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): September 6, 1996
TEXOIL, INC.
(Exact name of registrant as specified in its charter)
NEVADA 0-12633 88-0177083
(STATE OF INCORPORATION) (COMMISSION FILE NUMBER) (IRS EMPLOYER
IDENTIFICATION NO.)
1600 SMITH STREET, SUITE 4000
HOUSTON, TEXAS 77002
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
713/652-5741
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
(NOT APPLICABLE)
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE>
ITEM 5. OTHER EVENTS
RIMCO FINANCING. On September 6, 1996, Texoil, Inc., a Nevada
corporation (the "Company"), and its wholly-owned operating subsidiary, Texoil
Company ("Subsidiary"), entered into a Note Purchase Agreement with four limited
partnerships of which Resource Investors Management Company Limited Partnership
("RIMCO") is the controlling general partner (the "RIMCO Agreement"). Under the
RIMCO Agreement, the lenders have agreed to provide up to $8,000,000 in two
separate financings to fund Subsidiary's 3-D seismic exploration program. In
connection with the RIMCO financing, the Company's Board of Directors expanded
the number of directors to seven and elected Gary J. Milavec, a Vice President
of RIMCO's controlling general partner RIMCO Associates, Inc., to fill the
vacancy created thereby until the next annual stockholders' meeting. To date,
Subsidiary has borrowed $200,000 from the RIMCO lenders which is exchangeable
for 250,000 shares of the Company's common stock, par value $.01 per share
("Common Stock") or approximately 6% of outstanding Common Stock. Proceeds were
used to repay indebtedness of the Company to one of its directors, Joe C.
Richardson, Jr., as discussed further below.
The first financing under the RIMCO Agreement is in the form of Senior
Exchangeable General Obligation Notes issued by the Subsidiary in the maximum
amount of $3,000,000 (the "Exchangeable Notes"). The Company intends that
proceeds from this financing be used primarily to fund leasehold, drilling and
completion costs for Subsidiary's Raceland and Greens Lake Prospects in
Lafourche Parish, Louisiana and Galveston County, Texas, respectively, on which
3-D seismic data acquisition now is completed. The second financing is in the
form of Senior Secured General Obligation Notes (the "Senior Notes") issued by
Subsidiary in the maximum amount of $5,000,000. The Company intends that
proceeds from the second financing be used primarily to fund future leasehold,
drilling and completion costs for the Laurel Grove Prospects in Lafourche
Parish, Louisiana, subsequent wells in the Raceland and Greens Lake Prospects,
and up-front land and other costs associated with new 3-D seismic projects.
Under the RIMCO Agreement, Subsidiary may borrow under the Exchangeable
Notes until September 1, 1997. The Exchangeable Notes will mature September 1,
1999. Amounts advanced under the Exchangeable Notes will accrue interest at a
fixed, annual rate of 10%, with interest payable monthly and all outstanding
principal plus all accrued and unpaid interest due and payable at maturity.
Indebtedness outstanding under the Exchangeable Notes is exchangeable, in whole
or in part, for Common Stock at an initial per share price equal to $.80,
subject to anti-dilution adjustments. Subsidiary can require the RIMCO lenders
to make such an exchange if they have funded at least $2,800,000 and the average
trading price of the Common Stock for any consecutive 20-day trading period is
$3.00 or more. The Company granted the RIMCO lenders certain registration rights
in respect of shares of Common Stock issuable upon exchange of debt under the
Exchangeable Notes.
After $2,800,000 in principal has been advanced under the Exchangeable
Notes, Subsidiary may borrow under the Senior Notes until September 1, 1999. The
Senior Notes will mature September 1, 2002. Amounts advanced under the Senior
Notes will accrue interest at a fixed, annual rate of 10%, with interest and
principal paid monthly from certain revenues generated by the assets pledged to
RIMCO to secure the notes. Advances under the Senior Notes for future drilling
and completion costs will be contingent upon Subsidiary maintaining an agreed
upon borrowing base. Obligations under the Exchangeable Notes and the Senior
Notes are secured by all of the existing and future oil and gas assets of
Subsidiary, and the Company guarantees Subsidiary's obligations thereunder. In
addition, the RIMCO lenders will receive an assignment of a 1.0% of 8/8ths
overriding royalty interest, proportionately reduced to the interest of
Subsidiary, in all wells drilled and/or completed with proceeds from the Senior
Notes.
1996 DIRECTOR LOANS. In May 1996, four directors of the Company loaned
it an aggregate $1,100,000. Each loan was made pursuant to a promissory note
bearing interest at an annual rate of 12%, maturing May 6, 1997, and convertible
at the option of the lender into shares of Common Stock at a price of $.80 per
share, subject to anti-dilution adjustments. Each note was guaranteed by
Subsidiary and the guaranty was secured by substantially all of Subsidiary's
assets. The lenders also were issued warrants exercisable until May 2001 for an
aggregate 1,100,000 shares of Common Stock at $1.3125 per share, subject to
anti-dilution adjustments. The four lenders were T. W. Hoehn, Jr., who loaned
$550,000 and received a warrant exercisable for 550,000 shares; T. W. Hoehn,
III, who loaned $300,000 and received a warrant exercisable for 300,000 shares;
Joe C. Richardson, Jr., Trustee UDT 5-17-91, as amended, who loaned $200,000 and
received a warrant exercisable for 200,000 shares; and William F. Seagle, who
loaned $50,000 and received a warrant exercisable for 50,000 shares. The lenders
were granted certain registration rights in respect of shares of Common Stock
issuable upon exercise or conversion of the warrants or convertible notes.
Proceeds of the loans were used to fund the Company's share of 3-D seismic
survey costs associated with its exploration projects in progress in Lafourche
Parish, Louisiana and Galveston County, Texas, and for general corporate
purposes. Loan proceeds also were used to pay the March 31, 1996 dividend of
$69,000 on the Company's outstanding Series A Preferred Stock, all of which is
held by lending director Mr. Hoehn, Jr. and his son Robert A. Hoehn, and to
repay the Company's remaining indebtedness of approximately $260,000 to First
Interstate Bank of Texas, N.A. which was guaranteed by Mr. Hoehn, Jr.
In connection with the RIMCO financing, the $200,000 owed to Joe C.
Richardson, Jr., Trustee, UDT 5-17-91, as amended, was repaid in September 1996.
The notes payable to T. W. Hoehn, Jr., T. W. Hoehn, III, and William F. Seagle,
respectively, were canceled and replaced by Replacement 12% Convertible
Promissory Notes dated September 6, 1996 (the "Replacement Notes"), which are
convertible into shares of Common Stock at an initial conversion price of $.80
per share, subject to anti-dilution adjustments, and which mature upon the
earlier to occur of October 1, 2002 and the date occurring 30 days after the
RIMCO debt has been paid in full or exchanged for Common Stock. The Replacement
Note to each of T. W. Hoehn, Jr. is in the amount of $550,000, to T. W. Hoehn,
III is in the amount of $300,000, and to William F. Seagle is in the amount of
$50,000. Interest on each of the Replacement Notes accrues at a fixed rate of
12% per annum and monthly payments of interest are due on the 10th day of each
month. Although no prepayments of principal are permitted, the Company may
require these lenders to convert the outstanding principal amount under their
Replacement Notes into Common Stock if at least $2,800,000 has been funded by
the RIMCO lenders and the average trading price of the Common Stock for any
consecutive 20-day trading period is $3.00 or more, or the Company requires the
RIMCO lenders to exchange Subsidiary's indebtedness to them for Common Stock.
The Company granted certain registration rights to Messrs. Hoehn, Hoehn and
Seagle in respect of shares of Common Stock into which their Replacement Notes
may be converted. As part of the restructuring of the May 1996 debt evidenced by
the Replacement Notes, the warrants, registration rights and Subsidiary guaranty
issued and granted in May 1996 were canceled. These lenders and Wells Fargo Bank
(Texas), N.A. (f/k/a First Interstate Bank of Texas, N.A.) released all liens
against the assets of the Company or Subsidiary.
The Company's performance of obligations under the Replacement Notes are
subordinate to performance of obligations under the RIMCO financings. In this
regard, the Company, with the consent of both holders of all of the Company's
outstanding Series A Preferred Stock, amended the Certificate of Stock
Designation covering the Series A Preferred Stock to provide that the annual
cumulative dividends of $12 per share are payable only if, as and when declared
by the Company's Board of Directors, provided that Board has no obligation to
declare such dividends before October 1, 2002. Before the amendment, such
dividends were payable quarterly.
OTHER AFFILIATE LOANS. Nine individuals, some of whom are stockholders
of the Company, have made interim debt financing available to the Company for
working capital purposes. All of these loans have been repaid, except those made
by the Company's Chairman, T. W. Hoehn, Jr., as discussed below. During 1993 and
January 1994, the Company borrowed an aggregate $1,837,500 from these
individuals, $100,000 of which the Company repaid in October 1993. In accordance
with the terms of the underlying notes, as amended, $800,000 of such borrowings
were repaid by the Company in June 1994 in connection with consummation of a
public offering by the Company of its securities ("Public Offering"), resulting
in a balance of $937,500 which was due December 31, 1994. Of such amount,
$100,000 was repaid by the due date, and the holders of notes aggregating
$837,500 agreed to extend the maturity thereof. In February 1995, the Company
repaid an additional $25,000 of such loans, reducing the outstanding amount at
March 31, 1995 to $812,500. Each interim loan was evidenced by a promissory note
bearing interest at an annual rate of 2% over the prime rate charged by the
Company's bank lender, First Interstate Bank of Texas, N.A. Pursuant to these
notes, the Company issued to the interim lenders warrants to purchase an
aggregate of 154,375 shares of Common Stock exercisable at any time before May
27, 1996 at a per share price of $3.00, being the price attributable to one
share of Common Stock in the Public Offering. All warrants expired unexercised.
Two of the nine interim lenders were William F. Seagle and Joe C. Richardson,
Jr., each of whom is a director of the Company and loaned $25,000 (repaid in
February 1995) and $12,500 (repaid in March 1996), respectively. Another interim
lender was the wife of Walter L. Williams, a director of the Company. She loaned
$50,000 to the Company which was repaid in June 1996. Betty Ann Hoehn Garrison
and Peter R. Garrison, the daughter and former son-in-law of T. W. Hoehn, Jr.,
also were among the Company's interim lenders, each of whom loaned $150,000. Of
the aggregate amount owed to Ms. Garrison, $50,000 was repaid in June 1994 from
Public Offering proceeds and the balance subsequently paid in full during 1994.
Mr. Garrison's loan was repaid in full from the proceeds of the Public Offering.
The Company also borrowed $100,000 from Hart Brown, Mr. Williams' father-in-law,
in 1995 on substantially the same terms as the other bridge loans, except no
warrants were issued in connection therewith. Mr. Brown's loan was repaid in
June 1996.
One of the nine interim lenders is the Company's Chairman, T. W. Hoehn,
Jr., from whom the Company has borrowed an aggregate $1,450,000 at various times
since 1993 (in addition to his $550,000 loan discussed above and $50,000 loan
discussed below). Of this $1,450,000 in loans, $400,000 was repaid in June 1994
and $50,000 was repaid in March 1996. The remaining $1,000,000 now is evidenced
by a promissory note which is dated September 1, 1996, matures upon the earlier
to occur of October 1, 2002 and 30 days after the RIMCO debt has been paid in
full or exchanged for Common Stock, accrues interest at a variable rate equal to
2% plus the prime rate announced by Wells Fargo Bank (Texas), N.A., is payable
to the T .W. Hoehn, Jr. and Betty Jo Hoehn Revocable Trust, and is subordinate
to the RIMCO financing. Monthly interest payments are due on the 10th day of
each month and scheduled quarterly principal payments may be made if certain
liquidity conditions are satisfied and after the first $2,800,000 of the RIMCO
loans have been funded. Unpaid quarterly principal payments are cumulative and
amounts in excess of the scheduled quarterly payments may be paid if the
liquidity conditions are satisfied.
In June 1996, the Company borrowed $50,000 from Opal Air, Inc., a
company owned by T. W. Hoehn, Jr. This loan is evidenced by a promissory note
from the Company to Opal Air, Inc. dated September 1, 1996, which matures on the
same date and is otherwise subject to substantially the same terms as the
Company's September 1996 $1,000,000 note to the T. W. Hoehn, Jr. and Betty Jo
Hoehn Revocable Trust.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Inapplicable.
(b) PRO FORMA FINANCIAL INFORMATION.
Inapplicable.
(c) EXHIBITS.
3.1 Restated Articles of Incorporation of Texoil, Inc., as
amended (filed herewith).
10.1 Note Purchase Agreement dated as of September 6, 1996, among
Texoil Company, Texoil, Inc., and RIMCO Partners, L.P., RIMCO
Partners, L.P. II, RIMCO Partners, L.P. III, and RIMCO Partners, L.P.
IV (collectively, the "RIMCO PURCHASERS") (filed herewith).
10.2 Form of 10% Senior Secured Exchangeable General Obligation
Notes, each dated as of September 6, 1996, issued by Texoil Company to
the RIMCO Purchasers (filed herewith).
10.3 Form of 10% Senior Secured General Obligation Notes, each
dated as of September 6, 1996, issued by Texoil Company to the RIMCO
Purchasers (filed herewith).
10.4 Guaranty and Exchange Agreement among Texoil, Inc., Texoil
Company and the RIMCO Purchasers dated as of September 6, 1996 (the
"GUARANTY") (filed herewith).
10.5 Pledge Agreement dated as of September 6, 1996, executed by
Texoil, Inc. for the benefit of the RIMCO Purchasers (filed herewith).
10.6 Stock Ownership and Registration Rights Agreement dated as
of September 6, 1996, by and among Texoil Company, Texoil, Inc. and
the RIMCO Purchasers (filed herewith).
10.7 Subordination Agreement dated as of September 6, 1996, among
Texoil Company, Texoil, Inc., the RIMCO Purchasers and Opal Air, Inc.
(filed herewith).
10.8 Subordination Agreement dated as of September 6, 1996, among
Texoil Company, Texoil, Inc., the RIMCO Purchasers and T. W. Hoehn,
Jr. and Betty Joe Hoehn Revocable Trust (filed herewith).
10.9 Subordination Agreement dated as of September 6, 1996, among
Texoil Company, Texoil, Inc., the RIMCO Purchasers and T. W. Hoehn,
Jr. (filed herewith).
10.10 Subordination Agreement dated as of September 6, 1996,
among Texoil Company, Texoil, Inc., the RIMCO Purchasers and T. W.
Hoehn, III (filed herewith).
10.11 Subordination Agreement dated as of September 6, 1996,
among Texoil Company, Texoil, Inc., the RIMCO Purchasers and William F.
Seagle (filed herewith).
10.12 Mortgage, Assignment of Production, Security Agreement and
Financing Statement dated as of September 6, 1996, from Texoil Company
to the RIMCO Purchasers (filed herewith).
10.13 Promissory Note dated September 1, 1996, executed by
Texoil, Inc. and made payable to the order of T. W. Hoehn, Jr. and
Betty Joe Hoehn Revocable Trust in the original principal amount of
$1,000,000 (filed herewith).
10.14 Promissory Note dated September 1, 1996, executed by
Texoil, Inc. and made payable to the order of Opal Air, Inc. in the
original principal amount of $50,000 (filed herewith).
10.15 Cancellation of Guaranty, Warrants and Registration Rights
Agreement dated as of September 6, 1996 among Texoil, Inc., Texoil
Company, and T. W. Hoehn, Jr., T. W. Hoehn, III, Joe C. Richardson,
Jr., Trustee, U/D/T 5-17-91, as amended, and William F. Seagle (filed
herewith).
10.16 Form of Amended and Restated Agreements of Purchase and
Sale dated as of September 6, 1996, between Texoil, Inc. and,
respectively, T. W. Hoehn, Jr., T. W. Hoehn, III and William F. Seagle
(filed herewith).
10.17 Form of Replacement 12% Convertible Promissory Notes each
dated as of September 6, 1996, in the aggregate original principal
amount of $900,000, issued by Texoil, Inc. to, respectively, T. W.
Hoehn, Jr., T. W. Hoehn, III and William F. Seagle in various amounts
(filed herewith).
10.18 Stock Ownership and Registration Rights Agreement dated as
of September 6, 1996, by and among Texoil, Inc., Texoil Company and,
respectively, T. W. Hoehn, Jr., T. W. Hoehn, III and William F. Seagle
(filed herewith).
SIGNATURE
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 thereunto duly authorized.
Date: September 19, 1996
TEXOIL, INC.
By: /s/ RUBEN MEDRANO
Ruben Medrano, President
INDEX OF EXHIBITS
3.1 Restated Articles of Incorporation of Texoil, Inc., as amended (filed
herewith).
10.1 Note Purchase Agreement dated as of September 6, 1996, among Texoil
Company, Texoil, Inc., and RIMCO Partners, L.P., RIMCO Partners, L.P. II,
RIMCO Partners, L.P. III, and RIMCO Partners, L.P. IV (collectively, the
"RIMCO PURCHASERS") (filed herewith).
10.2 Form of 10% Senior Secured Exchangeable General Obligation Notes, each
dated as of September 6, 1996, issued by Texoil Company to the RIMCO
Purchasers (filed herewith).
10.3 Form of 10% Senior Secured General Obligation Notes, each dated as of
September 6, 1996, issued by Texoil Company to the RIMCO Purchasers (filed
herewith).
10.4 Guaranty and Exchange Agreement among Texoil, Inc., Texoil Company and the
RIMCO Purchasers dated as of September 6, 1996 (the "GUARANTY") (filed
herewith).
10.5 Pledge Agreement dated as of September 6, 1996, executed by Texoil, Inc.
for the benefit of the RIMCO Purchasers (filed herewith).
10.6 Stock Ownership and Registration Rights Agreement dated as of September 6,
1996, by and among Texoil Company, Texoil, Inc. and the RIMCO Purchasers
(filed herewith).
10.7 Subordination Agreement dated as of September 6, 1996, among Texoil
Company, Texoil, Inc., the RIMCO Purchasers and Opal Air, Inc. (filed
herewith).
10.8 Subordination Agreement dated as of September 6, 1996, among Texoil
Company, Texoil, Inc., the RIMCO Purchasers and T. W. Hoehn, Jr. and Betty
Joe Hoehn Revocable Trust (filed herewith).
10.9 Subordination Agreement dated as of September 6, 1996, among Texoil
Company, Texoil, Inc., the RIMCO Purchasers and T. W. Hoehn, Jr. (filed
herewith).
10.10 Subordination Agreement dated as of September 6, 1996, among Texoil
Company, Texoil, Inc., the RIMCO Purchasers and T. W. Hoehn, III (filed
herewith).
10.11 Subordination Agreement dated as of September 6, 1996, among Texoil
Company, Texoil, Inc., the RIMCO Purchasers and William F. Seagle (filed
herewith).
10.12 Mortgage, Assignment of Production, Security Agreement and Financing
Statement dated as of September 6, 1996, from Texoil Company to the RIMCO
Purchasers (filed herewith).
10.13 Promissory Note dated September 1, 1996, executed by Texoil, Inc. and made
payable to the order of T. W. Hoehn, Jr. and Betty Joe Hoehn Revocable
Trust in the original principal amount of $1,000,000 (filed herewith).
10.14 Promissory Note dated September 1, 1996, executed by Texoil, Inc. and made
payable to the order of Opal Air, Inc. in the original principal amount of
$50,000 (filed herewith).
10.15 Cancellation of Guaranty, Warrants and Registration Rights Agreement dated
as of September 6, 1996 among Texoil, Inc., Texoil Company, and T. W.
Hoehn, Jr., T. W. Hoehn, III, Joe C. Richardson, Jr., Trustee, U/D/T
5-17-91, as amended, and William F. Seagle (filed herewith).
10.16 Form of Amended and Restated Agreements of Purchase and Sale dated as of
September 6, 1996, between Texoil, Inc. and, respectively, T. W. Hoehn,
Jr., T. W. Hoehn, III and William F. Seagle (filed herewith).
10.17 Form of Replacement 12% Convertible Promissory Notes each dated as of
September 6, 1996, in the aggregate original principal amount of $900,000,
issued by Texoil, Inc. to, respectively, T. W. Hoehn, Jr., T. W. Hoehn, III
and William F. Seagle in various amounts (filed herewith).
10.18 Stock Ownership and Registration Rights Agreement dated as of September 6,
1996, by and among Texoil, Inc., Texoil Company and, respectively, T. W.
Hoehn, Jr., T. W. Hoehn, III and William F. Seagle (filed herewith).
EXHIBIT 3.1
RESTATED ARTICLES OF INCORPORATION
OF
STAR AMUSEMENT COMPANY, INC.
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, as Vice President and Secretary, respectively, of
Star Amusement Company, Inc., do hereby amend the Articles of Incorporation
filed with the Secretary of State of the State of Nevada on January 4, 1982, in
their entirety as follows:
ARTICLE 1.
The name of the corporation is STAR AMUSEMENT COMPANY, INC.
(Original Article)
ARTICLE 2.
The location of the principal office of the corporation in the State of
Nevada is 241 Ridge Street, Suite 440, Reno, Nevada. Branch offices may
hereafter be established at such other place or places, either within or without
the State of Nevada as may be determined from time to time by the Board of
Directors.
(Amended June 1, 1984)
ARTICLE 3.
The corporation may engage in any lawful activity.
(Original Article)
ARTICLE 4.
The amount of the authorized capital stock of this corporation is
50,000,000 common shares with a par value of $.001 per share and 10,000,000
preferred shares with a par value of $.01 per share. Upon the amendment of this
paragraph to read as herein set forth, each outstanding share is converted into
or reconstituted as one common share.
The shares of preferred stock authorized hereby may, when authorized for
issuance by the Board of Directors of this corporation, be issued in series
having such designations, powers, preferences, rights and limitations, and on
such terms and conditions as the Board of Directors may from time to time
determine including the rights, if any, of the holders thereof with respect to
voting, dividends, redemption, liquidation and conversion.
Any and all shares of stock of this corporation of any class shall be paid
in as the Board of Directors may designate and as provided by law, in cash, real
or personal property, option to purchase, or any other valuable right or thing,
for the uses and purposes of the corporation, and said shares of stock when
issued in exchange therefore shall thereupon and thereby become and be fully
paid, the same as though paid for in cash, and shall be nonassessable forever,
and the judgment of the Board of Directors of the corporation concerning the
value of the property, right or thing, acquired in purchase or exchange for
capital stock shall be conclusive. No stockholder shall have any pre-emptive
rights
(Amended June 1, 1984)
ARTICLE 5.
Members of the governing board shall be known as "Directors," and the
number thereof shall not be less than three nor more than nine, the exact number
to be fixed by the Board of Directors of
the corporation, provided that the number so fixed by the Directors may be
increased or decreased from time to time. The name and address of the current
Board of Directors who shall hold office until their successors are duly elected
and qualified, are as follows:
Ross B. Scheer
9229 Sunset Blvd., 9th Floor
Los Angeles, California 90069
A. J. Hicks
241 Ridge Street, Suite 440
Reno, Nevada 89501
Thomas E. Boyle
1520 Denver Club Bldg.
518 - 17th Street
Denver, Colorado 80202
(Amended June 1, 1984)
ARTICLE 6.
The capital stock of the corporation, after the amount of the subscription
price has been paid in, shall not be subject to assessment and not stock issued
as fully paid up shall ever be assessable, or assessed, and the Articles of
Incorporation shall not be amended in this particular.
(Deleted June 1, 1984-This provision added to amended Article 4.)
ARTICLE 6.
The names and post offices addresses of each of the original incorporators,
which are three in number, signing the Articles of Incorporation, are as
follows:
Michele K. Hitcznko
770 E. Sahara, #401
Las Vegas, Nevada 89104
Michael L. Foley
770 E. Sahara, #401
Las Vegas, Nevada 89104
Kate Whisler
770 E. Sahara, #401
Las Vegas, Nevada 89104
(Originally Article 7-renumbered June 1, 1984)
ARTICLE 7.
The corporation shall become effective January 1, 1982, and shall have
perpetual existence.
