the total of Reimbursable Costs, and the denominator of which shall be
1,208,000, subject to a possible revision in the denominator based upon the
final terms of a pending transaction concerning Texoil's interest in the Laurel
Grove Prospect. The fraction may be greater than one.
Each party agrees that it remains bound by the terms of the
confidentiality agreements previously entered into by the parties. Each party
will issue a press release in form and substance acceptable to the other upon
the execution of this letter of intent. Such press releases shall be issued no
later than the opening of trading on April 18, 1996. Further, each party shall
file with the SEC a Form 8-K disclosing the material terms of this transaction.
The parties will each continue to operate their businesses and
operations from the date hereof through the closing of the transaction
contemplated hereby in a reasonable and prudent manner so as to not cause or
allow a material loss or decline in the value, use, or contemplated benefit of
their respective assets or any portion thereof. Further, neither party shall
take any action to enter into any agreement prior to the closing of the
transaction contemplated hereby for the issuance of significant additional
shares of stock or securities convertible into stock or otherwise take steps to
alter their capital structure without the prior written consent of the other.
Texoil shall not sell or encumber, or enter into any agreement to sell or
encumber, any of its properties, leases, prospects, or other assets without the
prior written approval of Fortune. Fortune shall, prior to the sale,
acquisition, or encumbrance of any assets, advise Texoil of its intention and
shall provide it with the details of the transaction.
The parties understand that the merger agreement to be prepared will be
the definitive agreement and hereby stipulate that this letter is not intended
to be and shall not be construed as a binding agreement between the parties.
Notwithstanding the foregoing, the parties acknowledge that each, by entering
into this letter of intent, will begin to expend considerable sums in commencing
due diligence, preparing and negotiating the definitive merger agreement, and
preparing and filing appropriate documents with the SEC. The parties are
undertaking such expenditures pursuant to an explicit representation and
warranty that a majority of Texoil directors, a majority of Fortune directors,
and shareholders representing a majority of all outstanding Texoil shares have
each been notified of an approved the transaction in substantially the form set
forth in this letter of
Mr. Walter Williams
Mr. T. W. Hoehn, III
April 17, 1996
Page 6
intent. In the event that the board of directors of either party fails to
approve a definitive merger agreement in substantially the form set forth
herein, the parties agree that the resulting damages would be impracticable or
extremely difficult to ascertain. Because of these difficulties, the parties
agree that, in the event of such a breach, the party which fails to approve the
definitive merger agreement shall pay the sum of $50,000 to the other as
liquidated damages. Except for the representation and warranty concerning
director and shareholder approval and the provisions concerning confidentiality,
set forth above, the terms of this letter of intent shall not survive the
execution of the definitive merger agreement. Except for such specific
provisions, neither party hereto shall be bound to any of the terms or
provisions herein set forth until the formal agreement reflecting this
transaction are prepared and are duly approved by each party's respective board
of directors and shareholders, as necessary.
If this letter correctly sets forth our discussions to date, please
date, sign, and return one copy of it to the undersigned immediately.
Very truly yours,
/s/Tyrone J. Fairbanks
TYRONE J. FAIRBANKS
ACCEPTED AND AGREED TO
THIS 17TH DAY OF APRIL, 1996
TEXOIL, INC.
BY: /S/ WALTER L. WILLIAMS
WALTER WILLIAMS
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BY: /S/ T. W. HOEHN III
T. W. HOEHN, III
CHAIRMAN, SPECIAL COMMITTEE OF DIRECTORS