(Originally Article 8-renumbered June 1, 1984)
ARTICLE 8.
A resolution, in writing, signed by all of the members of the Board of
Directors of the corporation, shall be and constitute action by the Board of
Directors to the effect therein expressed with the same force and effect as
though such resolution has been passed at a duly convened meeting, and it shall
be the duty of the Secretary to record every such resolution in the minute book
of the corporation under its proper date.
(Added June 1, 1984)
ARTICLE 9.
The Directors shall have the power to make and alter the By-Laws of the
corporation. ByLaws so made by the Directors under the powers so conferred may
be altered, amended, or repealed by the Directors or the stockholders at any
meeting called and held for that purpose.
(Added June 1, 1984)
IN WITNESS WHEREOF, we have hereunto set our hands and executed these
Amended Articles of Incorporation this 27th day of June, 1984.
/s/ SARAH SMITHSON
SARAH SMITHSON, Vice-President
/s/ A. J. HICKS
A. J. HICKS, Secretary
STATE OF NEVADA, )
) ss.
COUNTY OF WASHOE. )
On this 27th day of June, 1984, personally appeared before the
undersigned, a Notary Public, SARAH SMITHSON, as Vice-President of Star
Amusement Company, Inc., known to me to be the person described in and who
executed the foregoing instrument freely and voluntarily and for the uses and
purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ NORMA B. ZIRBEL
Notary Public
STATE OF NEVADA, )
) ss.
COUNTY OF WASHOE. )
On this 27th day of June, 1984, personally appeared before the
undersigned, a Notary Public, A. J. HICKS, as Secretary of Star Amusement
Company, Inc., known to me to be the person described in and who executed the
foregoing instrument freely and voluntarily and for the uses and purposes
therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ NORMA B. ZIRBEL
Notary Public
CERTIFICATE OF AMENDMENT
TO ARTICLES OF INCORPORATION OF
STAR AMUSEMENT COMPANY, INC.
The undersigned hereby certify as follows:
1. That they are the Vice-President and Secretary, respectively, of STAR
AMUSEMENT COMPANY, INC.
2. That the Articles of Incorporation were filed in the office of the
Secretary of State, State of Nevada, on the 4th day of January, 1982.
3. That Jackpot Enterprises, Inc., a Nevada corporation, owns 100% of the
issued and outstanding stock of Star Amusement Company, Inc. That on June 1,
1984, Jackpot Enterprises, Inc., consented to the adoption of the resolutions
set forth in this Certificate as the sole shareholder of Star Amusement Company,
Inc.
4. That on June 1, 1984, the directors of Star Amusement Company
unanimously consented to the adoption of the following resolutions:
A. Article 2 of the Articles of Incorporation is amended as follows:
2. The location of the principal office of the corporation in the State of
Nevada is 241 Ridge Street, Suite 440, Reno, Nevada. Branch offices may
hereafter be established at such other place or places, either within or without
the State of Nevada as may be determined from time to time by the Board of
Directors.
B. Article 4 of the Articles of Incorporation is amended as follows:
4. The amount of the authorized capital stock of this corporation is
50,000,000 common shares with a par value of $.001 per share and 10,000,000
preferred shares with a par value of $.01 per share. Upon the amendment of this
paragraph to read as herein set forth, each outstanding share is converted into
or reconstituted as one common share.
The shares of preferred stock authorized hereby may, when authorized for
issuance by the Board of Directors of this corporation, be issued in series
having such designations, powers, preferences, rights and limitations, and on
such terms and conditions as the Board of Directors may from time to time
determine including the rights, if any, of the holders thereof with respect to
voting, dividends, redemption, liquidation and conversion.
Any and all shares of stock of this corporation of any class shall be paid
in as the Board of Directors may designate and as provided by law, in cash, real
or personal property, option to purchase, or any other valuable right or thing,
for the uses and purposes of the corporation, and said shares of stock when
issued in exchange therefore shall thereupon and thereby become and be fully
paid, the same as though paid for in cash, and shall be nonassessable forever,
and the judgment of the Board of Directors of the corporation concerning the
value of the property, right or thing, acquired in purchase or exchange for
capital stock shall be conclusive. No stockholder shall have any pre-emptive
rights.
C. Article 5 of the Articles of Incorporation is amended as follows:
5. Members of the governing board shall be known as "Directors," and the
number thereof shall not be less than three nor more than nine, the exact number
to be fixed by the Board of Directors of the corporation, provided that the
number so fixed by the Directors may be increased
or decreased from time to time. The name and address of the current Board of
Directors who shall hold office until their successors are duly elected and
qualified, are as follows:
Ross B. Scheer
9229 Sunset Blvd., 9th Floor
Los Angeles, California 90069
A. J. Hicks
241 Ridge Street, Suite 440
Reno, Nevada 89501
Thomas E. Boyle
1520 Denver Club Bldg.
518 - 17th Street
Denver, Colorado 80202
D. Article 6 of the Articles of Incorporation shall be deleted in its
entirety; Article 7 of the Articles of Incorporation shall be renumbered as
Article 6; and Article 8 of the Articles of Incorporation shall be renumbered as
Article 7.
E. Article 8 of the Articles of Incorporation shall be added as follows:
8. A resolution, in writing, signed by all of the members of the Board of
Directors of the corporation, shall be and constitute action by the Board of
Directors to the effect therein expressed with the same force and effect as
though such resolution has been passed at a duly convened meeting, and it shall
be the duty of the Secretary to record every such resolution in the minute book
of the corporation under its proper date.
F. Article 9 of the Articles of Incorporation shall be added as follows:
9. The Directors shall have the power to make and alter the By-Laws of the
corporation. By-Laws so made by the Directors under the powers so conferred may
be altered, amended, or repealed by the Directors or the stockholders at any
meeting called and held for that purpose.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Amendment to Articles of Incorporation this 27th day of June, 1984.
/s/ SARAH SMITHSON
SARAH SMITHSON, Vice-President
/s/ ALVIN J. HICKS
A. J. HICKS, Secretary
STATE OF NEVADA, )
) ss.
COUNTY OF WASHOE. )
On this 27th day of June, 1984, personally appeared before the
undersigned, a Notary Public, SARAH SMITHSON, as Vice-President of Star
Amusement Company, Inc., known to me to be the person described in and who
executed the foregoing instrument freely and voluntarily and for the uses and
purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ NORMA B. ZIRBEL
Notary Public
STATE OF NEVADA, )
) ss.
COUNTY OF WASHOE. )
On this 27th day of June, 1984, personally appeared before the
undersigned, a Notary Public, A. J. HICKS, as Secretary of Star Amusement
Company, Inc., known to me to be the person described in and who executed the
foregoing instrument freely and voluntarily and for the uses and purposes
therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.
/s/ NORMA B. ZIRBEL
Notary Public
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION OF
STAR AMUSEMENT COMPANY, INC.
The undersigned hereby certify as follows:
1. That they are the President and Secretary, respectively, of STAR
AMUSEMENT COMPANY, INC.
2. That the Articles of Incorporation were filed in the office of the
Secretary of State, State of Nevada, on the 4th day of January, 1982.
3. That at a meeting of the shareholders held on August 28, 1986, at 2900
South Highland, #18D, Las Vegas, Nevada, stockholders holding 2,836,492 shares
representing 66.9% of the issued and outstanding stock of the Corporation voted
in favor of the adoption of the Resolution as set forth below.
4. That at a meeting of the Directors of said Corporation duly held at 2900
South Highland, #18D, Las Vegas, Nevada, on the 3rd day of July, 1986, the
following Resolution was unanimously adopted:
RESOLVED: The Article I of the Articles of Incorporation be amended as
follows:
ARTICLE I
The name of the Corporation is COMET ENTERPRISES, INC.
IN WITNESS WHEREOF, the undersigned have executed this Amendment to
Articles of Incorporation this 28th day of August, 1986.
/s/ ROSS B. SCHEER
ROSS B. SCHEER, President
/s/ WILLIAM R. MORSE
WILLIAM R. MORSE, Secretary
STATE OF NEVADA )
) ss.
COUNTY OF CLARK )
On this 28th day of August, 1986, personally appeared before me, a Notary
Public, Ross B. Scheer and William R. Morse, as President and Secretary,
respectively, of Star Amusement Company, Inc., who acknowledged that they
executed the foregoing Certificate of Amendment to Articles of Incorporation on
behalf of said Corporation.
/s/ SHARON H. BULLOCH
Notary Public
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
COMET ENTERPRISES, INC.
Rebecca R. Reno and Jeffrey A. Kessler hereby certify as follows:
1. That they are the President and Secretary, respectively, of Comet
Enterprises, Inc. (the "Corporation").
2. That the Articles of Incorporation were filed in the office of the
Secretary of State, State of Nevada, on January 4, 1982 and amended on September
2, 1986.
3. That at a meeting of the directors of the Corporation, the resolutions
set forth below were unanimously adopted.
4. That at a meeting of the shareholders of the Corporation duly held,
shareholders holding all 5,238,129 shares present in person or proxy,
representing 60.9% of the issued and outstanding stock of the Corporation, voted
in favor of the adoption of the following resolutions:
RESOLVED, that Article 1 of the Articles of Incorporation, as
amended, be further amended to read as follows:
1. NAME
The name of the Corporation is:
COMET ENTERTAINMENT, INC.
RESOLVED, that a new Article 9 be added to the Articles of
Incorporation, to read as follows:
9. LIABILITY OF DIRECTORS AND OFFICERS
No director or officer of the Corporation shall be liable to the
Corporation or its stockholders for damages for breach of fiduciary duty
as a director or officer, except for (a) acts of omission which involve
intentional misconduct, fraud or a knowing violation of law; or (b) the
payment of dividends in violation of Nevada Revised Statutes section
78.300.
RESOLVED, that a new Article 10 be added to the Articles of
Incorporation, to read as follows:
10. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Corporation shall pay the expenses of officers and directors of
the Corporation incurred in defending a civil or criminal action, suit or
proceeding as are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by or on behalf
of the director or officer to repay the amount if it is ultimately
determined by a court of competent jurisdiction that he is not entitled to
be indemnified by the corporation. The provisions herein do not affect any
rights to advancement of expenses to which corporate personnel other than
directors or officers may be entitled under any contract or otherwise by
law.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Amendment to Articles of Incorporation this 27th day of March, 1989.
/s/ REBECCA R. RENO
Rebecca R. Reno
President
/s/ JEFFREY A. KESSLER
Jeffrey A. Kessler
Secretary
STATE OF MONTANA )
) ss.
COUNTY OF YELLOWSTONE )
On March 28th, 1989, personally appeared before me, a Notary Public,
Rebecca R. Reno, as President of Comet Enterprises, Inc. who acknowledged that
she executed the foregoing Certificate of Amendment to Articles of Incorporation
on behalf of said corporation.
WITNESS my hand and official seal.
/s/ MADONNA HURD
Madonna Hurd
Notary Public
STATE OF MONTANA )
) ss.
COUNTY OF YELLOWSTONE )
On March 28th, 1989, personally appeared before me, a Notary Public,
Jeffrey A. Kessler, as Secretary of Comet Enterprises, Inc. who acknowledged
that he executed the foregoing Certificate of Amendment to Articles of
Incorporation on behalf of said corporation.
WITNESS my hand and official seal.
/s/ MADONNA HURD
Madonna Hurd
Notary Public
CERTIFICATE OF AMENDMENT
TO
THE ARTICLES OF INCORPORATION
OF
COMET ENTERTAINMENT, INC.
1. The name of the corporation is Comet Entertainment, Inc.
2. The Board of Directors of the corporation, declaring its advisability
in calling a meeting of the stockholders of the corporation for the
consideration thereof.
3. The majority of the stockholders of the corporation have adopted the
amendments hereinafter set forth by written consent in accordance with
NRS 78.320.
4. The Articles of Incorporation of the corporation shall be amended by
(a) amending and replacing Article 1. to read as follows:
ARTICLE 1.
The name of the corporation is TEXOIL, INC.
and (b) amending and replacing Article 4. to read as follows:
ARTICLE 4.
The amount of the authorized capital stock of this corporation is
50,000,000 common shares with a par value of $.001 per share and 10,000,000
preferred shares with a par value of $.01 per share. Upon the amendment of this
paragraph to read as herein set forth, each outstanding common share is split up
and converted into or reconstituted as .035714 common shares (twenty-eight (28))
shares converted to one (1) share). This reverse stock split shall not result in
the increase or decrease in the aggregate amounts of the capital accounts of
this corporation.
The shares of preferred stock authorized hereby may, when authorized
by issuance by the Board of Directors of this corporation, be issued in a series
having such designations powers, preferences, rights and limitations, and on
such terms and conditions as the Board of Directors may from time to time
determine including the rights, if any, of the holders thereof with respect to
voting, dividends, redemption, liquidation and conversion.
Any and all shares of the stock of this corporation of any class
shall be paid in as the Board of Directors may designate and as provided by law,
in cash, real or personal property, option to purchase, or any other valuable
right or thing, for the uses and purpose of the corporation, and said shares of
stock when issued in exchange therefore shall thereupon and thereby become and
be fully paid, the same as though paid for in cash, and shall be nonassessable
forever; and the judgment of the
Board of Directors of the corporation concerning the value of the property,
right or thing acquired in purchase or exchange for capital stock shall be
conclusive. No stock holder shall have any pre-emptive rights.
DATED this 11 day of March, 1993.
ATTEST: Comet Entertainment, Inc.
/s/ WILLIAM F. COFFIN /s/ M. W. BAUMGARDNER
William F. Coffin, Secretary M. W. Baumgardner, President
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
The foregoing instrument was acknowledged before me on the 11th day of
March, 1993, by E. W. Baumgardner, President, and William F. Coffin, Secretary,
of Comet Entertainment, Inc., a Nevada corporation, on behalf of the
corporation.
/s/ TERI BRATH
Teri Brath
Notary Public
CERTIFICATE OF STOCK DESIGNATION
OF
COMET ENTERTAINMENT, INC.
E. W. Baumgardner and
William F. Coffin certify that:
(1) They are the President and Secretary, respectively, of Comet
Entertainment, Inc., a Nevada corporation (the "Corporation").
(2) The number of authorized shares of Preferred Stock (the
"Preferred Stock") is Ten Million (10,000,000), all par value $.01, none of
which has been issued.
(3) The Board of Directors duly adopted the following resolution:
WHEREAS, the Articles of Incorporation authorize the Preferred Stock
of the Corporation to be issued in series and authorize the Board of Directors
to determine the rights, preferences, privileges and restrictions granted to or
imposed upon any wholly unissued series of Preferred Stock and to fix the number
of shares and designation of any such series; now, therefore, it is
RESOLVED, that the Board of Directors does hereby establish a Series
of Preferred Stock as follows:
(a) DESIGNATION. The designation of such series of Preferred Stock
is Series A Preferred Stock, and the number of shares of such series is 25,000
($.01 par value).
(b) DIVIDENDS. The Series A Preferred Stock is entitled to receive,
out of funds legally available therefor, cumulative dividends at the annual rate
of $12 per share and no more, payable on the last day of the third month of each
calendar quarter when and as declared by the Board of Directors. Such dividends
shall accrue from the date of issuance whether or not earned so that no
dividends or other distributions shall be made with respect to the Common Stock
and no Common Stock shall be repurchased by the Corporation until cumulative
dividends on the Preferred Stock for all past dividend periods and for the then
current three (3) month dividend period shall have been declared and paid or set
apart. After cumulative dividends on the Series A Preferred Stock for all past
dividend periods shall have declared and paid or set apart, if the Board of
Directors shall elect to declare additional dividends out of funds legally
available therefor, such additional dividends shall be declared solely on the
Common Stock.
(c) LIQUIDATION PREFERENCES. Upon the voluntary or involuntary
liquidation, winding up or dissolution of the Corporation, out of the assets
available for distribution to
shareholders the Series A Preferred Stock shall be entitled to receive, in
preference to any payment on the Common Stock, an amount equal to $100 per share
plus cumulative dividends as provided above, accrued and unpaid to the date
payment is made available to the Series A Preferred Stock. After the full
preferential liquidation amount has been paid to, or determined or set apart
for, the Series A Preferred Stock, the remaining assets shall be paid in equal
amounts per share on all classes of Common Stock. In the event the assets of the
Corporation are insufficient to pay the full preferential liquidation amount
required to be paid to the Series A Preferred Stock, the entire remaining assets
shall be paid to the Series A Preferred Stock and the Common Stock shall receive
nothing. A reorganization shall not be considered to be a liquidation, winding
up or dissolution within the meaning of this subdivision.
(d) RIGHT OF REDEMPTION. The Series A Preferred Stock is subject to
redemption, out of funds legally available therefor, in whole, or from time to
time in part, at the option of the Board of Directors of the Corporation. If
only a part of the Series A Preferred Stock is to be redeemed, the redemption
shall be carried out pro rata. The redemption price shall be $100 per share plus
cumulative dividends as provided in subdivision (b) of this Article, accrued and
unpaid to the date fixed for redemption (herein called the "redemption price").
The Corporation shall mail a notice of redemption to each holder of record of
shares to be redeemed, addressed to the holder at the address of such holder
appearing on the books of the Corporation or given by the holder to the
Corporation for the purpose of notice, or if no such address appears or is
given, at the place where the principal executive office of the Corporation is
located, not earlier than sixty (60) nor later than twenty (20) days before the
date fixed for redemption. The notice of redemption shall include: (i) the class
of shares or the part of a class of shares to be redeemed, (ii) the date fixed
for redemption, (iii) the redemption price, (iv) the place at which the
shareholders may obtain payment of the redemption price upon surrender of their
share certificates, and (v) the last date prior to the date of redemption that
the right of conversion may be exercised. If funds are available on the date
fixed for the redemption, then whether or not the share certificates are
surrendered for payment of the redemption price, the shares shall no longer be
outstanding and the holders thereof shall cease to be shareholders of the
Corporation with respect to the shares redeemed on and after the date fixed for
redemption and shall be entitled only to receive the redemption price without
interest upon surrender of the share certificate. If less than all the shares
represented by one share certificate are to be redeemed, the Corporation shall
issue a new share certificate for the shares not redeemed.
(e) CONVERSION RIGHTS.
(i) The Series A Preferred Stock shall be convertible into Common Stock at
any time not later than the close of business on the fifth day prior to the date
fixed for redemption in any notice of redemption at the option of the respective
holders of Series A Preferred Stock, but in any event not prior to the public
offering by the Corporation of its Common Stock through an offering registered
with the Securities and Exchange Commission (the "public offering"). For the
purpose of any such conversion, each share of Series A Preferred Stock shall be
treated as equivalent to its liquidation preference not including accrued and
unpaid dividends. The number of shares of Common Stock issuable with respect to
any share of Series A Preferred Stock upon conversion shall be determined by
dividing the aggregate dollar equivalent (liquidation value) of all shares of
Series A
Preferred Stock at any one time surrendered for conversion by any one (1) holder
thereof by the public offering price (the "conversion price"). In effecting the
conversion, the Corporation at its option either shall pay any accrued unpaid
dividends on the shares being converted or shall issue additional shares of
Common Stock for such unpaid amount at the conversion price. Upon conversion, no
fractional shares shall be issued and the Corporation shall in lieu thereof pay
in cash the fair value of the fraction. The Corporation shall reserve and keep
reserved out of its authorized but unissued shares of Common Stock sufficient
shares to effect the conversion of all shares of Series A Preferred Stock
outstanding from time to time.
(ii) A holder of Series A Preferred Stock desiring to convert shall
deliver the share certificate to the Corporation's Transfer Agent, if it has
one, otherwise to the Corporation at its principal executive office, accompanied
by a written request to convert, specifying the number of shares to be
converted. The endorsement of the share certificate and the request to convert
shall be in form satisfactory to the Transfer Agent or the Corporation, as the
case may be. Upon the date of such delivery the conversion is deemed to have
occurred and the person entitled to receive share certificates for Common Stock
shall be regarded for all corporate purposes from and after such date as the
holder of the number of shares of Common Stock to which he/she is entitled upon
the conversion.
(iii) In the event of a stock split, reverse stock split, stock dividend,
reorganization or recapitalization affecting the number of shares of Common
Stock outstanding, the conversion price set forth in paragraph (i) shall be
proportionately revised so as to fairly and equitably preserve the conversion
rights of the Series A Preferred Stock.
(iv) Promptly after any change in one conversion price, the Corporation
shall cause to be prepared a written statement setting forth in detail the facts
and the revised conversion ratio. The statement shall be signed by the President
or a vice-president and by the chief financial officer, the treasurer or an
assistant treasurer and filed with the secretary or an assistant treasurer and
filed with the secretary and also with the Transfer Agent if there be one. A
copy of the statement shall be mailed to each holder of Series A Preferred
Stock.
(f) VOTING RIGHTS. Except as otherwise expressly provided by law or
by these Articles, the Common Stock and Series A Preferred Stock shall have
equal voting rights, one vote per share, on all matters requiring a vote of
shareholders, including election of directors.
(g) So long as any shares of Series A Preferred Stock are
outstanding, the Corporation shall not, without first obtaining the approval by
vote or written consent, in the manner provided by law, of the holders of at
least a majority of the total number of shares of Series A Preferred Stock
outstanding, voting separately as a clause, (i) alter or change any of the
powers, preferences, privileges, or rights of the Series A Preferred Stock; or
(ii) amend the provisions of this paragraph (g).
/s/ E. W. BAUMGARDNER
E. W. Baumgardner, President
/s/ WILLIAM F. COFFIN
William F. Coffin, Secretary
On March 15, 1993, before me, the undersigned, a Notary Public in and for
said County and State, personally appeared E. W. Baumgardner and William F.
Coffin, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the persons who executed the within instrument on the President
and Secretary, respectively of Coast Entertainment, Inc., the corporation
therein named, and acknowledged to on that such Corporation executed the within
instrument pursuant to its bylaws or a resolution of its Board of Directors.
WITNESS by hand and official seal.
/s/ TERI BRATH
Teri Brath
(Seal)
CERTIFICATE OF AMENDMENT
TO
THE ARTICLES OF INCORPORATION
OF
TEXOIL, INC.
1. The name of the Corporation is Texoil, Inc.
2. The Board of Directors of the Corporation has adopted resolutions (i)
proposing amendments to the Articles of Incorporation of the Corporation, (ii)
declaring the advisability of such proposed amendments, and (iii) submitting the
proposed amendments to the stockholders of the Corporation entitled to vote for
the consideration thereof.
3. A majority of the stockholders of the Corporation have adopted the
amendments hereinafter set forth by written consent in accordance with Section
78.320 of the Nevada Revised Statutes.
4. The Articles of Incorporation of the Corporation are hereby amended by
deleting the language contained in Article 4 in its entirety and substituting
the following therefore:
"ARTICLE 4.
The total number of shares that the corporation shall have authority
to issue is 50,000,000 common shares with a par value of $.01 per share
and 10,000,000 preferred shares with a par value of $.01 per share. Upon
the amendment of this paragraph to read as herein set forth, each
outstanding common share, $.001 par value, is split up and converted into
.5 common shares (two [2] shares converted into one (1) share) and all
authorized, issued and outstanding shares of common stock are
reconstituted and reclassified into shares of common stock having a par
value of $.01 per share. This reverse stock split and reclassification
shall not result in the increase or decrease in the aggregate amounts of
the capital accounts of this corporation.
The shares of preferred stock authorized hereby may, when authorized
by issuance by the Board of Directors of this corporation, be issued in a
series having such designations, powers, preferences, rights and
limitations, and on such terms and conditions as the Board of Directors
may from time to time determine including the rights, if any, of the
holders thereof with respect to voting, dividends, redemption, liquidation
and conversion.
Any and all shares of the stock of this corporation of any class
shall be paid in as the Board of Directors may designate and as provided
by law, in cash, real or personal property, option to purchase, or any
other valuable right or thing, for the uses and purpose of the
corporation, and said shares of stock when issued in exchange
therefor shall thereupon and thereby become and be fully paid, the same as
though paid for in cash, and shall be nonassessable forever; and the
judgment of the Board of Directors of the corporation concerning the value
of the property, right or thing acquired in purchase or exchange for stock
shall be conclusive. No stockholder shall have any pre-emptive rights."
5. On the date of the filing with the Secretary of State of Nevada of this
Certificate of Amendment to the Articles of Incorporation (the "Effective
Time"), each share of the Corporation's common stock, par value $.001 per share,
issued and outstanding immediately prior to the Effective Time shall,
automatically and without any action on the part of the respective holders
thereof, be split up and converted into .5 shares of common stock, and all
authorized, issued and outstanding shares of common stock shall be reconstituted
and reclassified into shares of common stock having a par value of $.01 per
share. No fractional shares of common stock, par value $.01 per share will be
issued; instead, fractional shares shall be rounded up to the nearest whole
share.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to the Articles of Incorporation of Texoil, Inc. to be executed by
Walter L. Williams, its President and Lynn W. Graves, its Secretary, this 8th
day of November, 1993.
TEXOIL, INC.
/s/ WALTER L. WILLIAMS
Walter L. Williams, President
ATTEST:
/s/ LYNN W. GRAVES
Lynn W. Graves, Secretary
STATE OF TEXAS )
)ss.
COUNTY OF HARRIS )
The foregoing instrument was acknowledged before me, on the 8th day of
November, 1993, by Walter L. Williams, President, and Lynn W. Graves, Secretary,
of Texoil, Inc., a Nevada corporation, on behalf of the corporation.
/s/ SUSAN P. CRAIN
Susan P. Crain
Notary Public in and for
The State of Texas
CERTIFICATE OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
TEXOIL, INC.
1. The name of the corporation is Texoil, Inc. (the "Corporation").
2. The Corporation's Board of Directors adopted a resolution approving and
declaring the advisability of the following amendment to the Corporation's
articles of incorporation. The proposed amendment then was adopted by the
Corporation's stockholders at the annual meeting of its stockholders held on
August 31, 1994 (the "1994 Annual Meeting"). The amendment adds to the
Corporation's articles of incorporation, as heretofore amended, a new Article 11
to be and read in its entirety as follows:
ARTICLE 11
This corporation elects not to be governed by Nevada Revised
Statutes 78.411 to 78.444 inclusive concerning combinations with
interested stockholders.
3. A total of 4,058,628 shares of the Company's common stock, par value
$.01 per share ("Common Stock"), and 23,000 shares of the Company's Series A
Preferred Stock, par value $.01 per share (such Series A Preferred Stock and the
Common Stock are referred to herein collectively as the "Stock"), collectively
constituting 4,081,628 shares of Stock, were entitled to vote as one class upon
said amendment at the 1994 Annual Meeting. The total number of shares of Stock,
excluding 1,602,306 shares held by interested stockholders and their affiliates
and associates (as those terms are used in Section 78.434 of the Nevada Revised
Statutes), voted for the approval of said amendment was 1,517,111 or 61.2% of
all shares of Stock entitled to vote thereon not held by such interested
stockholders and their affiliates and associates. The total number of shares of
Stock voted for the approval of said amendment was 3,119,417 or 76.4% of all
shares of Stock entitled to vote thereon.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to the Articles of Incorporation of Texoil, Inc. to be executed by
Walter L. Williams, its President, and Lynn W. Graves, its Secretary, on this
1st day of September 1994.
TEXOIL, INC.
By: /s/ WALTER L. WILLIAMS
Walter L. Williams, President
ATTEST:
/s/ LYNN W. GRAVES
Lynn W. Graves, Secretary
STATE OF TEXAS )
)ss.
COUNTY OF HARRIS )
The foregoing instrument was acknowledged before me on the 1st day of
September 1994 by Walter L. Williams, President, and Lynn W. Graves, Secretary,
of Texoil, Inc., a Nevada corporation, on behalf of the corporation.
/s/ SUSAN DOTSON
Susan Dotson
Notary Public in and for
The State of Texas
CERTIFICATE OF AMENDMENT
FILED TO AMEND THE CERTIFICATE OF STOCK DESIGNATION
OF THE SERIES A PREFERRED STOCK OF COMET ENTERTAINMENT, INC.,
FILED IN THE OFFICE OF THE SECRETARY OF STATE
OF THE STATE OF NEVADA ON MARCH 16, 1993.
Ruben Medrano and Lynn W. Graves,the President and Secretary,
respectively, of Texoil, Inc. (formerly Comet Entertainment, Inc.), a Nevada
corporation (the "CORPORATION") do hereby certify:
1. That the Certificate of Stock Designation (the "CERTIFICATE") of the
Series A Preferred Stock of Comet Entertainment, Inc. (predecessor to the
Corporation) was filed in the office of the Secretary of State of the State of
Nevada on March 16, 1993, and that the Certificate requires amendment as
permitted by Section 78.1955 of the General Corporation Law of Nevada.
2. That the approval of the stockholders of the Series A Preferred Stock
of the amendment to the Certificate has been obtained.
3. That the Certificate is hereby amended, by deleting the first two
sentences of paragraph (b) thereof and replacing them with the following two
sentences:
"(b) DIVIDENDS. The Series A Preferred Stock is entitled to receive, out
of funds legally available therefor, cumulative dividends at the
annual rate of $12 per share and no more, payable if, as and when
declared by the Board of Directors, provided that the Board of
Directors shall have no obligation to declare any such dividends
payable prior to October 1, 2002. Such dividends shall accrue from
the date of issuance whether or not earned so that no dividends or
other distributions shall be made with respect to the Common Stock
and no Common Stock shall be repurchased by the Corporation until
cumulative dividends on Preferred Stock shall have been declared and
paid or set apart."
EXECUTED as of this 5th day of September 1996.
TEXOIL, INC.
/s/ RUBEN MEDRANO
Ruben Medrano, President
/s/ LYNN W. GRAVES
Lynn W. Graves, Secretary
STATE OF TEXAS )
) ss.
COUNTY OF HARRIS )
The foregoing instrument was acknowledged before me on this 5th day of
September, 1996, by Ruben Medrano, as President of Texoil, Inc., a Nevada
corporation, on behalf of the corporation and by Lynn W. Graves, as Secretary of
Texoil, Inc., on behalf of the corporation.
/s/ AMY R. GILLIAM
Amy R. Gilliam
Notary Public in and for
the State of Texas
EXHIBIT 10.1
- --------------------------------------------------------------------------------
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TEXOIL COMPANY
$3,000,000
10% Senior Secured Exchangeable General Obligation Notes
$5,000,000
10% Senior Secured General Obligation Notes
NOTE PURCHASE AGREEMENT
Dated as of September 6, 1996
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS, ETC..................................................1
Section 1.01. Certain Defined Terms..................................1
Section 1.02. Covenant Construction..................................1
Section 1.03. Other Rules of Construction............................1
ARTICLE II COMMITMENTS AND NOTES............................................2
Section 2.01. Tranche A Notes..........................................2
Section 2.02. Tranche B Notes.........................................2
Section 2.03. Procedures for Tranche A Advances.......................3
Section 2.04. Procedures for Tranche B Advances.......................3
Section 2.05. Guaranty and Exchange Agreement.........................4
ARTICLE III CLOSING.........................................................4
Section 3.01. Execution of Documents..................................5
Section 3.02. Certificates............................................5
Section 3.03. Opinion of Counsel.....................................6
Section 3.04. Representations and Warranties..........................6
Section 3.05. Performance; No Default................................6
Section 3.06. Restructure of Shareholder Debt........................6
Section 3.07. Title Information......................................6
Section 3.08.Insurance.................................................6
Section 3.09. Payment of Special Counsel Fees........................7
Section 3.10. Proceedings and Documents..............................7
ARTICLE IV CONDITIONS TO ADVANCES...........................................7
Section 4.01.Conditions to All Advances................................7
Section 4.02. Conditions to Tranche B Advances.........................7
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................8
Section 5.01. Organization; Power and Authority......................8
Section 5.02. Authorization, etc.....................................8
Section 5.03. Compliance with Laws, Other Instruments, etc...........8
Section 5.04. Governmental Authorizations, etc.......................9
Section 5.05. Subsidiaries...........................................9
Section 5.06. Disclosure.............................................9
Section 5.07. Litigation.............................................9
Section 5.08. Observance of Agreements, Statutes and Orders..........9
Section 5.09. Taxes.................................................10
Section 5.10. Title to Property.....................................10
Section 5.11. Licenses, Permits, etc................................10
Exhibit 10.1
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Section 5.12. Compliance with ERISA.................................10
Section 5.13. Use of Proceeds; Margin Regulations...................11
Section 5.14. Status under Certain Statutes.........................11
Section 5.15. Securities Matters.....................................12
Section 5.16. Environmental Matters.................................12
ARTICLE VI REPRESENTATIONS OF THE PURCHASER................................12
Section 6.01. Purchase for Investment...............................12
Section 6.02. Status; No Registration................................12
ARTICLE VII PAYMENT OF THE NOTES...........................................13
Section 7.01. Place of Payment......................................13
Section 7.02. Payments Due on NonBusiness Days......................13
Section 7.03. No Optional Prepayments of Tranche A Notes............13
Section 7.04. Mandatory Prepayments of Tranche B Notes...............13
Section 7.05.Optional Prepayment of Tranche B Notes...................13
Section 7.06. Purchase of Notes.....................................14
ARTICLE VIII INFORMATION AS TO COMPANY.....................................14
Section 8.01. Financial and Business Information....................14
Section 8.02. Officer's Certificate.................................16
Section 8.03. Inspection............................................16
ARTICLE IX AFFIRMATIVE COVENANTS...........................................17
Section 9.01. Compliance with Law; Contracts........................17
Section 9.02. Insurance.............................................17
Section 9.03. Maintenance of Properties.............................17
Section 9.04. Payment of Taxes and Claims...........................18
Section 9.05. Corporate Existence, etc..............................18
Section 9.06. Lien on Additional Oil and Gas Properties..............18
Section 9.07. Overriding Royalty Interests...........................18
ARTICLE X NEGATIVE COVENANTS...............................................19
Section 10.01. Restrictions on Indebtedness..........................19
Section 10.02. Restrictions on Liens................................19
Section 10.03. Financial Covenants..................................20
Section 10.04. Restricted Disbursements..............................20
Section 10.05. Merger, Consolidation, etc...........................20
Section 10.06. Restrictions on Asset Sales..........................20
Section 10.07. Transactions with Affiliates.........................20
Section 10.08. Change in Business....................................21
Section 10.09. Shareholder Debt......................................21
Exhibit 10.1
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ARTICLE XI DEFAULT AND REMEDIES............................................21
Section 11.01. Events of Default....................................21
Section 11.02. Acceleration.........................................23
Section 11.03. Other Remedies.......................................24
Section 11.04. No Waivers or Election of Remedies, Expenses, etc....24
ARTICLE XII BORROWING BASE.................................................24
Section 12.01. Initial Borrowing Base...............................24
Section 12.02. Annual Determination of Borrowing Base...............24
Section 12.03. Unscheduled Determinations of Borrowing Base..........25
Section 12.04. Borrowing Base Remains in Effect.....................25
ARTICLE XIII REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.................25
Section 13.01. Registration of Notes................................25
Section 13.02. Transfer and Exchange of Notes.......................26
Section 13.03. Replacement of Notes.................................26
ARTICLE XIV MISCELLANEOUS..................................................26
Section 14.01. Transaction Expenses..................................26
Section 14.02. Survival of Representations and Warranties...........27
Section 14.03. Amendment and Waiver.................................27
Section 14.04. Notices..............................................27
Section 14.05. Limitation on Interest................................28
Section 14.06. Indemnification.......................................28
Section 14.07. Successors and Assigns...............................29
Section 14.08. Severability.........................................29
Section 14.09. Counterparts.........................................30
Section 14.10. Final Agreement of the Parties........................30
Section 14.11. Jury Waiver...........................................30
Section 14.13. Governing Law........................................30
Exhibit 10.1
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NOTE PURCHASE AGREEMENT
NOTE PURCHASE AGREEMENT dated as of September 6, 1996 among TEXOIL
COMPANY, a Tennessee corporation (the "COMPANY"), TEXOIL, INC., a Nevada
corporation ("PARENT"), and RIMCO PARTNERS, L.P., a Delaware limited
partnership, RIMCO PARTNERS, L.P. II, a Delaware limited partnership, RIMCO
PARTNERS, L.P. III, a Delaware limited partnership, and RIMCO PARTNERS, L.P. IV,
a Delaware limited partnership.
In consideration of the mutual covenants herein contained, the
Company, Parent and the Noteholders agree as follows:
ARTICLE I
DEFINITIONS, ETC.
SECTION 1.01. CERTAIN DEFINED TERMS. Capitalized terms used in this
Agreement and not otherwise defined herein shall have the respective meanings
set forth in ANNEX A attached hereto (such meanings to be equally applicable to
both singular and plural forms of the terms defined).
SECTION 1.02. COVENANT CONSTRUCTION. Each covenant contained herein
shall be construed (absent express provision to the contrary) as being
independent of each other covenant contained herein, so that compliance with any
one covenant shall not (absent such an express contrary provision) be deemed to
excuse compliance with any other covenant. Where any provision herein refers to
action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person.
SECTION 1.03. OTHER RULES OF CONSTRUCTION. The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement. All references herein to articles, sections, annexes, exhibits
and schedules shall, unless the context requires a different construction, be
deemed to be references to the articles and sections of this Agreement and the
annexes, exhibits and schedules attached hereto and made a part hereof. In this
Agreement, unless a clear contrary intention appears, the word "including" (and
with correlative meaning "include") means including, without limiting the
generality of any description preceding such term. The headings of the various
articles and sections of this Agreement are for convenience only and shall not
affect the meaning of the terms and conditions of this Agreement. No provision
of this Agreement shall be interpreted or construed against any party solely
because that party or its legal representative drafted such provision.
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Exhibit 10.1 - Page 1
ARTICLE II
COMMITMENTS AND NOTES
SECTION 2.01. TRANCHE A NOTES. (a) Subject to the terms and
conditions of this Agreement, each Tranche A Noteholder severally agrees to make
advances to the Company (each a "TRANCHE A ADVANCE") during the period from the
date hereof through September 1, 1997 (the "TRANCHE A COMMITMENT PERIOD") in an
aggregate amount not exceeding the principal amount specified opposite such
Tranche A Noteholder's name in SCHEDULE A (such amount, as it may be reduced or
terminated pursuant to this Agreement, is herein referred to as such Tranche A
Noteholder's "TRANCHE A COMMITMENT"). Each funding of Tranche A Advances shall
be made on the same date ratably by the Tranche A Noteholders. The Tranche A
Advances made by each Tranche A Noteholder shall be evidenced by the Tranche A
Note issued to such Noteholder.
Tranche A Advances, once repaid, may not be reborrowed.
(b) The Company will authorize the issue and sale of $3,000,000
aggregate principal amount of its 10% Senior Secured Exchangeable General
Obligation Notes (the "TRANCHE A NOTES"). Subject to the terms and conditions of
this Agreement, at the Closing provided for in ARTICLE III, the Company will
issue to each Tranche A Noteholder a Tranche A Note in the principal amount of
such Tranche A Noteholder's Tranche A Commitment. The Tranche A Notes shall be
substantially in the form set out in EXHIBIT 2.01, with such changes therefrom,
if any, as may be approved by the Tranche A Noteholders and the Company. Each
Tranche A Noteholder will note on its internal records, to the extent
applicable, the date and amount of each Tranche A Advance made by such Tranche A
Noteholder to the Company hereunder, and the amount of each payment in respect
thereof and will prior to any transfer of any of its Tranche A Note endorse on
the reverse side thereof the outstanding principal amount of Tranche A Advances
evidenced thereby. Failure to make any such notation shall not affect the
Company's obligations in respect of such Tranche A Advance. Absent manifest
error, any Tranche A Noteholder's records or notations on its Tranche A Note as
to the outstanding principal amount of its Tranche A Advances shall be
rebuttably presumed to be correct.
SECTION 2.02. TRANCHE B NOTES. (a) Subject to the terms and
conditions of this Agreement, each Tranche B Noteholder severally agrees to make
advances to the Company (each a "TRANCHE B ADVANCE") during the period from the
date hereof through September 1, 1999 (the "TRANCHE B COMMITMENT PERIOD") in an
aggregate amount not exceeding the principal amount specified opposite such
Tranche B Noteholder's name in SCHEDULE A (such amount, as it may be reduced or
terminated pursuant to this Agreement, is herein referred to as such Tranche B
Noteholder's "TRANCHE B COMMITMENT"). Each funding of Tranche B Advances shall
be made on the same date ratably by the Tranche B Noteholders. The Tranche B
Advances made by each Tranche B Noteholder shall be evidenced by the Tranche B
Note issued to such Noteholder. Subject to the limits set forth herein and the
other terms and conditions of this Agreement, the Company may borrow, repay and
reborrow Tranche B Advances under this SECTION 2.02.
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Exhibit 10.1 - Page 2
(b) The Company will authorize the issue and sale of $5,000,000
aggregate principal amount of its 10% Senior Secured General Obligation Notes
(the "TRANCHE B NOTES" and, together with the Tranche A Notes, the "NOTES").
Subject to the terms and conditions of this Agree ment, at the Closing provided
for in ARTICLE III, the Company will issue to each Tranche B Noteholder a
Tranche B Note in the principal amount of such Tranche B Noteholder's Tranche B
Commitment. The Tranche B Notes shall be substantially in the form set out in
EXHIBIT 2.02, with such changes therefrom, if any, as may be approved by the
Tranche B Noteholders and the Company. Each Tranche B Noteholder will note on
its internal records, to the extent applicable, the date and amount of each
Tranche B Advance made by such Tranche B Noteholder to the Company hereunder,
and the amount of each payment in respect thereof and will prior to any transfer
of any of its Tranche B Note endorse on the reverse side thereof the outstanding
principal amount of Tranche B Advances evidenced thereby. Failure to make any
such notation shall not affect the Company's obligations in respect of such
Tranche B Advance. Absent manifest error, any Tranche B Noteholder's records or
notations on its Tranche B Note as to the outstanding principal amount of its
Tranche B Advances shall be rebuttably presumed to be correct.
SECTION 2.03. PROCEDURES FOR TRANCHE A ADVANCES. (a) Whenever the
Company desires to obtain a funding of Tranche A Advances, it shall, no less
than 5 Business Days prior to the proposed funding date for such Tranche A
Advances, transmit by telecopy to the Tranche A Noteholders a written request
(each an "ADVANCE REQUEST") setting forth (i) the total amount of the Tranche A
Advances requested, (ii) the proposed date such Tranche A Advances are to be
made, (iii) wire transfer instructions for such Tranche A Advances, and (iv) a
description in reasonable detail of the proposed use of proceeds of such Tranche
A Advances.
(b) Upon satisfaction of all conditions to any Tranche A Advance,
the Tranche A Noteholders will make their respective Tranche A Advances
available to the Company by delivery to the Company or its order of immediately
available funds in the amount stated in the Advance Request by wire transfer for
the account of the Company to the bank account stated in the Advance Request.
SECTION 2.04. PROCEDURES FOR TRANCHE B ADVANCES. (a) Whenever the
Company desires to obtain a funding of Tranche B Advances, it shall, no less
than 5 Business Days prior to the proposed funding date for such Tranche B
Advances, transmit by telecopy to the Tranche B Noteholders an Advance Request
setting forth(i) the total amount of the Tranche B Advances requested, (ii) the
proposed date such Tranche B Advances are to be made, (iii) wire transfer
instructions for such Tranche B Advances and (iv) a description in reasonable
detail of the proposed use of proceeds of such Tranche B Advances.
(b) Upon satisfaction of all conditions to any Tranche B Advance,
the Tranche B Noteholders will make their respective Tranche B Advances
available to the Company by delivery to the Company or its order of immediately
available funds in the amount stated in the Advance Request by wire transfer for
the account of the Company to the bank account stated in the Advance Request.
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Exhibit 10.1 - Page 3
SECTION 2.05. GUARANTY AND EXCHANGE AGREEMENT. At the Closing
provided for in ARTICLE III, Parent and the Company will enter into a Guaranty
and Exchange Agreement (as same may be amended from time to time, the "GUARANTY
AND EXCHANGE AGREEMENT") pursuant to which Parent will (a) guarantee payment of
the Notes, and (b) agree that the Tranche A Notes may be exchanged for shares of
the common stock of Parent in accordance with the terms thereof. The Guaranty
and Exchange Agreement shall be substantially in the form set out in EXHIBIT
2.05, with such changes therefrom, if any, as may be approved by the
Noteholders, the Company and Parent. Upon the exchange of all or a portion of
the outstanding principal amount of a Tranche A Note for common stock of Parent
in accordance with the Guaranty and Exchange Agreement, the amount of the
outstanding principal of such Tranche A Note and the Tranche A Commitment of the
holder of such Tranche A Note shall each be automatically reduced by the
principal amount of such Tranche A Note so exchanged without further notice or
action by any Person; provided, however, that the holder of such Tranche A Note
will note on its internal records such reduction in the principal amount of such
Tranche A Note and will, prior to any transfer of such Tranche A Note, endorse
on the reverse side thereof the outstanding principal amount of such Tranche A
Note taking any such reductions into account. Failure to make any such notation
shall not affect the Company's obligations in respect of such Tranche A Note.
Absent manifest error, any Tranche A Noteholder's records or notations on its
Tranche A Note as to the outstanding principal amount of its Tranche A Note
shall be rebuttably presumed to be correct. Upon the exchange of all of the
principal amount of a Tranche A Note (or so much thereof as shall have been
advanced prior to the expiration of the Tranche A Commitment Period) for common
stock of Parent in accordance with the Guaranty and Exchange Agreement, the
holder of such Tranche A Note shall, reasonably promptly after written request
by the Company, surrender such Tranche A Note for cancellation to the Company at
the Company's principal executive office.
SECTION 2.06. TERMINATION OF COMMITMENTS. Upon written notice to the
Noteholders and the full and final payment of all outstanding Indebtedness under
the Notes and the other Transaction Documents, the Company may terminate all
(but not less than all) of the Commitments.
ARTICLE III
CLOSING
The sale and purchase of the Notes to be purchased by the
Noteholders shall occur at the offices of Andrews & Kurth L.L.P., 600 Travis,
Houston, Texas 77002, at 10:00 a.m., Houston time, at a closing (the "CLOSING")
on September 6, 1996 or on such other Business Day thereafter on or prior to
September 30, 1996 as may be agreed upon by the Company, Parent and the
Noteholders. At the Closing the Company will deliver to each Noteholder the
Tranche A Note and/or Tranche B Note to be purchased by such Noteholder,
registered in such Noteholder's name. If at the Closing the Company shall fail
to tender such Notes to the Noteholders as provided above in this ARTICLE III,
or any of the conditions specified below shall not have been fulfilled to the
Noteholders' reasonable satisfaction or waived in writing by the Noteholders,
the Noteholders shall, at the
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Exhibit 10.1 - Page 4
Noteholders' election, be relieved of all further obligations under this
Agreement, without thereby waiving any rights the Noteholders may have by reason
of such failure or such nonfulfillment.
The effectiveness of this Agreement is subject to the fulfillment to
the Noteholders' reasonable satisfaction, prior to or at the Closing, of the
following conditions:
SECTION 3.01. EXECUTION OF DOCUMENTS. The Noteholders shall have
received the following agreements (together with this Agreement and any
documents delivered pursuant to SECTIONS 9.06 AND 9.07, collectively, the
"TRANSACTION DOCUMENTS"), in such number of counterparts as the Noteholders may
reasonably request, each dated the date of the Closing and duly executed by the
Persons indicated below:
(a) the Notes duly executed by the Company;
(b) the Initial Mortgage duly executed and acknowledged by the
Company;
(c) the Guaranty and Exchange Agreement duly executed by Parent and
the Company;
(d) the Registration Rights Agreement duly executed by Parent and
the Company;
(e) the Pledge Agreement duly executed by Parent, together with
certificates representing all of the issued and outstanding common stock
of the Company and related stock powers duly executed in blank by Parent;
(f) UCC-1 financing statements pertaining to the Initial Mortgage
and the Pledge Agreement; and
(g) the Subordination Agreements duly executed by the holders of the
Bridge Shareholder Debt and the New Shareholder Debt.
SECTION 3.02. CERTIFICATES. The Company shall have delivered to the
Noteholders:
(a) Officer's Certificates from the Company and Parent, dated the
date of the Closing, certifying that the conditions specified in SECTION
3.04 and SECTION 3.05 have been fulfilled;
(b) certificates of the Company and Parent certifying as to the
resolutions attached thereto and other corporate proceedings relating to
the authorization, execution and delivery of the Notes and the other
Transaction Documents;
(c) certificates of appropriate public officials as to the corporate
existence and good standing of, and the payment of all franchise taxes
owing by, the Company in the States of Texas, Louisiana and Tennessee; and
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Exhibit 10.1 - Page 5
(d) certificates of appropriate public officials as to the corporate
existence and good standing of, and payment of all franchise taxes owing
by, Parent in the States of Texas and Nevada.
SECTION 3.03. OPINION OF COUNSEL. The Noteholders shall have
received opinions in form and substance satisfactory to the Noteholders, dated
the date of the Closing from Porter & Hedges, L.L.P., counsel for the Company
and Parent, covering the matters set forth in EXHIBIT 3.03 and covering such
other matters incident to the transactions contemplated hereby as the
Noteholders or the Noteholders' counsel may reasonably request (and the Company
and Parent hereby instruct their counsel to deliver such opinion to the
Noteholders).
SECTION 3.04. REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Company and Parent in this Agreement and the other
Transaction Documents shall be correct when made and at the time of the Closing.
SECTION 3.05. PERFORMANCE; NO DEFAULT. The Company and Parent shall
have performed and complied with all agreements and conditions contained in this
Agreement or the other Transaction Documents required to be performed or
complied with by each of them prior to or at the Closing and after giving effect
to the issue and sale of the Notes no Default or Event of Default shall have
occurred and be continuing.
SECTION 3.06. RESTRUCTURE OF SHAREHOLDER DEBT. The Noteholders shall
have received (a) copies of all Shareholder Debt Restructure Documents duly
executed by the parties thereto and (b) full and final releases of all existing
liens and security interests held in the name of First Interstate Bank, N.A.,
such Shareholder Debt Restructure Documents and releases to be in form and
substance reasonably satisfactory to the Noteholders.
SECTION 3.07. TITLE INFORMATION. The Noteholders shall have received
title opinions or other title information concerning the Company's Oil and Gas
Properties covered by the Initial Mortgages in form, scope and substance
reasonably satisfactory to the Noteholders.
SECTION 3.08. INSURANCE. The Noteholders shall have received an
insurance certificate in form and substance reasonably satisfactory to the
Noteholders evidencing that the Company has the insurance required under SECTION
9.02 covering its Oil and Gas Properties and other related assets.
SECTION 3.09. PAYMENT OF SPECIAL COUNSEL FEES. Without limiting the
provisions of SECTION 14.01, the Company shall have paid on or before the
Closing the reasonable fees, charges and disbursements of the Noteholders'
special counsel to the extent reflected in a statement of such counsel rendered
to the Company at least one Business Day prior to the Closing.
SECTION 3.10. PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and all documents and
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Exhibit 10.1 - Page 6
instruments incident to such transactions shall be satisfactory to the
Noteholders and the Noteholders' special counsel, and the Noteholders and the
Noteholders' special counsel shall have received all such counterpart originals
or certified or other copies of such documents as the Noteholders or they may
reasonably request.
ARTICLE IV
CONDITIONS TO ADVANCES
SECTION 4.01. CONDITIONS TO ALL ADVANCES. (a) Each Noteholder's
obligation to fund any Advance is subject to the condition that on the date of
such Advance the following statements shall be true, and the Company, by virtue
of its delivery of an Advance Request, shall be deemed to have certified to the
Noteholders as of such date that (i) the representations and warranties of the
Company and Parent in this Agreement and the other Transaction Documents shall
be correct when made and at the time of such Advance, (ii) the Company and
Parent shall have performed and complied with all covenants and agreements
contained in this Agreement and the other Transaction Documents required to be
performed or complied with by each of them prior to such Advance, and after
giving effect to such Advance (and the application of the proceeds thereof as
contemplated by SECTION 5.13) no Default or Event of Default shall have occurred
and be continuing, and (iii) no event shall have occurred since the date of this
Agreement that could reasonably be expected to have a Material Adverse Effect on
the Company or Parent.
(b) Each Noteholder's obligation to fund any Advance to be used to
pay for the Company's share of drilling and/or completion costs for any well is
subject to the condition that on the date of such Advance the Company shall have
(i) obtained valid oil and gas leases (or valid assignments thereof) covering
its interests in such well and (ii) executed, acknowledged and delivered to the
Noteholders Security Documents in form and substance satisfactory to the
Noteholders granting a first priority lien on the Company's interest in the Oil
and Gas Properties and other related assets pertaining to such well.
SECTION 4.02. CONDITIONS TO TRANCHE B ADVANCES. Each Tranche B
Noteholder's obligation to fund any Tranche B Advance is subject to the
following further conditions:
(a) an aggregate amount of at least $2,800,000 shall have been
advanced by the Tranche A Noteholders under the Tranche A Notes;
(b) the Borrowing Base shall exceed 130% of the outstanding
principal balance of the Notes after giving effect to the Tranche B
Advances requested by the Company in the most recent Advance Request
delivered to the Tranche B Noteholders; and
(c) if the proceeds of such Tranche B Advance are to be used for any
purpose other than to pay for Initial Prospect Development Costs, the
Tranche B Noteholders shall have consented in writing to such use of
proceeds, in their sole absolute discretion.
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Exhibit 10.1 - Page 7
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Noteholders that:
SECTION 5.01. ORGANIZATION; POWER AND AUTHORITY. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Tennessee, and is duly qualified as a foreign corporation and is
in good standing in each jurisdiction in which such qualification is required by
law, other than those jurisdictions as to which the failure to be so qualified
or in good standing would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company. The Company has the
corporate power and authority to own or hold under lease the properties it
purports to own or hold under lease, to transact the business it transacts and
proposes to transact, to execute and deliver this Agreement and the other
Transaction Documents to which it is a party and to perform the provisions
hereof and thereof.
SECTION 5.02. AUTHORIZATION, ETC. This Agreement and the other
Transaction Documents to which it is a party have been duly authorized by all
necessary corporate action on the part of the Company, and this Agreement
constitutes, and upon execution and delivery thereof each other Transaction
Document to which it is a party will constitute, a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and (b) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
SECTION 5.03. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC. The
execution, delivery and performance by the Company of this Agreement and the
other Transaction Documents to which it is a party will not (a) contravene,
result in any breach of, or constitute a default under, or result in the
creation of any Lien in respect of any property of the Company under, any
indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease,
corporate charter or by-laws, or any other agreement or instrument to which the
Company is bound or by which the Company or any of its properties may be bound
or affected (except for Liens created under the Transaction Documents) the
consequence of which would have a Material Adverse Effect on the Company, (b)
conflict with or result in a breach of any of the terms, conditions or
provisions of any order, judgment, decree, or ruling of any court, arbitrator or
Governmental Authority in respect of a proceeding to which the Company is a
party or (c) to the knowledge of the Company violate any provision of any
statute or other rule or regulation of any Governmental Authority applicable to
the Company.
SECTION 5.04. GOVERNMENTAL AUTHORIZATIONS, ETC. No consent, approval
or authorization of, or registration, filing or declaration with, any
Governmental Authority is required in connection with the execution, delivery or
performance by the Company of this Agreement or the other Transaction Documents
to which it is a party that has not been obtained.
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Exhibit 10.1 - Page 8
SECTION 5.05. SUBSIDIARIES. The Company has no Subsidiaries.
SECTION 5.06. DISCLOSURE. This Agreement, the documents,
certificates or other writings delivered to the Noteholders by or on behalf of
the Company in connection with the transactions contemplated hereby, taken as a
whole, do not contain any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein not misleading. There
is no fact known to the Company that would reasonably be expected to have a
Material Adverse Effect on the Company that has not been set forth herein or in
the other documents, certificates and other writings delivered to the
Noteholders by or on behalf of the Company specifically for use in connection
with the transactions contemplated hereby.
SECTION 5.07. LITIGATION. Except as disclosed in SCHEDULE 5.07,
there are no actions, suits or proceedings pending of which the Company has
received notice, or, to the knowledge of the Company, threatened against or
affecting the Company or any property of the Company in any court or before any
arbitrator of any kind or before or by any Governmental Authority that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on the Company.
SECTION 5.08. OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS. The
Company is not in default under any term of any agreement or instrument to which
it is a party or by which it is bound, or any order, judgment, decree or ruling
of any court, arbitrator or Governmental Authority arising out of any proceeding
to which it is a party or of which it has notice or in violation of any
applicable law, ordinance, rule or regulation (including without limitation
Environmental Laws) of any Governmental Authority, which default or violation,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on the Company.
SECTION 5.09. TAXES. The Company has filed all tax returns that are
required to have been filed in any jurisdiction, and has paid all taxes shown to
be due and payable on such returns and all other taxes and assessments levied
upon it or its properties, assets, income or franchises, to the extent such
taxes and assessments have become due and payable and before they have become
delinquent, except for any taxes and assessments (i) the amount of which is not
individually or in the aggregate Material or (ii) the amount, applicability or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which the Company has established adequate
reserves in accordance with GAAP. The Company knows of no basis for any other
tax or assessment that, if imposed, would reasonably be expected to have a
Material Adverse Effect on the Company. The charges, accruals and reserves on
the books of the Company in respect of Federal, state or other taxes for all
fiscal periods are adequate in all material respects.
SECTION 5.10. TITLE TO PROPERTY. The Company has good and defensible
title to all of its assets, free and clear of all Liens except Permitted Liens.
After giving full effect to the Permitted Liens, the Company owns the net
interests in production attributable to its Oil and Gas Properties reflected in
the Initial Reserve Report and the ownership of such Oil and Gas Properties does
not obligate the Company to bear the costs and expenses relating to the
development and operations of
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.1 - Page 9
each such Oil and Gas Property in an amount in excess of the working interest of
each Oil and Gas Property reflected in the Initial Reserve Report. Further upon
delivery of each Annual Reserve Report and Supplemental Reserve Report, the
statements made in the preceding sentence shall be true with respect to such
Annual Reserve Report or Supplemental Reserve Report, as the case may be.
SECTION 5.11. LICENSES, PERMITS, ETC. The Company owns or possesses
all licenses, permits, franchises, authorizations, patents, copyrights, service
marks, trademarks and trade names, or rights thereto, that individually or in
the aggregate are Material, without known conflict with the rights of others. To
the best knowledge of the Company, (a) no product of the Company infringes in
any material respect any license, permit, franchise, authorization, patent,
copyright, service mark, trademark, trade name or other right owned by any other
Person; and (b) there is no Material violation by any Person of any right of the
Company with respect to any patent, copyright, service mark, trademark, trade
name or other right owned or used by the Company.
SECTION 5.12. COMPLIANCE WITH ERISA.
(a) The Company and each ERISA Affiliate have operated and
administered each Plan, if any, in compliance with all applicable laws except
for such instances of noncompliance as have not resulted in and would not
reasonably be expected to result in a Material Adverse Effect on the Company.
Neither the Company nor any ERISA Affiliate has incurred any liability pursuant
to Title I or IV or ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans (as defined in Section 3 of ERISA), and no
event, transaction or condition has occurred or exists that could reasonably be
expected to result in the incurrence of any such liability by the Company or any
ERISA Affiliate, or in the imposition of any Lien on any of the rights,
properties or assets of the Company or any ERISA Affiliate, in either case
pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions
or to Section 401(a)(29) or 412 of the Code, other than such liabilities or
Liens as would not be individually or in the aggregate Material.
(b) The present value of the aggregate benefit liabilities under
each of the Plans (other than Multiemployer Plans), determined as of the end of
such Plan's most recently ended plan year on the basis of the actuarial
assumptions specified for funding purposes in such Plan's most recent actuarial
valuation report, did not exceed the aggregate current value of the assets of
such Plan allocable to such benefit liabilities. The term "BENEFIT LIABILITIES"
has the meaning specified in section 4001 of ERISA and the terms "CURRENT VALUE"
and "PRESENT VALUE" have the meaning specified in section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred
withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer
Plans that individually or in the aggregate are Material.
(d) The expected post-retirement benefit obligation (determined as
of the last day of the Company's most recently ended fiscal year in accordance
with Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by section 4980B of
the Code) of the Company is not Material.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.1 - Page 10
SECTION 5.13. USE OF PROCEEDS; MARGIN REGULATIONS. The Company will
apply the proceeds of the Tranche A Advances to pay for (a) the Company's share
of future 3-D seismic acquisition costs for the Raceland Prospect which amount
shall not exceed $500,000, (b) the Company's share of leasehold acquisition
costs for the Raceland Prospect and the Green's Lake Prospect, (c) the Company's
share of drilling and completion costs for the initial well to be drilled on
each of the Raceland Prospect and the Green's Lake Prospect, and (d) $200,000 of
Indebtedness owing by Parent to Joe C. Richardson, Jr., Trustee. The Company
will apply the proceeds of the Tranche B Advances to pay for (y) Initial
Prospect Development Costs and (z) to the extent consented to in writing by the
Tranche B Noteholders, leasehold and 3-D seismic acquisition costs and
development costs for oil and gas prospects other than the Initial Prospects. No
part of the proceeds of any Advance will be used, directly or indirectly, for
the purpose of buying or carrying any margin stock within the meaning of
Regulation G of the Board of Governors of the Federal Reserve System (12 C.F.R.
207), or for the purpose of buying or carrying or trading in any securities
under such circumstances as to involve the Company in a violation of Regulation
X of said Board (12 C.F.R. 224) or to involve any broker or dealer in a
violation of Regulation T of said Board (12 C.F.R.
220).
SECTION 5.14. STATUS UNDER CERTAIN STATUTES. The Company is not
subject to regulation under the Investment Company Act of 1940, as amended, the
Public Utility Holding Company Act of 1935, as amended, the Interstate Commerce
Act, as amended, or the Federal Power Act, as amended.
SECTION 5.15. SECURITIES MATTERS. Other than offers to Accredited
Investors, neither the Company nor anyone acting on its behalf has directly or
indirectly offered the Notes or any part thereof or any similar securities for
sale to, or solicited any offer to buy any of the same from, or otherwise
approached or negotiated in respect thereof with, anyone other than the
Noteholders named in SCHEDULE A. Neither the Company nor anyone acting on its
behalf has taken or will take any action which would subject the issuance and
sale of the Notes to the registration and prospectus delivery provisions of the
Securities Act.
SECTION 5.16. ENVIRONMENTAL MATTERS. The Company has no knowledge of
any claim and has not received any notice of any claim, and no proceeding has
been instituted of which the Company has notice raising any claim against the
Company or any of its real properties now or formerly owned, leased or operated
by the Company or other assets, alleging any damage to the environment or
violation of any Environmental Laws, except, in each case, such as would not
reasonably be expected to result in a Material Adverse Effect on the Company.
Except as otherwise disclosed to the Noteholders in writing, (a) the Company has
no knowledge of any facts which would give rise to any claim, public or private,
of violation of Environmental Laws or damage to the environment emanating from,
occurring on or in any way related to real properties now or formerly owned,
leased or operated by the Company or to other assets or their use, except, in
each case, such as would not reasonably be expected to result in a Material
Adverse Effect on the Company; (b) Company has not stored any Hazardous
Materials on real properties now or formerly owned, leased or operated by the
Company and has not disposed of any Hazardous Materials in a manner contrary to
any Environmental Laws in each case in any manner that would reasonably be
expected to result
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.1 - Page 11
in a Material Adverse Effect on the Company; and (c) all buildings on all real
properties now owned, leased or operated by the Company are in compliance with
applicable Environmental Laws, except where failure to comply would not
reasonably be expected to result in a Material Adverse Effect on the Company.
ARTICLE VI
REPRESENTATIONS OF THE PURCHASER
SECTION 6.01. PURCHASE FOR INVESTMENT. Each Noteholder represents
that it is acquiring its Note(s) for its own account or for one of its separate
accounts (or for the account of trusts for which it is trustee) for investment
with no intention of presently distributing or reselling the same, subject,
nevertheless, to its right to dispose of, in compliance with all applicable
securities laws, its respective Note(s), or any part of any thereof held by it,
if at some future time in its sole discretion it deems it advisable so to do.
Each Noteholder hereby agrees that it will not sell, transfer or otherwise
dispose of its Note(s) in violation of the Securities Act.
SECTION 6.02. STATUS; NO REGISTRATION. Each Noteholder represents
that it is an Accredited Investor. Each Noteholder acknowledges that the Notes
have not been registered under the Securities Act, and that such Notes must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available.
ARTICLE VII
PAYMENT OF THE NOTES
SECTION 7.01. PLACE OF PAYMENT. The Company will pay all sums
becoming due to any Noteholder under any Transaction Document by the method and
at the address specified for such purpose below such Noteholder's name in
SCHEDULE A, or by such other method or at such other address as such Noteholder
shall have from time to time specified to the Company in writing for such
purpose, without the presentation or surrender of such Note or the making of any
notation thereon, except that upon written request of the Company made
concurrently with or reasonably promptly after payment or prepayment in full of
any Note, the holder of such Note shall surrender such Note for cancellation,
reasonably promptly after any such request, to the Company at its principal
executive office.
SECTION 7.02. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this
Agreement or the Notes to the contrary notwithstanding, any payment of principal
of or interest on any Note that is due on a date other than a Business Day shall
be made on the next succeeding Business Day without including the additional
days elapsed in the computation of the interest payable on such next succeeding
Business Day.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.1 - Page 12
SECTION 7.03. NO OPTIONAL PREPAYMENTS OF TRANCHE A NOTES. The
Company shall not have the right to prepay the Tranche A Notes, in whole or in
part, prior to maturity.
SECTION 7.04. MANDATORY PREPAYMENTS OF TRANCHE B NOTES. Prepayments
on the Tranche B Notes shall be due and payable as follows:
(a) on each Monthly Payment Date when the Borrowing Base equals or
exceeds 120% of the outstanding principal amount of the Notes, a payment
equal to 75% of the Net Revenues for the second preceding month from such
date (or, if less, the entire unpaid principal of and accrued interest on
the Tranche B Notes) shall be due and payable; and
(b) on each Monthly Payment Date when the Borrowing Base is less
than 120% of the outstanding principal amount of the Notes, a payment
equal to 100% of the Net Revenues for the second preceding month from such
date (or, if less, the entire unpaid principal of and accrued interest on
the Tranche B Notes) shall be due and payable.
All payments on the Tranche B Notes shall be applied pro rata, in accordance
with the principal amounts outstanding on the Tranche B Notes, first to accrued
but unpaid interest on the Tranche B Notes and the remainder, if any, to the
principal amount outstanding on the Tranche B Notes.
SECTION 7.05. OPTIONAL PREPAYMENT OF TRANCHE B NOTES. The Company
may, at its option, without notice, penalty, premium or fee, prepay at any time
all, or from time to time any part of, the Tranche B Notes at 100% of the
principal amount so prepaid, plus accrued and unpaid interest on such principal
amount. In the case of each partial prepayment of the Tranche B Notes, the
principal amount of the Tranche B Notes to be prepaid shall be allocated among
all of the Tranche B Notes at the time outstanding in proportion, as nearly as
practicable, to the respective unpaid principal amounts thereof not theretofore
called for prepayment.
SECTION 7.06. PURCHASE OF NOTES. The Company will not, and will not
permit any Affiliate to, purchase, redeem, prepay or otherwise acquire, directly
or indirectly, any of the outstanding Notes except upon the full and final
payment or exchange of the Notes in accordance with the terms of the Transaction
Documents. The Company will promptly cancel, or cause to be cancelled, all Notes
acquired by it or any Affiliate by virtue of any payment or exchange of the
Notes pursuant to any provision of the Transaction Documents and no Notes may be
issued in substitution or exchange for any such Notes.
ARTICLE VIII
INFORMATION AS TO COMPANY
SECTION 8.01. FINANCIAL AND BUSINESS INFORMATION. The Company shall
deliver to each of the Noteholders:
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Exhibit 10.1 - Page 13
(a) Within 45 days after the end of each quarterly fiscal period in
each fiscal year of the Company, copies of (i) a consolidated balance sheet of
the Company as at the end of such quarter, and (ii) consolidated statements of
income, changes in shareholders' equity and cash flows of the Company, for such
quarter and for the portion of the fiscal year ending with such quarter, setting
forth in each case in comparative form the figures for the corresponding periods
in the previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP applicable to quarterly financial statements generally, and certified
by a Senior Financial Officer of the Company as fairly presenting, in all
material respects, the financial position of the companies being reported on and
their results of operations and cash flows, subject to changes resulting from
year-end adjustments.
(b) Within 90 days after the end of each fiscal year of the Company,
copies of (i) a consolidated balance sheet of the Company, as at the end of such
year, and (ii) consolidated statements of income, changes in shareholders'
equity and cash flows of the Company, for such year, setting forth in each case
in comparative form the figures for the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP, and accompanied by (A) an opinion
thereon of independent certified public accountants of recognized national
standing, which opinion shall state that such financial statements present
fairly, in all material respects, the financial position of the companies being
reported upon and their results of operations and cash flows and have been
prepared in conformity with GAAP, and that the examination of such accountants
in connection with such financial statements has been made in accordance with
generally accepted auditing standards, and that such audit provides a reasonable
basis for such opinion in the circumstances, and (B) a certificate of such
accountants stating that they have reviewed this Agreement and stating further
whether, in making their audit, they have become aware of any condition or event
that then constitutes a Default or an Event of Default, and, if they are aware
that any such condition or event then exists, specifying the nature and period
of the existence thereof.
(c) Within 20 days after the end of each calendar month, copies of
(i) a consolidated balance sheet of the Company as at the end of such month, and
(ii) consolidated statements of income, changes in shareholders' equity and cash
flows of the Company, for such month and for the portion of the fiscal year
ending with such month, setting forth in each case in comparative form the
figures for the corresponding periods in the previous fiscal year, all in
reasonable detail, prepared in accordance with GAAP applicable to monthly
financial statements generally, and certified by a Senior Financial Officer of
the Company as fairly presenting, in all material respects, the financial
position of the companies being reported on and their results of operations and
cash flows, subject to changes resulting from year-end adjustments.
(d) Within 60 days after the end of each calendar year, beginning
December 31, 1996, a reserve report (each an "ANNUAL RESERVE REPORT") in form
and substance satisfactory to the Noteholders, prepared by an independent
petroleum engineering firm satisfactory to the Noteholders setting forth as of
December 31 of such year the Future Net Revenue for the Company's Oil and Gas
Properties.
(e) On or before the 20th day of each month, commencing October 20,
1996, a reserve report prepared by the Company setting forth in reasonable
detail, the production from, and
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.1 - Page 14
Gross Proceeds and Deductible Costs attributable to, the Company's Oil and Gas
Properties for the immediately preceding month and such other information as the
Noteholders may reasonably request (each a "MONTHLY PRODUCTION REPORT").
(f) Promptly, and in any event within five Business Days after a
Responsible Officer of the Company becoming aware of the existence of any
Default or Event of Default or that any Person has given any notice or taken any
action with respect to a claimed default hereunder or that any Person has given
any notice or taken any action with respect to a claimed default of the type
referred to in SECTION 11.01, a written notice specifying the nature and period
of existence thereof and what action the Company is taking or proposes to take
with respect thereto.
(g) Promptly, and in any event within five Business Days after a
Responsible Officer of the Company becoming aware of any of the following, a
written notice setting forth the nature thereof and the action, if any, that the
Company or an ERISA Affiliate proposes to take with respect thereto: (i) with
respect to any Plan, any reportable event, as defined in section 4043(b) of
ERISA and the regulations thereunder, for which notice thereof has not been
waived pursuant to such regulations as in effect on the date hereof; or (ii) the
taking by the PBGC of steps to institute, or the threatening by the PBGC of the
institution of, proceedings under section 4042 of ERISA for the termination of,
or the appointment of a trustee to administer, any Plan, or the receipt by the
Company or any ERISA Affiliate of a notice from a Multiemployer Plan that such
action has been taken by the PBGC with respect to such Multiemployer Plan; or
(iii) any event, transaction or condition that could result in the incurrence of
any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the Code relating to employee
benefit plans, or in the imposition of any Lien on any of the rights, properties
or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of
ERISA or such penalty or excise tax provisions, if such liability or Lien, taken
together with any other such liabilities or Liens then existing, would
reasonably be expected to be Material as to the Company.
(h) Promptly, and in any event within five Business Days of receipt
thereof, copies of any notice to the Company from any Federal or state
Governmental Authority relating to any order, ruling, statute or other law or
regulation that would reasonably be expected to have a Material Adverse Effect
on the Company.
(i) Promptly, and in any event within five Business Days after a
Responsible Officer of the Company becoming aware thereof, any event which could
reasonably be expected to have a Material Adverse Effect on the Company.
(j) With reasonable promptness, such other data and information
relating to the business, operations, affairs, financial condition, assets or
properties of the Company or any of its Subsidiaries or relating to the ability
of the Company to perform its obligations hereunder and under the Notes as from
time to time may be reasonably requested by any Noteholder.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.1 - Page 15
SECTION 8.02. OFFICER'S CERTIFICATE. Each set of financial
statements delivered to the Noteholders pursuant to SECTION 8.01(A), SECTION
8.01(B) or SECTION 8.01(C) shall be accompanied by a certificate of a Senior
Financial Officer of the Company stating that such officer has reviewed the
relevant terms hereof and has made, or caused to be made, under his or her
supervision, a review of the transactions and conditions of the Company from the
beginning of the monthly, quarterly or annual period covered by the statements
then being furnished to the date of the certificate and that such review shall
not have disclosed the existence during such period of any condition or event
that constitutes a Default or an Event of Default or, if any such condition or
event existed or exists (including, without limitation, any such event or
condition resulting from the failure of the Company to comply with any
Environmental Law), specifying the nature and period of existence thereof and
what action the Company shall have taken or proposes to take with respect
thereto.
SECTION 8.03. INSPECTION. The Company shall permit the
representatives of each Noteholder, at the expense of the Company, upon
reasonable prior notice to the Company and during normal business hours, to
visit and inspect any of the offices or properties of the Company, to examine
all its books of account, records, reports and other papers, to make copies and
extracts therefrom, and to discuss the Company's affairs, finances and accounts
with its officers and independent public accountants (and by this provision the
Company authorizes said accountants to discuss the affairs, finances and
accounts of the Company), all at such times and as often as may be requested.
ARTICLE IX
AFFIRMATIVE COVENANTS
The Company covenants that so long as any of the Commitments remain
in effect or any of the Notes are outstanding:
SECTION 9.01. COMPLIANCE WITH LAW; CONTRACTS. The Company will
comply with all laws, ordinances or governmental rules or regulations to which
it is subject, including, without limitation, Environmental Laws, and will
obtain and maintain in effect all licenses, certificates, permits, franchises
and other governmental authorizations necessary to the ownership of its
properties or to the conduct of its businesses, in each case to the extent
necessary to ensure that non-compliance with such laws, ordinances or
governmental rules or regulations or failures to obtain or maintain in effect
such licenses, certificates, permits, franchises and other governmental
authorizations would individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Company. The Company will comply with, and
perform its obligations under, each contract or agreement to which it is a
party, unless, in the good faith judgment of the Company, the failure to so
comply or perform would not reasonably be expected to have a Material Adverse
Effect on the Company.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.1 - Page 16
SECTION 9.02. INSURANCE. (a) The Company will maintain, with
financially sound and reputable insurers, insurance with respect to its
properties (including its Oil and Gas Properties) against such casualties and
contingencies, of such types, on such terms and in such amounts as is customary
in the case of entities of established reputations engaged in the same or a
similar business and similarly situated, including the insurance set forth in
SCHEDULE 9.02. In addition, each such policy shall (i) be maintained with
financially sound and responsible insurance carriers authorized to do business
in the States of Texas and Louisiana, (ii) name the Company as a named insured
and the Noteholders as additional insureds or loss payees, as applicable,
thereunder (without any representation or warranty by or obligation upon the
Noteholders), (iii) provide that at least 30 days' prior written notice of
reduction, cancellation or lapse and at least 10 days' prior written notice of
non-payment of premium shall be given to the Noteholders by the insurer and (iv)
provide that the Noteholders may (but shall not be obligated to) cure any lapse
or breach by the Company during such 30-day period (or 10-day period, in the
case of non-payment).
(b) The Company shall, if so requested by the Noteholders, deliver
to the Noteholders duplicate policies of insurance, or if duplicate policies are
not readily available, cover notes or equivalent documentation satisfactory to
the Noteholders. In addition, annually or more frequently as may be reasonably
requested by the Noteholders, the Company shall furnish the Noteholders with
approved certification of all required insurance.
SECTION 9.03. MAINTENANCE OF PROPERTIES. The Company will maintain
and keep, or cause to be maintained and kept, its properties in good repair,
working order and condition (other than ordinary wear and tear), so that the
business carried on in connection therewith may be properly conducted at all
times.
SECTION 9.04. PAYMENT OF TAXES AND CLAIMS. The Company will file all
tax returns required to be filed in any jurisdiction and to pay and discharge
all taxes shown to be due and payable on such returns and all other taxes,
assessments, governmental charges, or levies imposed on them or any of their
properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Company, provided that the Company
need not pay any such tax or assessment or claims if (i) the amount,
applicability or validity thereof is contested by the Company on a timely basis
in good faith and in appropriate proceedings, and the Company has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or (ii) the nonpayment of all such taxes and assessments in the aggregate would
not reasonably be expected to have a Material Adverse Effect on the Company.
SECTION 9.05. CORPORATE EXISTENCE, ETC. The Company will at all
times preserve and keep in full force and effect its corporate existence. The
Company will at all times preserve and keep in full force and effect all rights
and franchises of the Company unless, in the good faith judgment of the Company,
the termination of or failure to preserve and keep in full force and effect such
corporate existence, right or franchise would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.1 - Page 17
SECTION 9.06. LIEN ON ADDITIONAL OIL AND GAS PROPERTIES. Promptly
after acquiring any additional Oil and Gas Properties not covered by the Initial
Mortgage, the Company shall execute, acknowledge and deliver to the Noteholders
Security Documents in form and substance satisfactory to the Noteholders
granting a first priority Lien on such Oil and Gas Properties and related assets
acquired by the Company.
SECTION 9.07. OVERRIDING ROYALTY INTERESTS. Prior to commencing
drilling operations on any well to be drilled and/or completed with proceeds of
Tranche B Advances, the Company shall execute, acknowledge and deliver to the
Tranche B Noteholders an assignment of overriding royalty interest in a form
reasonably satisfactory to the Tranche B Noteholders conveying to the Tranche B
Noteholders an overriding royalty interest in and to the Oil and Gas Properties
attributable to such well equal to 1% of 8/8ths of the Hydrocarbons produced and
saved from such well, reduced in the same proportion as the Company's undivided
working interest in such well bears to 100%. If (a) proceeds of any Tranche B
Advances are to be used for purposes other than Initial Prospect Development
Costs, (b) the Tranche B Noteholders have consented to such use of proceeds in
accordance with SECTIONS 4.02(C) AND 5.13, and (c) such consent by the Tranche B
Noteholders is subject to the assignment to the Tranche B Noteholders of an
overriding royalty interest mutually agreed to by the Company and the Tranche B
Noteholders in the Oil and Gas Properties to be acquired and/or developed with
the proceeds of such Tranche B Advances, the Company shall execute, acknowledge
and deliver to the Tranche B Noteholders an assignment of such mutually agreed
to overriding royalty interest.
ARTICLE X
NEGATIVE COVENANTS
The Company covenants that so long as any of the Commitments remain
in effect or any of the Notes are outstanding:
SECTION 10.01. RESTRICTIONS ON INDEBTEDNESS. The Company will not
create, incur, assume, Guaranty or permit to exist any Indebtedness, except the
Notes.
SECTION 10.02. RESTRICTIONS ON LIENS. The Company will not create,
incur, assume, or permit to exist any Lien with respect to any asset now owned
or hereafter acquired, except:
(a) Liens in favor of the Noteholders;
(b) encumbrances consisting of easements of ingress or egress over
real property, where the same do not materially detract from the use or
enjoyment of such property by, or the value of such property to, the
Company;
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.1 - Page 18
(c) Liens for taxes or assessments or governmental charges or
levies, if payment shall not at the time be required to be made in
accordance with the provisions of SECTION 9.04;
(d) statutory liens of landlords and liens of carriers,
warehousemen, mechanics, laborers and materialmen incurred in the ordinary
course of business for sums not yet due or being contested in good faith;
(e) Liens (other than liens created by section 4068 of ERISA)
incurred on pledges or deposits made in the ordinary course of business in
connection with workmen's compensation, unemployment insurance, social
security laws or similar legislation;
(f) all contracts, agreements and instruments, and all defects and
irregularities and other matters affecting the Company's Oil and Gas
Properties which were in existence at the time such Oil and Gas Properties
were originally acquired by the Company and all routine operational
agreements entered into in the ordinary course of business, which
contracts, agreements, instruments, defects, irregularities and other
matters and routine operational agreements do not reduce the Company's net
interest in production in its Oil and Gas Properties below the interests
reflected in each Annual or Supplemental Reserve Report or the interests
warranted under this Agreement and do not interfere Materially with the
operation, value or use of the Company's Oil and Gas Properties; and
(g) royalties, overriding royalties, reversionary interests,
production payments and similar burdens granted by the Company with
respect to its Oil and Gas Properties to the extent such burdens do not
reduce the Company's net interests in production in its Oil and Gas
Properties below the interests reflected in each Annual or Supplemental
Reserve Report or the interests warranted under this Agreement and do not
operate to deprive the Company of any Material rights in respect of its
Oil and Gas Properties.
SECTION 10.03. FINANCIAL COVENANTS. The Company will not permit:
(a) its Current Assets, at any time, to be less than the sum of (i)
its Current Liabilities MINUS (ii) any portion of such Current Liabilities
consisting of amounts owing on the Notes; and
(b) the ratio of (i) the Borrowing Base to (ii) the outstanding
principal of and accrued, but unpaid, interest on the Notes to be less
than 1.15 to 1.0 at any time on or after April 1, 1998.
SECTION 10.04. RESTRICTED DISBURSEMENTS. The Company will not make
or commit to make any Restricted Disbursements except:
(a) Permitted Investments;
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Exhibit 10.1 - Page 19
(b) Capital Expenditures made in connection with the exploration and
development of the Initial Prospects and such other Capital Expenditures
as may be agreed to in writing by the Noteholders;
(c) advances or extension of credit on terms customary in the oil
and gas industry in the form of accounts receivable made in the ordinary
course of business; and
(d) so long as no Default or Event of Default has occurred and is
continuing, dividends to Parent that are used by Parent to make Permitted
Shareholder Debt Payments and Permitted Preferred Stock Dividends.
SECTION 10.05. MERGER, CONSOLIDATION, ETC. The Company shall not
consolidate with or merge with any other Person or convey, transfer or lease all
or substantially all of its assets in a single transaction or series of
transactions to any Person.
SECTION 10.06. RESTRICTIONS ON ASSET SALES. Without the Noteholders'
prior written consent, the Company will not sell, transfer, assign, convey or
otherwise dispose of an interest in any Oil and Gas Properties or other asset
now owned or hereafter acquired, except for the sale of Hydrocarbon production
in the ordinary course of business.
SECTION 10.07. TRANSACTIONS WITH AFFILIATES. The Company will not
enter into directly or indirectly any Material transaction or Material group of
related transactions (including without limitation the purchase, lease, sale or
exchange of properties of any kind or the rendering of any service) with any
Affiliate, except in the ordinary course and pursuant to the reasonable
requirements of the Company's business and upon fair and reasonable terms no
less favorable to the Company than would be obtainable in a comparable
arm's-length transaction with a Person not an Affiliate.
SECTION 10.08. CHANGE IN BUSINESS. The Company will not directly or
indirectly engage to a Material extent in any business other than the
Hydrocarbon exploration and production business, or discontinue such business or
substantially alter its method of doing business.
SECTION 10.09. SHAREHOLDER DEBT. Except for permitted dividend
payments to Parent under SECTION 10.04(D), the Company will not directly or
indirectly make any payment of principal or interest on the Bridge Shareholder
Debt or the New Shareholder Debt.
ARTICLE XI
DEFAULT AND REMEDIES
SECTION 11.01. EVENTS OF DEFAULT. An "EVENT OF DEFAULT" shall exist
if any of the following conditions or events shall occur and be continuing:
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Exhibit 10.1 - Page 20
(a) the Company defaults in the payment of any principal or interest
on any Note when the same becomes due and payable, whether at maturity, by
declaration or otherwise; or
(b) the Company defaults in the performance of or compliance with
any term contained in ARTICLE X hereof or Parent defaults in the
performance or compliance with any term of ARTICLE VII of the Guaranty and
Exchange Agreement; or
(c) the Company, Parent, or the holders of the Bridge Shareholder
Debt or the New Shareholder Debt default in the performance of or
compliance with any term contained in the Transaction Documents to which
they are a party (other than those referred to in paragraphs (a) and (b)
of this SECTION 11.01) and such default is not remedied within 30 days
after the earlier of (i) a Responsible Officer obtains actual knowledge of
such default or (ii) the Company receives written notice of such default
from any holder of a Note; or
(d) any representation or warranty made in writing by or on behalf
of the Company or Parent or by any officer of the Company or Parent in
this Agreement or the other Transaction Documents or in any writing
furnished in connection with the transactions contemplated hereby or
thereby proves to have been false or incorrect in any Material respect on
the date as of which made; or
(e) (i) Parent, the Company or any other Subsidiary of Parent is in
default (as principal or as guarantor or other surety) in the payment of
any principal of or premium or interest on any Indebtedness that is
outstanding in an aggregate principal amount of at least $100,000 beyond
any period of grace provided with respect thereto, or (ii) Parent, the
Company or any other Subsidiary of Parent is in default in the performance
of or compliance with any term of any evidence of any Indebtedness in an
aggregate outstanding principal amount of at least $100,000 or of any
mortgage, indenture or other agreement relating thereto or any other
condition exists, and as a consequence of such default or condition such
Indebtedness has become, or has been declared (or one or more Persons are
entitled to declare such Indebtedness to be), due and payable before its
stated maturity or before its regularly scheduled dates of payment, or
(iii) as a consequence of the occurrence or continuation of any event or
condition (other than the passage of time or the right of the holder of
Indebtedness to convert such Indebtedness into equity interests), (x)
Parent, the Company or any other Subsidiary of Parent has become obligated
to purchase or repay Indebtedness before its regular maturity or before
its regularly scheduled dates of payment, in an aggregate outstanding
principal amount of at least $100,000 or (y) one or more Persons have the
right to require Parent, the Company or any other Subsidiary of Parent to
purchase or repay such Indebtedness; or
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Exhibit 10.1 - Page 21
(f) Parent, the Company or any other Subsidiary of Parent (i) is
generally not paying, or admits in writing its inability to pay, its debts
as they become due, (ii) files, or consents by answer or otherwise to the
filing against it of, a petition for relief or reorganization or
arrangement or any other petition in bankruptcy, for liquidation or to
take advantage of any bankruptcy, insolvency, reorganization, moratorium
or other similar law of any jurisdiction, (iii) makes an assignment for
the benefit of its creditors, (iv) consents to the appointment of a
custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its property, (v)
is adjudicated as insolvent or to be liquidated, or (vi) takes corporate
action for the purpose of any of the foregoing; or
(g) a Governmental Authority enters an order appointing, without
consent by Parent, the Company or any other Subsidiary of Parent, a
custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its property, or
constituting an order for relief or approving a petition for relief or
reorganization or any other petition in bankruptcy or for liquidation or
to take advantage of any bankruptcy or insolvency law of any jurisdiction,
or ordering the dissolution, winding-up or liquidation of Parent, the
Company or any other Subsidiary of Parent or any such petition shall be
filed against Parent, the Company or any other Subsidiary of Parent and
such petition shall not be dismissed within 60 days; or
(h) a final judgment or judgments for the payment of money
aggregating in excess of $250,000 are rendered against Parent, the Company
or any other Subsidiary of Parent and such judgments are not, within 60
days after entry thereof, bonded, discharged or stayed pending appeal, or
are not discharged within 60 days after the expiration of such stay; or
(i) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is sought
or granted under section 412 of the Code, (ii) a notice of intent to
terminate any Plan shall have been or is reasonably expected to be filed
with the PBGC or the PBGC shall have instituted proceedings under ERISA
section 4042 to terminate or appoint a trustee to administer any Plan or
the PBGC shall have notified Parent, the Company or any other Subsidiary
of Parent or any ERISA Affiliate that a Plan may become subject to any
such proceedings (iii) the aggregate "amount of unfunded benefit
liabilities" (within the meaning of section 4001(a)(18) of ERISA) under
all Plans, determined in accordance with Title IV of ERISA, shall exceed
$25,000, (iv) Parent, the Company or any other Subsidiary of Parent or any
ERISA Affiliate shall have incurred or is reasonably expected to incur any
liability pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, (v) Parent, the
Company or any other Subsidiary of Parent or any ERISA Affiliate withdraws
from any Multiemployer Plan, (vi) Parent, the Company or any other
Subsidiary of Parent or any ERISA Affiliate fails to make any contribution
due, or payment to, any employee benefit plan, or (vii) Parent, the
Company or any other Subsidiary of Parent establishes or amends any
employee welfare benefit plan that provides post-employment welfare
benefits in a manner that would increase the liability of Parent, the
Company or any ERISA Affiliate thereunder, and any such event or events
described in
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Exhibit 10.1 - Page 22
clauses (i) through (vii) above, either individually or together with any
other such event or events, could reasonably be expected to have a
Material Adverse Effect. As used in this Section 11.01(i), the terms
"EMPLOYEE BENEFIT PLAN" and "EMPLOYEE WELFARE BENEFIT PLAN" shall have the
respective meanings assigned to such terms in Section 3 of ERISA; or
(j) Parent fails to own (both beneficially and of record) 100% of
the common stock and other equity securities of the Company.
SECTION 11.02. ACCELERATION.
(a) If an Event of Default with respect to the Company described in
paragraph (f) or (g) of SECTION 11.01 (other than an Event of Default described
in clause (i) of paragraph (f) or described in clause (vi) of paragraph (f) by
virtue of the fact that such clause encompasses clause (i) of paragraph (f)) has
occurred, (i) all unfunded Commitments shall automatically terminate and (ii)
all amounts then outstanding under the Notes shall automatically become
immediately due and payable.
(b) If any other Event of Default has occurred and is continuing,
the Required Holders at any time at its or their option, by notice or notices to
the Company, may (i) terminate all unfunded Commitments and (ii) declare all
amounts then outstanding under the Notes to be immediately due and payable.
Upon any Notes becoming due and payable under this SECTION 11.02,
whether automatically or by declaration, such Notes will forthwith mature and
the entire unpaid principal amount of such Notes, plus all accrued and unpaid
interest thereon, shall all be immediately due and payable, in each and every
case without presentment, demand, notice of default, notice of intent to
accelerate, notice of acceleration, protest or further notice, all of which are
hereby waived.
SECTION 11.03. OTHER REMEDIES. If any Default or Event of Default
has occurred and is continuing, and irrespective of whether any Notes have
become or have been declared immediately due and payable under SECTION 11.02,
the Required Holders may proceed to protect and enforce the rights of the
Noteholders by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein or in any
Note, or for an injunction against a violation of any of the terms hereof or
thereof, or in aid of the exercise of any power granted hereby or thereby or by
law or otherwise.
SECTION 11.04. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC. No
course of dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power or
remedy conferred by this Agreement or by any Note upon any holder thereof shall
be exclusive of any other right, power or remedy referred to herein or therein
or now or hereafter available at law, in equity, by statute or otherwise.
Without limiting the obligations of the Company under SECTION 14.01, the Company
will pay to the holder of each Note on demand such further amount as shall be
sufficient to cover all reasonable costs and expenses of such holder
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.1 - Page 23
incurred in any enforcement or collection under this ARTICLE XI, including,
without limitation, reasonable attorneys' fees, expenses and disbursements,
together with interest on such amounts at the Default Rate accruing from the
date of demand.
ARTICLE XII
BORROWING BASE
SECTION 12.01. INITIAL BORROWING BASE. At all times prior to April
1, 1997, the borrowing base (as redetermined from time to time under this
ARTICLE XII, the "BORROWING BASE") shall equal $1,400,000.
SECTION 12.02. ANNUAL DETERMINATION OF BORROWING BASE. The Borrowing
Base shall be redetermined as of April 1 of each year commencing April 1, 1997
and shall equal the Future Net Revenue for the Company's Oil and Gas Properties
as set forth in the most recent Annual Reserve Report delivered to the
Noteholders under SECTION 8.01(D) as adjusted for production and pricing changes
for the period from the date of such Annual Reserve Report to the date of such
redetermination; provided, however, that if the Future Net Revenue set forth in
the Annual Reserve Report (as adjusted) exceeds 110% of the Future Net Revenue
as determined in good faith by the Noteholders' reserve engineer and the
Noteholders deliver written notice to the Company within fifteen (15) Business
Days after receipt of such Annual Reserve Report that such a difference exists,
then the independent engineering firm that prepared the Annual Reserve Report
and the Noteholders' reserve engineer shall jointly select another independent
petroleum engineering firm to determine the Future Net Revenue and the Borrowing
Base shall equal the average of the two lowest Future Net Revenue
determinations.
SECTION 12.03. UNSCHEDULED DETERMINATIONS OF BORROWING BASE. In
addition, at any time after Closing, the Company or the Required Holders may
initiate a redetermination of the Borrowing Base as they so elect (each an
"UNSCHEDULED BORROWING BASE REDETERMINATION") by giving notice to the
Noteholders or the Company, as applicable; provided that the Required Holders
and the Company may initiate only one such Unscheduled Borrowing Base
Redetermination during any consecutive six month period. Within 30 days after
the Company gives or receives notice of an Unscheduled Borrowing Base
Redetermination under this SECTION 12.03, the Company shall furnish the
Noteholders a reserve report (each a "SUPPLEMENTAL RESERVE REPORT") in form and
substance satisfactory to the Noteholders, prepared by an independent petroleum
engineering firm satisfactory to the Noteholders setting forth as of the date of
the notice of such Unscheduled Borrowing Base Redetermination, the Future Net
Revenue for the Company's Oil and Gas Properties. The Borrowing Base shall be
redetermined as of the 30th day following the Noteholders' receipt of the
Supplemental Reserve Report and shall equal the Future Net Revenue for the
Company's Oil and Gas Properties as set forth in such Supplemental Reserve
Report as adjusted for production and pricing changes for the period from the
date of such Supplemental Reserve Report to the date of such redetermination;
provided, however, that if the Future Net Revenue set forth in such Supplemental
Reserve Report (as adjusted) exceeds 110% of the Future Net Revenue as
determined in good faith by the
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Exhibit 10.1 - Page 24
Noteholders' reserve engineer and the Noteholders deliver written notice to the
Company within fifteen (15) Business Days after receipt of such Supplemental
Reserve Report that such a difference exists, then the independent engineering
firm that prepared such Supplemental Reserve Report and the Noteholders' reserve
engineer shall jointly select another independent petroleum engineering firm to
determine the Future Net Revenue and the Borrowing Base shall equal the average
of the two lowest Future Net Revenue determinations.
SECTION 12.04. BORROWING BASE REMAINS IN EFFECT. The Borrowing Base
as determined and redetermined from time to time under this ARTICLE XII shall
remain in effect until redetermined hereunder.
ARTICLE XIII
REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES
SECTION 13.01. REGISTRATION OF NOTES. The Company shall keep at its
principal executive office a register for the registration and registration of
transfers of Notes. The name and address of each holder of one or more Notes,
each transfer thereof and the name and address of each transferee of one or more
Notes shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Note shall be registered
shall be deemed and treated as the owner and holder thereof for all purposes
hereof, and the Company shall not be affected by any notice or knowledge to the
contrary. The Company shall give to any holder of a Note promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes.
SECTION 13.02. TRANSFER AND EXCHANGE OF NOTES. Subject to compliance
with all applicable securities laws, upon surrender of any Note at the principal
executive office of the Company for registration of transfer or exchange (and in
the case of a surrender for registration of transfer, duly endorsed or
accompanied by a written instrument of transfer duly executed by the registered
holder of such Note or his attorney duly authorized in writing and accompanied
by the address for notices of each transferee of such Note or part thereof), the
Company shall execute and deliver, at the Company's expense, one or more new
Notes (as requested by the holder thereof) in exchange therefor, in an aggregate
principal amount equal to the unpaid principal amount of the surrendered Note.
Each such new Note shall be payable to such Person as such holder may request
and shall be substantially in the form specified herein. Each such new Note
shall be dated and bear interest from the date to which interest shall have been
paid on the surrendered Note or dated the date of the surrendered Note if no
interest shall have been paid thereon.
SECTION 13.03. REPLACEMENT OF NOTES. Upon receipt by the Company of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note, and (a) in the case of loss, theft or
destruction, of indemnity reasonably satisfactory to it (provided that if the
holder of such Note is, or is a nominee for, an original Noteholder, such
Person's own unsecured agreement of indemnity shall be deemed to be
satisfactory), or (b) in the case of mutilation, upon surrender and cancellation
thereof, the Company at its own expense shall execute
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and deliver, in lieu thereof, a new Note, dated and bearing interest from the
date to which interest shall have been paid on such lost, stolen, destroyed or
mutilated Note or dated the date of such lost, stolen, destroyed or mutilated
Note if no interest shall have been paid thereon.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.01. TRANSACTION EXPENSES. Whether or not the transactions
contemplated hereby are consummated, the Company will pay all reasonable costs
and expenses (including reasonable attorneys' fees of a special counsel and any
local or other counsel) incurred by the Noteholders or holder of a Note in
connection with such transactions and in connection with any amendments, waivers
or consents under or in respect of this Agreement or the other Transaction
Documents (whether or not such amendment, waiver or consent becomes effective),
including, without limitation: (a) the reasonable costs and expenses incurred in
enforcing or defending (or determining whether or how to enforce or defend) any
rights under this Agreement or the other Transaction Documents or in responding
to any subpoena or other legal process or informal investigative demand issued
in connection with this Agreement or the other Transaction Documents, or by
reason of being a holder of any Note, (b) the reasonable costs and expenses of
negotiation, preparation and execution of this Agreement and the other
Transaction Documents, and (c) the reasonable costs and expenses, including
reasonable financial advisors' fees, incurred in connection with the insolvency
or bankruptcy of the Company or in connection with any proposed or finalized
work-out or restructuring of the transactions contemplated hereby and by the
Notes. The Company will pay, and will save the Noteholders and each other holder
of a Note harmless from, all claims in respect of any fees, costs or expenses,
if any, of brokers and finders (other than those retained by the Noteholders).
The obligations of the Company under this SECTION 14.01 will survive the payment
or transfer of any Note, the enforcement, amendment or waiver of any provision
of this Agreement or the other Transaction Documents, and the termination of
this Agreement.
SECTION 14.02. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the Notes, the purchase or transfer by the
Noteholders of any Note or portion thereof or interest therein and the payment
of any Note, and may be relied upon by any subsequent holder of a Note,
regardless of any investigation made at any time by or on behalf of the
Noteholders or any other holder of a Note. All statements contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant to this Agreement shall be deemed representations and warranties of the
Company under this Agreement.
SECTION 14.03. AMENDMENT AND WAIVER. This Agreement and the Notes
may be amended, and the observance of any term hereof or of the Notes may be
waived (either retroactively or prospectively), with (and only with) the written
consent of the Company and the Required Holders, except that (a) no amendment or
waiver of any of the provisions of ARTICLES II, III, IV OR V, or any defined
term (as it is used therein), will be effective as to the Noteholders unless
consented to by all of the Noteholders in writing, and (b) no such amendment or
waiver may, without the written consent
::ODMA\PCDOCS\DOCS\88117\1
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of the holder of each Note at the time outstanding affected thereby, (i) subject
to the provisions of ARTICLE XI relating to acceleration or rescission, change
the amount or time of any payment of principal of, or reduce the rate or change
the time of payment or method of computation of interest on, the Notes, or (ii)
change the percentage of the principal amount of the Notes the holders of which
are required to consent to any such amendment or waiver. Any amendment or waiver
consented to as provided in this SECTION 14.03 applies equally to all holders of
the Notes and is binding upon them and upon each future holder of any Note and
upon the Company and Parent without regard to whether such Note has been marked
to indicate such amendment or waiver. No such amendment or waiver will extend to
or affect any obligation, covenant, agreement, Default or Event of Default not
expressly amended or waived or impair any right consequent thereon. No course of
dealing between the Company or Parent and the holder of any Note nor any delay
in exercising any rights hereunder or under any Note shall operate as a waiver
of any rights of any holder of such Note.
SECTION 14.04. NOTICES. All notices and communications provided for
hereunder shall be in writing and sent (a) by telecopy if the sender on the same
day sends a confirming copy of such notice by a recognized overnight delivery
service (charges prepaid), or (b) by registered or certified mail with return
receipt requested (postage prepaid), or (c) by a recognized overnight delivery
service (with charges prepaid). Any such notice must be sent: if to a
Noteholder, to its address specified for such communications in SCHEDULE A, or
at such other address as it shall have specified to the Company in writing, if
to the Company, to the Company at 1600 Smith Street, Suite 4000, Houston, Texas
77002, Telecopy No. 713-652-9601, or at such other address as the Company shall
have specified to the holder of each Note in writing. Notices under this SECTION
14.04 will be deemed given only when actually received.
SECTION 14.05. LIMITATION ON INTEREST. Each provision in this
Agreement and each other Transaction Document is expressly limited so that in no
event whatsoever shall the amount paid, or otherwise agreed to be paid, by the
Company for the use, forbearance or detention of the money to be loaned under
this Agreement or any other Transaction Document or otherwise (including any
sums paid as required by any covenant or obligation contained herein or in any
other Transaction Document which is for the use, forbearance or detention of
such money), exceed that amount of money which would cause the effective rate of
interest thereon to exceed the Highest Lawful Rate, and all amounts owed under
this Agreement and each other Transaction Document shall be held to be subject
to reduction to the effect that such amounts so paid or agreed to be paid which
are for the use, forbearance or detention of money under this Agreement or such
Transaction Document shall in no event exceed that amount of money which would
cause the effective rate of interest thereon to exceed the Highest Lawful Rate.
Notwithstanding the provisions of SECTION 14.13, to the extent that the Highest
Lawful Rate applicable to a Noteholder is at any time determined by Texas law,
such rate shall be the "indicated rate ceiling" described in Section (a)(1) of
Article 1.04 of Chapter 1, Title 79, of the Revised Civil Statutes of Texas,
1925, as amended; PROVIDED, HOWEVER, to the extent permitted by such Article,
the Noteholders from time to time by notice to Company may revise the aforesaid
election of such interest rate ceiling as such ceiling affects the then-current
or future balances of the loans outstanding under the Notes. Notwithstanding any
provision in this Agreement or any other Transaction Document to the contrary,
if the maturity of the Notes or the obligations in respect of
::ODMA\PCDOCS\DOCS\88117\1
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the other Transaction Documents are accelerated for any reason, or in the event
of prepayment of all or any portion of the Notes or the obligations in respect
of the other Transaction Documents by the Company or in any other event, earned
interest on the Notes and such other obligations of the Company may never exceed
the maximum amount permitted by applicable law, and any unearned interest
otherwise payable under the Notes or the obligations in respect of the other
Transaction Documents that is in excess of the maximum amount permitted by
applicable law shall be canceled automatically as of the date of such
acceleration or prepayment or other such event and, if theretofore paid, shall
be credited on the principal of the Notes or, if the principal of the Notes has
been paid in full, refunded to the Company. In determining whether or not the
interest paid or payable, under any specific contingency, exceeds the Highest
Lawful Rate, the Company and the Noteholders shall, to the maximum extent
permitted by applicable law, amortize, prorate, allocate and spread, in equal
parts during the period of the actual term of this Agreement, all interest at
any time contracted for, charged, received or reserved in connection with the
Transaction Documents.
SECTION 14.06. INDEMNIFICATION. The Company agrees to indemnify,
defend and hold each Noteholder, their partners and their respective officers,
employees, agents, directors, partners, affiliates and shareholders
(collectively, "INDEMNIFIED PERSONS") harmless from and against any and all
loss, liability, damage, judgment, claim, deficiency or reasonable expense
(including interest, penalties, reasonable attorneys' fees and amounts paid in
settlement) incurred by or asserted against any Indemnified Person arising out
of, in any way connected with, or as a result of (a) the execution and delivery
of this Agreement and the other documents contemplated hereby, the performance
by the parties hereto and thereto of their respective obligations hereunder and
thereunder and the consummation of the transactions contemplated hereby and
thereby, (b) the actual or proposed use of the proceeds of the loans
contemplated hereby, (c) any violation by the Company or any of its Subsidiaries
of any requirement of law, including but not limited to Environmental Laws, (d)
any Noteholder being deemed an operator of any real or personal property of the
Company in circumstances in which no Noteholder is generally operating or
generally exercising control over such property, to the extent such losses,
liabilities, damages, judgments, claims, deficiencies or expenses arise out of
or result from any Hazardous Materials located in, on or under such property or
(e) any claim, litigation, investigation or proceeding relating to any of the
foregoing, whether or not any Indemnified Person is a party thereto; PROVIDED
that such indemnity shall not apply to any such losses, claims, damages,
liabilities or related expenses that are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of, or willful violation of the Transaction
Documents by, such Indemnified Person.
WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION
DOCUMENTS, IT IS THE EXPRESS INTENTION OF THE PARTIES THAT EACH INDEMNIFIED
PERSON SHALL BE INDEMNIFIED AND HELD HARMLESS AGAINST ANY AND ALL LOSSES,
LIABILITIES, CLAIMS, DEFICIENCIES, JUDGMENTS AND REASONABLE EXPENSES ARISING OUT
OF OR RESULTING FROM THE ORDINARY NEGLIGENCE (WHETHER SOLE OR CONTRIBUTORY) OF
SUCH INDEMNIFIED PERSON. Each Indemnified Person will attempt
to consult with the Company prior to entering into any settlement of any lawsuit
or proceeding that could give rise to a claim for indemnity under this SECTION
14.06, although nothing herein shall give the Company the right to direct, or
control any such settlement negotiations or any related lawsuit
::ODMA\PCDOCS\DOCS\88117\1
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or proceeding on behalf of such Indemnified Party. The obligations of the
Company under this SECTION 14.06 shall survive the termination of this Agreement
and repayment of the Notes.
SECTION 14.07. SUCCESSORS AND ASSIGNS. All covenants and other
agreements contained in this Agreement by or on behalf of any of the parties
hereto bind and inure to the benefit of their respective successors and assigns
(including, without limitation, any subsequent holder of a Note) whether so
expressed or not.
SECTION 14.08. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 14.09. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies hereof, each signed by less than all, but together signed by
all, of the parties hereto.
SECTION 14.10. FINAL AGREEMENT OF THE PARTIES. THIS AGREEMENT AND
THE OTHER TRANSACTION DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
SECTION 14.11. JURY WAIVER. THE COMPANY, PARENT AND THE NOTEHOLDERS
HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
SECTION 14.12. CHOICE OF FORUM. THE COMPANY, PARENT AND THE
NOTEHOLDERS AGREE THAT ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE BROUGHT IN THE
FEDERAL AND STATE COURTS OF HARRIS COUNTY, TEXAS, OTHER THAN LEGAL PROCEEDINGS
INSTITUTED BY THE NOTEHOLDERS WITH RESPECT TO THEIR RIGHTS AND REMEDIES UNDER
THE SECURITY DOCUMENTS, WHICH PROCEEDINGS MAY BE BROUGHT IN THE FEDERAL OR STATE
COURTS OF HARRIS COUNTY, TEXAS OR THE COURTS OF ANY OTHER JURISDICTION DEEMED
APPROPRIATE BY THE NOTEHOLDERS TO ENFORCE THEIR RIGHTS AND REMEDIES UNDER THE
SECURITY DOCUMENTS.
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SECTION 14.13. GOVERNING LAW. This Agreement and the Notes shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the law of the State of New York excluding choice-of-law
principles of the law of such State that would require the application of the
laws of a jurisdiction other than such State.
IN WITNESS WHEREOF, the Company, Parent and the Noteholders have
caused this Agreement to be executed by their respective representatives
thereunto duly authorized effective as of the date first above written.
TEXOIL COMPANY
By: /S/ RUBEN MEDRANO
Name: Ruben Medrano
Title:President
TEXOIL, INC.
By: /S/ RUBEN MEDRANO
Name: Ruben Medrano
Title:President
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.1 - Page 30
RIMCO PARTNERS, L.P.
RIMCO PARTNERS, L.P. II,
RIMCO PARTNERS, L.P. III, AND
RIMCO PARTNERS, L.P. IV
By: RESOURCE INVESTORS MANAGEMENT COMPANY
LIMITED PARTNERSHIP, THEIR GENERAL
PARTNER
By: RIMCO ASSOCIATES, INC.,
ITS GENERAL PARTNER
By: /S/ GARY MILAVEC
Name: Gary Milavec
Title:Vice President
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.1 - Page 31
SCHEDULE A
INFORMATION RELATING TO NOTEHOLDERS
Commitment Amount
NAME AND ADDRESS OF NOTEHOLDER
TRANCHE A NOTES
RIMCO PARTNERS, L.P. $ 840,000
RIMCO PARTNERS, L.P. II 840,000
RIMCO PARTNERS, L.P. III 360,000
RIMCO PARTNERS, L.P. IV 960,000
----------
$3,000,000
TRANCHE B NOTES
RIMCO PARTNERS, L.P. II $2,000,000
RIMCO PARTNERS, L.P. III 850,000
RIMCO PARTNERS, L.P. IV 2,150,000
----------
$5,000,000
(1) All payments by wire transfer
of immediately available
funds to:
Fleet Bank, N.Y.
ABA No. 021404465
Account Name: Texoil Company
Automatic Clearing Account
Account No. 939 066 5251
with sufficient information to identify the source and application of such
funds.
::ODMA\PCDOCS\DOCS\88117\1
Schedule A -1
(2) All notices of payments and
written confirmations of such
wire transfers:
Resource Investors Management Company
22 Waterville Road
Avon, Connecticut 06001
Attn: Doug Skelley
Telecopy No.:860-678-9382
(3) All other communications:
Resource Investors Management Company
Suite 6875
600 Travis Street
Houston, Texas 77002
Attn: Gary Milavec
Telecopy No.: 713-247-0730
with a copy to
Resource Investors Management Company
22 Waterville Road
Avon, Connecticut 06001
Attn: Paul McCollam
Telecopy No.:860-678-9382
::ODMA\PCDOCS\DOCS\88117\1
Schedule A -2
SCHEDULE 5.07
NONE
::ODMA\PCDOCS\DOCS\88117\1
Schedule 5.07
ANNEX A
DEFINED TERMS
"ACCREDITED INVESTOR" means an "accredited investor" as such term is
defined in Regulation D, Rule 501, promulgated by the Securities and Exchange
Commission.
"ADVANCE" means any Tranche A Advance or Tranche B Advance.
"ADVANCE REQUEST" is defined in SECTION 2.03(A).
"AFFILIATE" means, at any time, and with respect to any Person, (a)
any other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, and (b) any Person beneficially owning or holding, directly
or indirectly, 10% or more of any class of voting or equity interests of the
Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or more of any class of voting or equity interests. As used in this
definition, "CONTROL" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Unless the context otherwise clearly requires, any reference to an "Affiliate"
is a reference to an Affiliate of the Company.
"AGREEMENT" means this Note Purchase Agreement, as amended or
modified from time to time.
"ANNUAL RESERVE REPORT" is defined in SECTION 8.01(D).
"BORROWING BASE" is defined in SECTION 12.01.
"BRIDGE SHAREHOLDER DEBT" means Indebtedness of Parent in the amount
of $1,050,000 evidenced by: (a) that certain Promissory Note dated September 1,
1996, executed by Parent and made payable to the order of T.W. Hoehn, Jr. and
Betty Joe Hoehn Revocable Trust in the original principal amount of $1,000,000,
and (b) that certain Promissory Note dated September 1, 1996, executed by Parent
and made payable to the order of Opal Air, Inc. in the original principal amount
of $50,000.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a
day on which commercial banks in Houston, Texas or New York, New York are
required or authorized to be closed.
"CAPITAL EXPENDITURES" means as to any Person, the expenditures and
costs made by such Person that, in accordance with GAAP, are reflected as
capital expenditures on the consolidated balance sheet of such Person.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.1 (Annex A) - Page 1
"CAPITAL LEASE" means, at any time, a lease with respect to which
the lessee is required concurrently to recognize the acquisition of an asset and
the incurrence of a liability in accordance with GAAP.
"CLOSING" is defined in ARTICLE III.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time, and the rules and regulations promulgated thereunder from time to time.
"COMMITMENT" means any Tranche A Commitment or Tranche B Commitment.
"COMPANY" is defined in the introduction to this Agreement.
"CURRENT ASSETS" means as to any Person, as of any date, all assets
of such Person that would be reflected as current assets on a consolidated
balance sheet of such Person prepared on such date in accordance with GAAP
consistently applied.
"CURRENT LIABILITIES" means as to any Person, as of any date, all
liabilities of such Person that would be reflected as current liabilities on a
consolidated balance sheet of such Person prepared on such date in accordance
with GAAP consistently applied.
"DEDUCTIBLE COSTS" means, for any month, the sum of the following
amounts, to the extent such amounts were not deducted in calculating Gross
Proceeds, and without duplication, (a) Lease Operating Expenses for such month,
(b) severance and production taxes attributable to Gross Proceeds for such
month, and (c) royalties, overriding royalties and other similar burdens payable
out of production that are valid and existing and of record in the applicable
public records as of the date of this Agreement and overriding royalties granted
to the Noteholders under this Agreement, to the extent such royalties,
overriding royalties and other similar burdens are payable out of Gross Proceeds
for such month.
"DEFAULT" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.
"DEFAULT RATE" means fifteen percent (15%) per annum, but in no
event to exceed the Highest Lawful Rate.
"ENVIRONMENTAL LAWS" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.1 (Annex A) - Page 2
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the rules and regulations promulgated
thereunder from time to time in effect.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
and/or Parent under section 414 of the Code.
"EVENT OF DEFAULT" is defined in SECTION 11.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FUTURE NET REVENUE" means the aggregate of the estimated future net
revenues for each of the Company's Oil and Gas Properties, discounted at 10%,
attributable to the proved developed producing Hydrocarbon reserves for each
such Oil and Gas Property using average product prices and Lease Operating
Expenses for the six-month period preceding the date of determination of such
future net revenues. The product prices and Lease Operating Expenses for each
such Oil and Gas Property shall not be escalated over the life of such Oil and
Gas Property. Each determination of Future Net Revenue under the terms of this
Agreement shall also take into account cumulative production from the Oil and
Gas Properties since the last determination and such other criteria that are
required by sound petroleum engineering practice.
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States of America.
"GOVERNMENTAL AUTHORITY" means (a) the government of (i) the United
States of America or any State or other political subdivision thereof, or (ii)
any jurisdiction in which the Company or Parent conducts all or any part of its
business, or which asserts jurisdiction over any properties of the Company or
Parent, or (b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
"GREEN'S LAKE PROSPECT" means the lands situated in Galveston
County, Texas described as the "Greens Lake Area" in that certain Greens Lake
3-D Exploration Agreement dated October 16, 1996 between the Company and
Meridian Oil Inc.
"GROSS PROCEEDS" means, for any month, the gross proceeds accruing
from the sale of Hydrocarbons produced from the Company's Oil and Gas Properties
during such month.
"GUARANTY" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person: (a) to
purchase such indebtedness or obligation or any property constituting security
therefor; (b) to advance or
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.1 (Annex A) - Page 3
supply funds (i) for the purchase or payment of such indebtedness or obligation,
or (ii) to maintain any working capital or other balance sheet condition or any
income statement condition of any other Person or otherwise to advance or make
available funds for the purchase or payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services primarily for the
purpose of assuring the owner of such indebtedness or obligation of the ability
of any other Person to make payment of the indebtedness or obligation; or (d)
otherwise to assure the owner of such indebtedness or obligation against loss in
respect thereof. In any computation of the indebtedness or other liabilities of
the obligor under any Guaranty, the indebtedness or other obligations that are
the subject of such Guaranty shall be assumed to be direct obligations of such
obligor.
"GUARANTY AND EXCHANGE AGREEMENT" is defined in SECTION 2.05.
"HAZARDOUS MATERIAL" means any and all pollutants, toxic or
hazardous wastes or any other substances that might pose a hazard to health or
safety, the removal of which may be required or the generation, manufacture,
refining, production, processing, treatment, storage, handling, transportation,
transfer, use, disposal, release, discharge, spillage, seepage, or filtration of
which is or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polycholorinated biphenyls).
"HIGHEST LAWFUL RATE" means with respect to any indebtedness owed to
any Noteholder under any Transaction Document, the maximum nonusurious interest
rate, if any, that at any time or from time to time may be contracted for,
taken, reserved, charged or received by such Noteholder with respect to such
indebtedness under law applicable to such Noteholder.
"HOLDER" means, with respect to any Note, the Person in whose name
such Note is registered in the register maintained by the Company pursuant to
SECTION 13.01.
"HYDROCARBONS" means oil, natural gas, condensate and all other
liquid or gaseous hydrocarbons and all products produced or separated therefrom.
"INDEBTEDNESS" with respect to any Person means, at any time,
without duplication, (a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable Preferred Stock; (b) its
liabilities for the deferred purchase price of property acquired by such Person
(excluding accounts payable arising in the ordinary course of business but
including all liabilities created or arising under any conditional sale or other
title retention agreement with respect to any such property); (c) all
liabilities appearing on its balance sheet in accordance with GAAP in respect of
Capital Leases; (d) all liabilities for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has assumed or
otherwise become liable for such liabilities); (e) all its liabilities in
respect of letters of credit or instruments serving a similar function issued or
accepted for its account by banks and other financial institutions (whether or
not representing obligations for borrowed money); (f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to liabilities of a type described
in any of clauses (a) through (f) hereof.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.1 (Annex A) - Page 4
Indebtedness of any Person shall include all obligations of such Person of the
character described in clauses (a) through (g) to the extent such Person remains
legally liable in respect thereof notwithstanding that any such obligation is
deemed to be extinguished under GAAP.
"INDEMNIFIED PERSON" is defined in SECTION 14.06.
"INITIAL MORTGAGE" means that certain Mortgage, Assignment of
Production, Security Agreement and Financing Statement of even date herewith
from the Company to the Noteholders granting a first priority lien in favor of
the Noteholders on the Company's existing Oil and Gas Properties located in the
State of Louisiana or adjacent state waters and other related assets, as same
may be amended or supplemented from time to time.
"INITIAL PROSPECT DEVELOPMENT COSTS" means the Company's share of
costs to drill, test, complete, equip, deepen, sidetrack and/or recomplete any
well located on the Initial Prospects other than the first well to be drilled by
or on behalf of the Company on each of the Green's Lake Prospect and the
Raceland Prospect.
"INITIAL PROSPECTS" means, collectively, the Green's Lake Prospect,
the Laurel Grove Prospect and the Raceland Prospect.
"INITIAL RESERVE REPORT" means that certain reserve report, dated as
of January 1, 1996, prepared by Gruy Engineering Corp., a TESI company, covering
the Company's existing Oil and Gas Properties.
"INVESTMENT" means, with respect to any Person, any direct or
indirect purchase or other acquisition by such Person of stock or other
securities of any other Person, or any direct or indirect loan, advance or
capital contribution by such Person to any other Person, and any other item
which would be classified as an "investment" on a balance sheet of such Person
prepared in accordance with GAAP.
"LAUREL GROVE PROSPECT" means the lands situated in LaFourche
Parish, Louisiana described as the "Laurel Grove Area" in that certain Laurel
Grove 3-D Exploration Agreement dated May 1, 1996 between the Company and
Phillips Petroleum Company.
"LEASE OPERATING EXPENSES" means, for any month, direct
out-of-pocket costs and expenses incurred during such month by the Company to
operate and maintain the wells located on the Company's Oil and Gas Properties,
including fixed overhead costs payable under applicable operating agreements.
Without limiting the foregoing, Lease Operating Expenses shall not include any
land and legal fees incurred by the Company, leasehold, seismic or other
property acquisition costs, or costs to drill, test, complete, equip, deepen,
sidetrack, recomplete or plug and abandon any well or internal overhead costs.
"LIEN" means, with respect to any Person, any mortgage, lien,
pledge, charge, security interest or other encumbrance of any kind (whether
voluntary or involuntary), or any interest or title
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.1 (Annex A) - Page 5
of any vendor, lessor, lender or other secured party to or of such Person under
any conditional sale or other title retention agreement or Capital Lease, upon
or with respect to any property or asset of such Person (including in the case
of stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"MATERIAL" means, as to any Person, material in relation to the
business, operations, affairs, financial condition, assets, properties, or
prospects of such Person taken as a whole.
"MATERIAL ADVERSE EFFECT" means, as to any Person, a material
adverse effect on (a) the business, operations, affairs, financial condition,
assets or properties of such Person taken as a whole, or (b) the ability of such
Person to perform its obligations under this Agreement and the other Transaction
Documents, or (c) the validity or enforceability of this Agreement or the other
Transaction Documents.
"MONTHLY PAYMENT DATE" means the first day of each month.
"MONTHLY PRODUCTION REPORT" is defined in SECTION 8.01(E).
"MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer plan"
(as such term is defined in section 4001(a)(3) of ERISA).
"NET REVENUE" means, for any month, an amount equal to the excess,
if any, of Gross Proceeds for such month over Deductible Costs for such month.
"NEW SHAREHOLDER DEBT" means Indebtedness of Parent evidenced by
those three Replacement 12% Convertible Promissory Notes each dated as of
September 6, 1996, in the aggregate original principal amount of $900,000,
issued by the Parent to, respectively, T.W. Hoehn, Jr., T.W. Hoehn, III and
William F. Seagle, in various amounts and which may be converted into shares of
the Common Stock of Parent at an initial conversion price of $0.80 per share.
"NOTEHOLDERS" means, collectively, the Tranche A Noteholders and the
Tranche B Noteholders.
"NOTES" is defined in SECTION 2.02(B).
"OFFICER'S CERTIFICATE" means a certificate of a Senior Financial
Officer or of any other officer of the Company or Parent whose responsibilities
extend to the subject matter of such certificate.
"OIL AND GAS PROPERTIES" means oil and gas leasehold interests,
overriding royalty interests, mineral interests, royalty interests, net profits
interests, oil payments, production payments, carried interests, operating
rights and other similar properties or interests, including contractual rights
to any of the foregoing, together with all wells and units located on, or
attributable to, such properties or interests.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.1 (Annex A) - Page 6
"PARENT" is defined in the introduction to this Agreement.
"PARENT PREFERRED STOCK" means 23,000 shares of issued and
outstanding $.01 par Series A Preferred Stock of Parent.
"PBGC" means the Pension Benefit Guaranty Corporation referred to
and defined in ERISA or any successor thereto.
"PERMITTED INVESTMENTS" means any of the following Investments: (a)
securities issued or directly and fully guaranteed or insured by the United
States or any agency or instrumentality thereof (PROVIDED that the full faith
and credit of the United States of America is pledged in support thereof) having
a maturity not exceeding thirty (30) days from the date of acquisition; (b) time
deposits and certificates of deposit of any commercial bank of recognized
standing having capital and surplus in excess of $500,000,000, PROVIDED that the
long-term senior unsecured debt of such bank is rated at least A+ or the
equivalent thereof by Standard & Poor's Rating Group (a division of McGraw Hill)
("S&P") or at least A1 or the equivalent thereof by Moody's Investor Services,
Inc. ("Moody's"), having a maturity not exceeding thirty (30) days from the date
of acquisition; and (c) commercial paper issued by the parent corporation of any
commercial bank or by any domestic corporation, PROVIDED that such commercial
paper is rated at least A-1 or the equivalent thereof by S&P or at least P-1 or
the equivalent thereof by Moody's, having a maturity not exceeding thirty (30)
days from the date of acquisition.
"PERMITTED LIENS" means Liens permitted under SECTION 10.02.
"PERMITTED PREFERRED STOCK DIVIDENDS" means scheduled quarterly
dividends on the Parent Preferred Stock equal to $69,000 per quarter to the
extent such dividends are paid (a) after April 1, 1997, (b) when the Borrowing
Base equals or exceeds 150% of the outstanding principal amount of the Notes,
and (c) when no Default or Event of Default has occurred and is continuing.
"PERMITTED SHAREHOLDER DEBT PAYMENTS" means (a) monthly payments of
accrued interest on the Bridge Shareholder Debt and the New Shareholder Debt to
the extent such interest payments are made when no Default or Event of Default
has occurred and is continuing, and (b) quarterly principal payments of the
Bridge Shareholder Debt in the amounts specified in Section 2 of each of the
promissory notes evidencing the Bridge Shareholder Debt to the extent such
principal payments are made (i) when no Default or Event of Default has occurred
and is continuing, (ii) after the later of April 10, 1997 or the tenth day of
the first January, April, July or October after which the aggregate amount of
Tranche A Advances made under the Tranche A Notes equals or exceeds $2,800,000,
and (iii) when, after giving effect to such scheduled principal payments, the
Company has a cash balance of at least $150,000.
"PERSON" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.1 (Annex A) - Page 7
"PLAN" means an "employee benefit plan" (as defined in section 3(3)
of ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
"PLEDGE AGREEMENT" means that certain Pledge Agreement of even date
herewith executed by Parent in favor of the Noteholders pledging all of the
common stock of the Company, as amended from time to time.
"PREFERRED STOCK" means any class of capital stock of a corporation
that is preferred over any other class of capital stock of such corporation as
to the payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
"RACELAND PROSPECT" means the lands situated in LaFourche Parish,
Louisiana described as the "Raceland Area" in that certain Raceland 3-D
Exploration Agreement dated December 6, 1995 among the Company and Pogo
Producing Company, et al.
"REGISTRATION RIGHTS AGREEMENT" means that certain Stock Ownership
and Registration Rights Agreement of even date herewith among Parent, the
Company and the Noteholders, as same may be amended from time to time.
"REQUIRED HOLDERS" means, at any time, the holder or holders of at
least 51% of the then outstanding principal amount of the Notes (exclusive of
Notes then owned by Parent, the Company or any of their Affiliates).
"RESPONSIBLE OFFICER" means any Senior Financial Officer and any
other officer of the Company, or Parent, as the case may be, with responsibility
for the administration of the relevant portion of this Agreement.
"RESTRICTED DISBURSEMENTS" means, as to any Person, any: (a) loan or
advance to or investment in any other Person, or any commitment to make such a
loan, advance or investment in any other Person; (b) acquisition by such Person
of or investments by such Person in the debt of or equity of, and any capital
contribution (including capital contributions by transfer of assets or services)
by such Person to, another Person; (c) purchase, redemption or exchange of any
shares of any class of capital stock of such Person or any options, rights or
warrants to purchase any such stock or setting aside funds for any such purpose;
(d) declaration or payment of any dividends on shares of any class of capital
stock of such Person; (e) sinking fund or other payment or distribution made to
or for the benefit of any holders of the capital stock of such Person with
respect to such capital stock (other than distributions payable in capital
stock, or rights to acquire capital stock, of such Person) or setting aside
funds for any such purpose; (f) payment, purchase or redemption by such Person
of Indebtedness owing by such Person to any of its Affiliates; and (g) Capital
Expenditures made or funded by or on behalf of such Person.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.1 (Annex A) - Page 8
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.
"SECURITY DOCUMENTS" means the Initial Mortgage, the Pledge
Agreement and such other security agreements, guaranties, pledges, instruments,
financing statements or other documents which may be executed to secure the
obligations of the Company and Parent with respect to the Notes and this
Agreement and the other Transaction Documents.
"SENIOR FINANCIAL OFFICER" means any of the chief financial officer,
principal accounting officer, treasurer or comptroller of the Company or Parent,
as the case may be.
"SHAREHOLDER DEBT RESTRUCTURE DOCUMENTS" means, collectively, (a)
the promissory notes evidencing the Bridge Shareholder Debt, (b) the promissory
notes evidencing the New Shareholder Debt and those three Amended and Restated
Agreements of Purchase and Sale dated as of September 6, 1996 between Parent
and, respectively, T.W. Hoehn, Jr., T.W. Hoehn, III and William F. Seagle, (c)
that certain Cancellation of Guaranty, Warrants and Registration Rights
Agreement, dated as of September 6, 1996 among Parent, the Company, the holders
of the New Shareholder Debt and Joe C. Richardson, Jr., Trustee, U/D/T 5-17-91,
and (d) that certain Registration Rights Agreement, dated as of September 6,
1996, among Parent and the holders of the New Shareholder Debt.
"SUBORDINATION AGREEMENTS" means those certain Subordination
Agreements of even date herewith executed by the holders of the Bridge
Shareholder Debt and the New Shareholder Debt, in form and substance
satisfactory to the Noteholders, whereby the Bridge Shareholder Debt and the New
Shareholder Debt is subordinated to the Indebtedness under the Notes.
"SUBSIDIARY" means, as to any Person, any corporation, association
or other business entity in which such Person or one or more of its Subsidiaries
or such Person and one or more of its Subsidiaries owns sufficient equity or
voting interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person or
one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries).
"SUPPLEMENTAL RESERVE REPORT" is defined in SECTION 12.03.
"SWAPS" means, with respect to any Person, foreign exchange
transactions and commodity, currency and interest rate swaps, floors, caps,
collars, forward sales, options, other similar transactions and combinations of
the foregoing.
"TRANCHE A ADVANCE" is defined in SECTION 2.01(A).
"TRANCHE A COMMITMENT" is defined in SECTION 2.01(A).
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.1 (Annex A) - Page 9
"TRANCHE A COMMITMENT PERIOD" is defined in SECTION 2.01(A).
"TRANCHE A NOTES" is defined in SECTION 2.01(B).
"TRANCHE A NOTEHOLDERS" means, collectively, RIMCO Partners, L.P.,
RIMCO Partners, L.P. II, RIMCO Partners, L.P. III, RIMCO Partners, L.P. IV, and
each such Person's assignees or transferees who becomes a holder of any of the
Tranche A Notes.
"TRANCHE B ADVANCE" is defined in SECTION 2.02(A).
"TRANCHE B COMMITMENT" is defined in SECTION 2.02(A).
"TRANCHE B COMMITMENT PERIOD" is defined in SECTION 2.02(A).
"TRANCHE B NOTES" is defined in SECTION 2.02(B).
"TRANCHE B NOTEHOLDERS" means, collectively, RIMCO Partners, L.P.
II, RIMCO Partners, L.P. III, RIMCO Partners, L.P. IV, and each such Person's
assignees or transferees who becomes a holder of any of the Tranche B Notes.
"TRANSACTION DOCUMENTS" is defined in SECTION 3.01.
"UNSCHEDULED BORROWING BASE REDETERMINATION" is defined in SECTION
12.03.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.1 (Annex A) - Page 10
EXHIBIT 10.2
TRANCHE A NOTE
TEXOIL COMPANY
10% SENIOR SECURED EXCHANGEABLE
GENERAL OBLIGATION NOTE
No. [ ] September 6, 1996
------------
$[ ]
----------------------------------
FOR VALUE RECEIVED, the undersigned, TEXOIL COMPANY, a Tennessee
corporation (the "COMPANY"), hereby promises to pay to (the
- ----------------------------------------------------------- "TRANCHE A
NOTEHOLDER"), or registered assigns, the principal sum of and /100 DOLLARS ($ ),
or, if less, the aggregate unpaid principal amount of
- ------------------------------------ all Tranche A Advances (as defined in the
Note Purchase Agreement referred to below) made by the Tranche A Noteholder
under this Tranche A Note, together with interest (computed on the basis of a
360-day year of twelve 30-day months) (a) on the unpaid principal balance hereof
at the rate of ten percent (10%) per annum from the date hereof, until the
principal hereof shall have become due and payable, and (b) on any overdue
payment of principal or interest, at a rate per annum equal to fifteen percent
(15%); PROVIDED, HOWEVER, in no event shall such rate of interest ever exceed
the Highest Lawful Rate (as defined in the Note Purchase Agreement referred to
below).
This Tranche A Note shall be due and payable as follows:
(a) commencing on October 1, 1996, on the first day of each month, a
payment equal to all accrued, but unpaid interest hereon shall be due and
payable; and
(b) on September 1, 1999, the unpaid principal balance hereof,
together with all accrued, but unpaid interest hereon, shall be fully and
finally due and payable.
This Tranche A Note is one of a series of Tranche A Notes (herein
called the "TRANCHE A NOTES") issued pursuant to the Note Purchase Agreement
dated of even date herewith (as from time to time amended, the "NOTE PURCHASE
AGREEMENT"), among the Company, Texoil, Inc., a Nevada corporation ("PARENT"),
and the Noteholders named therein and is entitled to the benefits, and otherwise
subject to the provisions, thereof, including, without limitation, the
limitations on interest set forth in SECTION 14.05 thereof. This Tranche A Note
is secured by the Security Documents referred to in the Note Purchase Agreement.
This Tranche A Note is exchangeable for shares of common stock of
Parent upon the terms and conditions of that certain Guaranty and Exchange
Agreement dated of even date herewith among Parent, the Company and the
Noteholders named therein.
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
All payments made by the Company on this Tranche A Note shall be
applied first, to the accrued, but unpaid interest hereon, and the remainder, if
any, shall be applied to the principal balance hereof. The Company does not have
the right to prepay this Tranche A Note, in whole or in part, prior to maturity.
Payments of principal of and interest on this Tranche A Note are to
be made in lawful money of the United States of America at the places designated
in the Note Purchase Agreement.
This Tranche A Note is a registered Tranche A Note and, as provided
in the Note Purchase Agreement, upon surrender of this Tranche A Note for
registration of transfer, duly endorsed, or accompanied by a written instrument
of transfer duly executed, by the registered holder hereof or such holder's
attorney duly authorized in writing, a new Tranche A Note for a like principal
amount will be issued to, and registered in the name of, the transferee. Prior
to due presentment for registration of transfer, the Company may treat the
person in whose name this Tranche A Note is registered as the owner hereof for
the purpose of receiving payment and for all other purposes, and the Company
will not be affected by any notice to the contrary.
If an Event of Default, as defined in the Note Purchase Agreement,
occurs and is continuing, the principal and other amounts outstanding under this
Tranche A Note may be declared or otherwise become due and payable in the
manner, at the price and with the effect provided in the Note Purchase
Agreement.
This Tranche A Note shall be governed by and construed in accordance
with the laws of the State of New York, excluding the choice of law rules
thereof.
TEXOIL COMPANY
By:
Name:
Title:
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.2 - Page 2
EXHIBIT 10.3
TRANCHE B NOTE
TEXOIL COMPANY
10% SENIOR SECURED
GENERAL OBLIGATION NOTE
No. [ ] September 6, 1996
------------
$[ ]
----------------------------------
FOR VALUE RECEIVED, the undersigned, TEXOIL COMPANY, a Tennessee
corporation (the "COMPANY"), hereby promises to pay to (the
- ----------------------------------------------------------- "TRANCHE B
NOTEHOLDER"), or registered assigns, the principal sum of and /100 DOLLARS ($ ),
or, if less, the aggregate unpaid principal amount of
- ------------------------------------ all Tranche B Advances (as defined in the
Note Purchase Agreement referred to below) made by the Tranche B Noteholder
under this Tranche B Note, together with interest (computed on the basis of a
360-day year of twelve 30-day months) (a) on the unpaid principal balance hereof
at the rate of ten percent (10%) per annum from the date hereof, until the
principal hereof shall have become due and payable, and (b) on any overdue
payment of principal or interest, at a rate per annum equal to fifteen percent
(15%); PROVIDED, HOWEVER, in no event shall such rate of interest ever exceed
the Highest Lawful Rate (as defined in the Note Purchase Agreement referred to
below).
This Tranche B Note is one of a series of Tranche B Notes (herein
called the "TRANCHE B NOTES") issued pursuant to the Note Purchase Agreement
dated of even date herewith (as from time to time amended, the "NOTE PURCHASE
AGREEMENT"), among the Company, Texoil, Inc., a Nevada corporation ("PARENT"),
and the Noteholders named therein and is entitled to the benefits, and otherwise
subject to the provisions, thereof, including, without limitation, the
limitations on interest set forth in SECTION 14.05 thereof. This Tranche B Note
is secured by the Security Documents referred to in the Note Purchase Agreement.
The unpaid principal balance of this Tranche B Note, together with
all accrued, but unpaid interest hereon, shall be fully and finally due and
payable on September 1, 2002; provided, that this Tranche B Note is subject to,
and the Company agrees to make, mandatory prepayments on this Tranche B Note at
the times and in the manner specified in the Note Purchase Agreement.
All payments made by the Company on this Tranche B Note shall be
applied first, to the accrued, but unpaid interest hereon, and the remainder, if
any, shall be applied to the principal balance hereof. In addition, this Tranche
B Note is subject to optional prepayment, in whole or from time to time in part,
without notice, premium, fee or penalty, at the times and on the terms specified
in the Note Purchase Agreement, but not otherwise.
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
Payments of principal of and interest on this Tranche B Note are to
be made in lawful money of the United States of America at the places designated
in the Note Purchase Agreement.
This Tranche B Note is a registered Tranche B Note and, as provided
in the Note Purchase Agreement, upon surrender of this Tranche B Note for
registration of transfer, duly endorsed, or accompanied by a written instrument
of transfer duly executed, by the registered holder hereof or such holder's
attorney duly authorized in writing, a new Tranche B Note for a like principal
amount will be issued to, and registered in the name of, the transferee. Prior
to due presentment for registration of transfer, the Company may treat the
person in whose name this Tranche B Note is registered as the owner hereof for
the purpose of receiving payment and for all other purposes, and the Company
will not be affected by any notice to the contrary.
If an Event of Default, as defined in the Note Purchase Agreement,
occurs and is continuing, the principal and other amounts outstanding under this
Tranche B Note may be declared or otherwise become due and payable in the
manner, at the price and with the effect provided in the Note Purchase
Agreement.
This Tranche B Note shall be governed by and construed in accordance
with the laws of the State of New York, excluding the choice of law rules
thereof.
TEXOIL COMPANY
By:
Name:
Title:
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.3 - Page 2
EXHIBIT 10.4
GUARANTY AND EXCHANGE AGREEMENT
GUARANTY AND EXCHANGE AGREEMENT dated as of September 6, 1996 among
TEXOIL, INC., a Nevada corporation ("PARENT"), TEXOIL COMPANY, a Tennessee
corporation (the "COMPANY") and RIMCO PARTNERS, L.P., a Delaware limited
partnership, RIMCO PARTNERS, L.P. II, a Delaware limited partnership, RIMCO
PARTNERS, L.P. III, a Delaware limited partnership, and RIMCO PARTNERS, L.P. IV,
a Delaware limited partnership.
PRELIMINARY STATEMENT
The Noteholders have entered into a Note Purchase Agreement dated of
even date herewith (said Agreement, as it may hereafter be amended or otherwise
modified from time to time, being the "NOTE AGREEMENT") with the Company and
Parent. The Company is a wholly-owned subsidiary of Parent. It is a condition
precedent to the obligation of the Noteholders to make Advances under the Note
Agreement that the Company and Parent shall have executed and delivered this
Agreement. Parent has determined that it will receive a substantial benefit if
Advances are made to the Company under the Note Agreement.
In consideration of the mutual covenants herein contained, Parent,
the Company and the Noteholders agree as follows:
ARTICLE I
DEFINITIONS, ETC.
SECTION 1.01. CERTAIN DEFINED TERMS. Capitalized terms used in this
Agreement and not otherwise defined herein shall have the respective meanings
set forth in the Note Agreement and the Annex A attached thereto (such meanings
to be equally applicable to both singular and plural forms of the terms
defined).
SECTION 1.02. COVENANT CONSTRUCTION. Each covenant contained herein
shall be construed (absent express provision to the contrary) as being
independent of each other covenant contained herein, so that compliance with any
one covenant shall not (absent such an express contrary provision) be deemed to
excuse compliance with any other covenant. Where any provision herein refers to
action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person.
SECTION 1.03. OTHER RULES OF CONSTRUCTION. The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement. All references herein to articles, sections, annexes, exhibits
and schedules shall, unless the context requires a different construction, be
deemed to be references to the articles and sections of this Agreement and the
annexes, exhibits
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.4 - Page 1
<PAGE>
and schedules attached hereto and made a part hereof. In this Agreement, unless
a clear contrary intention appears, the word "including" (and with correlative
meaning "include") means including, without limiting the generality of any
description preceding such term. The headings of the various articles and
sections of this Agreement are for convenience only and shall not affect the
meaning of the terms and conditions of this Agreement. No provision of this
Agreement shall be interpreted or construed against any party solely because
that party or its legal representative drafted such provision.
ARTICLE II
GUARANTY
SECTION 2.01. GUARANTY. Parent hereby unconditionally and
irrevocably guarantees the full and punctual payment when due, whether at stated
maturity or earlier by acceleration or otherwise, of any and all debts,
liabilities and obligations of the Company now or hereafter existing under the
Note Agreement, the Notes or any of the other Transaction Documents whether for
principal, interest (including, without limitation, all interest that accrues
after the commencement of any proceeding by or against the Company under any
bankruptcy, insolvency, liquidation, moratorium, receivership, reorganization or
other similar debtor relief law), fees, expenses or otherwise (such obligations
being the "OBLIGATIONS"), and agrees to pay any and all reasonable costs and
expenses (including counsel fees and legal expenses) incurred by the Noteholders
in connection with the protection, defense or enforcement of any rights under
this Agreement and any of the other Transaction Documents.
SECTION 2.02. GUARANTY ABSOLUTE. Parent unconditionally guarantees
that the Obligations will be paid strictly in accordance with the terms of the
Note Agreement, the Notes and the other Transaction Documents, regardless of any
law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the Noteholders with respect
thereto. The liability of Parent under this Agreement shall be absolute and
unconditional irrespective of: (a) any lack of validity or enforceability of the
Note Agreement, the Notes, the other Transaction Documents or any other
agreement or instrument relating thereto (unless such invalidity or
unenforceability results from a failure of consideration on the part of the
Noteholders); (b) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to departure from the Note Agreement, the Notes or the
other Transaction Documents; (c) any taking, exchange, release or non-perfection
of any collateral, or any release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Obligations; (d) any
manner of application of collateral, or proceeds thereof, to all or any of the
Obligations, or any manner of sale or other disposition of any collateral for
all or any of the Obligations or any other assets of the Company; (e) any
change, restructuring or termination of the corporate structure or existence of
the Company; or (f) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, the Company or a guarantor (except full
and indefeasible payment of the Obligations, including, payment of the Tranche A
Notes, via exchange for Parent Common Stock in accordance with Article III
hereof).
The obligations of Parent under this Agreement shall not be subject
to reduction, termination or other impairment by reason of any setoff,
recoupment, counterclaim or defense or for
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.4 - Page 2
<PAGE>
any other reason (except full and indefeasible payment of the Obligations,
including, payment of the Tranche A Notes, via exchange for Parent Common Stock
in accordance with Article III hereof). This Agreement is to be in addition to
and is not to prejudice or be prejudiced by any other securities or guaranties
(including any guaranty signed by Parent) which the Noteholders may now or
hereafter hold from or on account of the Company and is to be binding on Parent
as a continuing security notwithstanding any payments from time to time made to
the Noteholders or any settlement of account or disability or incapacity
affecting Parent or any other thing whatsoever. This Agreement is a continuing
guaranty and shall remain in full force and effect until payment in full of the
Obligations and all other amounts payable under this Agreement.
SECTION 2.03. WAIVER. Parent hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Obligations
and this Agreement and any liability to which this Agreement applies or may
apply, and waives presentment, demand of payment, notice of intent to
accelerate, notice of acceleration, notice of dishonor or nonpayment, and any
requirement that the Noteholders institute suit, collection proceedings or take
any other action to collect the Obligations including any requirement that the
Noteholders protect, secure, perfect or insure any security interest or lien or
any property subject thereto or exhaust any right or take any action against the
Company or any other person or entity or any collateral (it being the intention
of the Noteholders and Parent that this Agreement is to be a guaranty of payment
and not of collection) or that the Company or any other person be joined in any
action hereunder. Notwithstanding the provisions of SECTION 8.12, Parent hereby
expressly waives each and every right to which it may be entitled by virtue of
the suretyship laws of the State of Texas, including, without limitation, any
and all rights it may have pursuant to Rule 31 or Rule 32, Texas Rules of Civil
Procedure, Section 17.001 of the Texas Civil Practice and Remedies Code and
Chapter 34 of the Texas Business and Commerce Code. Parent hereby waives
marshalling of assets and liabilities, sale in inverse order of alienation,
notice by the Noteholders of any indebtedness or liability to which it applies
or may apply any amounts received by the Noteholders, and of the creation,
advancement, increase, existence, extension, renewal, rearrangement and/or
modification of the Obligations.
SECTION 2.04. WAIVER OF SUBROGATION; ETC. Parent will not exercise
any rights of subrogation under this Agreement, by any payment made hereunder or
otherwise, until such time as the Noteholders have received full payment of the
Obligations. If, notwithstanding the preceding sentence, any amount shall be
paid to Parent on account of subrogation rights at any time when all the
Obligations shall not have been paid in full, such amount shall be held in trust
for the benefit of the Noteholders and shall forthwith be paid to the
Noteholders to be credited and applied upon the Obligations in accordance with
the terms of the Note Agreement.
Parent hereby subordinates all indebtedness owing to it from the
Company to all indebtedness of the Company to the Noteholders, and agrees that
upon the occurrence and continuance of an Event of Default or any event which
with the giving of notice or lapse of time could become an Event of Default, it
shall not accept any payment on the same until payment in full of the
Obligations, and shall in no circumstance whatsoever attempt to set off or
reduce any Obligations hereunder because of such indebtedness. Parent further
subordinates any lien or security interest that it has or may have on any
collateral or security securing payment of the Obligations to the liens and
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.4 - Page 3
<PAGE>
security interest on said collateral and security in favor of the Noteholders,
but the foregoing shall in no event imply or be construed to imply the
Noteholders' agreement or consent to the existence of any such security
interests in favor of Parent.
SECTION 2.05. RIGHT OF SET-OFF. Upon the occurrence and during the
continuance of any Event of Default the Noteholders are hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by the
Noteholders to or for the credit or the account of Parent against any and all of
the obligations of Parent now or hereafter existing under this Agreement,
irrespective of whether or not the Noteholders shall have made any demand under
this Agreement and although such obligations may be contingent and unmatured.
The Noteholders agree promptly to notify Parent after any such set-off and
application, PROVIDED that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Noteholders under
this Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Noteholders may have.
SECTION 2.06. TRANSACTION DOCUMENTS. Parent acknowledges that it has
had full and complete access to the Note Agreement, the Notes and the other
Transaction Documents, has fully reviewed same and is fully aware of their
contents.
SECTION 2.07. EFFECT OF BANKRUPTCY PROCEEDING, ETC. This Agreement
shall continue to be effective, or be automatically reinstated, as the case may
be, if at any time payment, in whole or in part, of any of the sums due any
Noteholders pursuant to the terms of the Note Agreement or hereunder is
rescinded or must otherwise be restored or returned by the Noteholders upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Company or Parent, or upon or as a result of the appointment of a custodian,
receiver, trustee or other officer with similar powers with respect to the
Company or Parent or any substantial part of their property, or otherwise, all
as though such payments had not been made. If an Event of Default shall at any
time have occurred and be continuing and declaration of such Event of Default
shall at such time be prevented by reason of the pendency against the Company of
a case or proceeding under a bankruptcy or insolvency law, Parent agrees that,
for purposes of this Agreement and its obligations hereunder, the Note Agreement
shall be deemed to have been declared in default with the same effect as if the
Note Agreement had been declared in default in accordance with the terms
thereof, and Parent shall forthwith pay the amounts specified by the Noteholders
to be paid thereunder, any interest thereon and any other amounts guaranteed
hereunder without further notice or demand.
SECTION 2.08. NO WAIVER; REMEDIES. No failure on the part of the
Noteholders to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 2.09. PLEDGE AGREEMENT. Parent's obligations under this
Agreement are secured by the Pledge Agreement.
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
SECTION 2.10. FURTHER ASSURANCES. Parent hereby agrees to execute
and deliver all such instruments and take all such action as the Noteholders may
from time to time reasonably request in order to fully effectuate the purpose of
this Agreement.
ARTICLE III
EXCHANGE AGREEMENT
SECTION 3.01. EXCHANGE. (a) Each Tranche A Noteholder shall have the
right, at the option of such holder at any time up to and including the maturity
date of the Tranche A Notes, to exchange the outstanding principal amount of any
Tranche A Note (or any portion thereof), plus accrued and unpaid interest due
thereon to the effective date of the exchange, into fully paid and
non-assessable shares of common stock, par value $.01 per share, of Parent (the
"PARENT COMMON STOCK"), subject to possible adjustment as provided below. The
number of shares of Parent Common Stock issuable in exchange for a Tranche A
Note shall be equal to the quotient of the principal amount of such Tranche A
Note (or the portion thereof) submitted for exchange plus accrued and unpaid
interest due thereon to the effective date of the exchange, divided by the
"Exchange Price" (as defined below). As used herein, the term "EXCHANGE PRICE"
shall mean the price of $.80 per share, or, in case an adjustment of such price
has taken place pursuant to the provisions hereof, then at the price as last
adjusted.
(b) Subject to the provisions of SECTIONS 3.01(C), 3.01(D) and
3.01(E) hereof, if at any time after an aggregate amount of at least $2,800,000
has been advanced under the Tranche A Notes, the average closing price per share
of Parent Common Stock (as reported by the principal securities exchange or
trading market, as the case may be, on which the Parent Common Stock is then
traded) during a period of 20 consecutive trading days (such 20-day average
being referred to herein as the "AVERAGE PRICE") equals or exceeds $3.00 per
share (a "SPECIAL EXCHANGE EVENT"), the Company may, at its option exercisable
in its sole discretion at any time during the 30-day period following such
Special Exchange Event, exchange all (but not less than all) of the outstanding
principal amount of the Tranche A Notes, plus accrued and unpaid interest due
thereon to the effective date of such exchange, into fully paid and
non-assessable shares of Parent Common Stock at the Exchange Price then in
effect. Such exchange shall be deemed to have been effected immediately upon the
mailing of the notice referred to in SECTION 3.02(B) hereof, which notice to be
effective must be deposited in the mail on or prior to the close of business on
the thirtieth day following the Special Exchange Event, whereupon the person or
persons entitled to receive the Parent Common Stock deliverable upon such
exchange shall thereupon be treated for all purposes as the record holder or
holders of such Parent Common Stock, and the Tranche A Notes shall be deemed to
represent only the right to receive certificates representing the number of
shares of Parent Common Stock, plus cash in lieu of fractional shares in
accordance with SECTION 3.04, for which each such Tranche A Note has been so
exchanged. If the Company does not exchange the Tranche A Notes in accordance
with this SECTION 3.01(B) within the 30-day period following any Special
Exchange Event, then a new period of trading days shall begin for purposes of
determining whether the Company may exchange the Tranche A Notes pursuant to
this SECTION 3.01(B).
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
(c) Notwithstanding the provisions of SECTION 3.01(B) hereof, during
any period of time in which the Parent Common Stock is not traded on a
securities exchange or other established trading market, no Special Exchange
Event shall be deemed to occur.
(d) Notwithstanding the provisions of SECTION 3.01(B), the Company
shall not exchange the Tranche A Notes for Parent Common Stock pursuant to
SECTION 3.01(B) unless the Replacement 12% Convertible Promissory Notes
evidencing the New Shareholder Debt are simultaneously converted pursuant to the
terms of such notes.
(e) Notwithstanding the provisions of SECTION 3.01(B), the Company
may not exercise its right to exchange all of the outstanding principal amount
of the Tranche A Notes for Parent Common Stock more than twice.
SECTION 3.02. EXCHANGE PROCEDURE. (a) If any Tranche A Noteholder
desires to exchange any Tranche A Note for Parent Common Stock pursuant to
SECTION 3.01(A) hereof, the holder of such Tranche A Note shall deliver an
irrevocable written notice to the Company that the holder elects so to exchange
such Tranche A Note in accordance with the terms of SECTION 3.01(A) hereof, and
specifying the name or names (with address) in which a certificate or
certificates for Parent Common Stock are to be issued.
(b) If the Company elects pursuant to SECTION 3.01(B) hereof to
exchange the outstanding principal amount of the Tranche A Notes for Parent
Common Stock, the Company shall, within 30 days after the Special Exchange Event
with respect to which such election is made, send notice (or cause notice to be
sent) by first class mail, postage prepaid, to each holder of record of the
Tranche A Notes at such holder's address as specified pursuant to the Tranche A
Note Agreement. Each such notice of exchange shall specify the date such
exchange was effected, the Exchange Price, the Exchange Rate (as defined in
SECTION 3.03), and that on and after such exchange date, interest will cease to
accrue on such outstanding principal amount of the Tranche A Notes being so
exchanged.
(c) The Company will, as soon as practicable after such written
notice specified in SECTION 3.02(A) or (B) hereof and compliance with any other
conditions herein contained, deliver or cause to be delivered, to the holder of
record of each Tranche A Note to be exchanged, certificates for the number of
full shares of Parent Common Stock to which such Person shall be entitled upon
exchange as aforesaid and a cash adjustment for any fraction of a share of
Parent Common Stock as provided in SECTION 3.04. In the case of an exchange of a
Tranche A Note pursuant to SECTION 3.01(A) hereof, such exchange shall be deemed
to have been made as of the date of the written notice delivered pursuant to
SECTION 3.02(A) hereof, and the Person entitled to receive the Parent Common
Stock deliverable upon exchange of such Tranche A Note shall be treated for all
purposes as the record holder of such Parent Common Stock on and after such date
of notice.
(d) Upon the exchange of all or a portion of the outstanding
principal amount of a Tranche A Note for common stock of Parent in accordance
with this Agreement, the amount of the
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
outstanding principal of such Tranche A Note and the Tranche A Commitment of the
holder of such Tranche A Note shall each be automatically reduced by the
principal amount of such Tranche A Note so exchanged.
SECTION 3.03. ADJUSTMENTS. The Exchange Price and the number of
shares of Parent Common Stock and the number or amount of any other securities
and property as hereinafter provided into which a Tranche A Note is exchangeable
(the "EXCHANGE RATE") shall be subject to adjustment from time to time effective
upon each occurrence of any of the following events. As used in this Section
3.03 the term "SHARES" means, collectively, (i) the shares of Parent Common
Stock issuable upon exchange of the Tranche A Notes and (ii) any securities
exchangeable for or issuable with respect to, the shares included in clause (i)
of this definition. In case by reason of the operation of this SECTION 3.03 the
Tranche A Notes shall be exchangeable for any other shares of stock or other
securities or property of Parent or of any other corporation, any reference
herein to the exchange of the Tranche A Notes shall be deemed to refer to and
include the exchange of the Tranche A Notes for such other shares of stock or
other securities or property.
(a) If Parent shall declare or pay any dividend with respect to
Parent Common Stock payable in Parent Common Stock, subdivide the outstanding
shares of Parent Common Stock into a greater number of shares of Parent Common
Stock, or reduce the number of shares of Parent Common Stock outstanding (by
stock split, reverse stock split, reclassification or otherwise than by
repurchase of its Parent Common Stock) (any of such events being hereinafter
called a "STOCK SPLIT"), the Exchange Price and number of shares of Parent
Common Stock issuable upon exchange of any Tranche A Note shall be appropriately
adjusted so as to entitle the holder thereof to receive upon exchange of its
Tranche A Note, for the same aggregate consideration provided herein, the same
number of shares of Parent Common Stock (plus cash in lieu of fractional shares)
as the holder would have received as a result of such Stock Split had such
holder exchanged such Tranche A Note in full immediately prior to such Stock
Split.
(b) If Parent shall merge or consolidate with or into one or more
corporations or partnerships and Parent is the sole surviving corporation, or
Parent shall adopt a plan of recapitalization or reorganization in which shares
of Parent Common Stock are exchanged for or changed into another class of stock
or other security or property of Parent, the holder of a Tranche A Note, for the
same aggregate consideration provided herein, shall be entitled upon exchange of
such Tranche A Note to receive in lieu of the number of shares of Parent Common
Stock for which such Tranche A Note would otherwise be exchangeable, the number
of shares of Parent Common Stock or other securities (plus cash in lieu of
fractional shares) or property to which such holder would have been entitled
pursuant to the terms of the agreement or plan of merger, consolidation,
recapitalization or reorganization had such holder exchanged such Tranche A Note
in full immediately prior to such merger, consolidation, recapitalization or
reorganization.
(c) If Parent is merged or consolidated with or into one or more
corporations or partnerships under circumstances in which Parent is not the sole
surviving corporation, or if Parent sells or otherwise disposes of substantially
all its assets, and in connection with any such merger,
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
consolidation or sale the holders of Parent Common Stock receive stock or other
securities convertible into equity of the surviving or acquiring corporations or
entities, or other securities or property, after the effective date of such
merger, consolidation or sale, as the case may be, the holder of a Tranche A
Note shall, for the same aggregate consideration provided herein, be entitled
upon exchange of the Tranche A Note to receive, in lieu of shares of Parent
Common Stock for which such Tranche A Note would otherwise be exchangeable,
shares of such stock or other securities (plus cash in lieu of fractional
shares) or property as the holder of such Tranche A Note would have received
pursuant to the terms of the merger, consolidation or sale had such holder
exchanged such Tranche A Note in full immediately prior to such merger,
consolidation or sale. In the event of any consolidation, merger or sale as
described in this SECTION 3.03(C), provision shall be made in connection
therewith for the surviving or acquiring corporations or partnerships to assume
all obligations and duties of Parent hereunder.
(d) If Parent shall declare or pay any dividend, or make any
distribution, with respect to its Parent Common Stock that is payable in
preferred stock or other securities, cash, assets or rights to subscribe for or
purchase any security of Parent other than Parent Common Stock, or that is
payable in debt securities of Parent convertible into Parent Common Stock,
preferred stock or other equity securities of Parent, the holder of a Tranche A
Note shall, for the same aggregate consideration provided herein, be entitled to
receive upon exchange of such Tranche A Note in lieu of the shares of Parent
Common Stock for which such Tranche A Note would otherwise be exchangeable, the
same amount of Parent Common Stock, preferred stock and other securities, cash,
assets or rights to subscribe for or purchase any security (plus cash in lieu of
fractional shares) as the holder would have received had the holder exchanged
such Tranche A Note in full immediately prior to any such dividend or
distribution being made.
(e) If Parent (other than in connection with a sale described in
SECTION 3.03(C)) proposes to liquidate and dissolve, Parent shall give notice
thereof as provided in SECTION 3.05(E) hereof and shall permit the holder of a
Tranche A Note to exchange any unexchanged portion thereof at any time, if such
holder should elect to do so, and participate as a stockholder of Parent in
connection with such dissolution.
(f) If the Exchange Price shall fall below the par value of the
Parent Common Stock, Parent agrees to use commercially reasonable efforts to
appropriately adjust the par value of the Parent Common Stock to an amount less
than or equal to the Exchange Price.
(g) In order to protect each holder of a Tranche A Note against the
dilution of its interest in Parent, if and whenever on or after the date hereof
Parent issues or sells any Parent Common Stock (except any Permitted Issuance or
any issuance pursuant to SECTION 3.03(A)) for a consideration per share which is
less than the then Exchange Price (a "SPECIAL ISSUANCE"), then forthwith upon
such issuance or sale the number of Shares (as defined in SECTION 3.03), as
determined immediately prior to such Special Issuance, will be increased to
equal the New Exchange Shares (as defined below), and the Exchange Price will be
equal to the New Exchange Price, each as determined pursuant to the following
formulas:
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.4 - Page 8
<PAGE>
NES = S x ((OS + SI) / (OS + X))
NEP = (OEP x S) / NES
where:
S = the Shares (as defined in SECTION 3.03), as determined immediately
prior to such Special Issuance
OS = the number of shares of Parent Common Stock outstanding
immediately prior to such Special Issuance on a fully diluted basis
without giving effect to such Special Issuance
NES = the number of Shares (as defined in SECTION 3.03) as determined
immediately following the aggregate adjustment made by reason of
this SECTION 3.03(G) ("NEW EXCHANGE SHARES")
SI = the number of shares of Parent Common Stock issued or sold (or
deemed issued or sold) in such Special Issuance
X = the number of shares of Parent Common Stock that the aggregate
cash consideration actually received by Parent for SI would purchase
at OEP
NEP = the "NEW EXCHANGE PRICE"
OEP = the Exchange Price in effect immediately prior to such Special
Issuance
"PERMITTED ISSUANCES" means any and all issuances of shares of Parent Common
Stock pursuant to (x) any stock option, stock purchase or other employee or
director benefit plan of Parent and (y) any warrant or other right to purchase
Parent Common Stock, in each case existing as of the date hereof and
specifically disclosed on SCHEDULE 3.03 attached hereto.
(h) Whenever the Exchange Rate or the Exchange Price is adjusted as
provided in any provision of this SECTION 3.03:
(i) the Company shall compute the adjusted Exchange Rate and
Exchange Price, as applicable, in accordance with this SECTION 3.03
and shall prepare a certificate signed by the Senior Financial
Officer of the Company setting forth the adjusted Exchange Rate and
Exchange Price, as applicable, and showing in reasonable detail the
facts upon which such adjustment is based, and such certificate
shall forthwith be filed with the Company or its designee; and
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.4 - Page 9
<PAGE>
(ii) a notice stating that the Exchange Rate and the Exchange Price,
as applicable, has been adjusted and setting forth the adjusted
Exchange Rate and the Exchange Price, as applicable, shall forthwith
be required, and as soon as practicable after it is prepared, such
notice shall be mailed by the Company to the holder of record of
each Tranche A Note at such holder's address specified pursuant to
the Tranche A Note Agreement.
(i) If at any time, as a result of any adjustment to the Exchange
Rate made pursuant to this SECTION 3.03, the holder of any Tranche A Note
thereafter surrendered for exchange shall become entitled to receive any shares
of Parent other than shares of Parent Common Stock or to receive any other
securities, the number of such other shares or securities so receivable upon
exchange of such Tranche A Note shall be subject to adjustment from time to time
in a manner and on terms as nearly equivalent as practicable to the provisions
contained in this SECTION 3.03 with respect to the Parent Common Stock.
(j) All of the events requiring adjustments pursuant to this SECTION
3.03 are subject to such prohibitions, limitations, restrictions and other
provisions as set forth in the Transaction Documents, as may be amended from
time to time.
SECTION 3.04. CASH IN LIEU OF FRACTIONAL SHARES. No fractional
shares or scrip representing fractional shares of Parent Common Stock shall be
issued upon the exchange of any Tranche A Note. Instead of any fractional share
of Parent Common Stock that would otherwise be issuable upon exchange of a
Tranche A Note, the Company will pay a cash adjustment in respect of such
fractional interest in an amount equal to the same fraction of the market price
per share of Parent Common Stock (as determined by the Board of Directors of the
Company or in any manner prescribed by the Board of Directors of the Company,
which shall be the last reported sale price of the Parent Common Stock on the
principal securities exchange or trading market on which the Parent Common Stock
is then traded) at the close of business on the business day prior to the day of
surrender of shares for exchange or, in the case of an exchange effected
pursuant to SECTION 3.01(B) hereof, the business day prior to the effective date
of such exchange.
SECTION 3.05. ADDITIONAL PARENT OBLIGATIONS. (a) Parent shall at all
times reserve and keep available, out of its authorized and unissued stock,
solely for the purpose of effecting the exchange of the Tranche A Notes, such
number of shares of Parent Common Stock free of preemptive rights as shall from
time to time be sufficient to effect the exchange of all Tranche A Notes from
time to time outstanding. Parent shall from time to time, in accordance with the
laws of the State of Nevada, increase the authorized number of shares of Parent
Common Stock if at any time the number of shares of Parent Common Stock
authorized but unissued shall not be sufficient to permit the exchange of all
the then outstanding Tranche A Notes into Parent Common Stock at the Exchange
Rate then in effect.
(b) If any shares of Parent Common Stock required to be reserved for
purposes of exchange of the Tranche A Notes require registration with or
approval of any governmental
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.4 - Page 10
<PAGE>
authority under any federal or state law before such shares may be issued upon
exchange, Parent will in good faith and as expeditiously as possible endeavor to
cause such shares to be duly registered or approved, as the case may be. If the
Parent Common Stock is then traded on any national securities exchange or
trading market, Parent will, if permitted by the rules of such exchange or
trading market, list and keep listed on such exchange or approved for trading on
such trading market, subject to official notice of issuance, all shares of
Parent Common Stock issuable upon exchange of the Tranche A Notes.
(c) The Company will pay any and all issue or other taxes that may
be payable in respect of any issue or delivery of shares of Parent Common Stock
on exchange of a Tranche A Note. The Company shall not, however, be required to
pay any tax that may be payable in respect of any transfer involved in the issue
or delivery of Parent Common Stock (or other securities or assets) in any name
or names other than that in which such Tranche A Note was registered, and no
such issue or delivery shall be made unless and until the Person requesting such
issue has paid to the Company or its designee the amount of such tax or has
represented, to the reasonable satisfaction of the Company, that such tax has
been paid.
(d) Before taking any action that would cause an adjustment
increasing the Exchange Rate, such that the effective Exchange Price would be
below the then par or stated value of the Parent Common Stock, the Company and
Parent will take such corporate action as may, in the opinion of counsel to the
Company and counsel to Parent, be necessary in order that Parent may validly and
legally issue fully paid and non-assessable shares of Parent Common Stock at the
Exchange Rate as so adjusted.
(e) In case Parent proposes, to the extent then permitted by the
Transaction Documents,
(i)to pay any stock dividend upon the Parent Common Stock or
make any distribution (other than ordinary cash dividends payable
out of earnings) or offer any subscription or other rights to the
holders of Parent Common Stock, or
(ii) to effect any capital reorganization or reclassification
of capital stock of Parent, or
(iii) to effect the consolidation, merger, sale of all or
substantially all of the assets, liquidation, dissolution or winding
up of Parent, or
(iv) to take any other action that would result in any
adjustment pursuant to SECTION 3.03 in the number of Shares or the
Exchange Price,
then the Company shall cause notice of any such intended action to be given to
each holder of the Tranche A Notes not less than 30 nor more than 60 days prior
to the date on which the transfer books of Parent shall close or a record be
taken for such dividend or distribution, or the date when such
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.4 - Page 11
<PAGE>
capital reorganization, reclassification, consolidation, merger, sale,
liquidation, dissolution or winding up shall be effected, or the date of such
other event, as the case may be.
SECTION 3.06. EXCHANGE RATE INCREASE. (a) The Company from time to
time may increase the Exchange Rate by any amount for any period of time if the
period is at least 20 days and if the increase is irrevocable during the period.
Whenever the Exchange Rate is so increased, the Company shall mail to holders of
record of the Tranche A Notes a notice of the increase at least 15 days before
the date the increased Exchange Rate takes effect, and such notice shall state
the increased Exchange Rate and the period it will be in effect.
(b)The Company may make such increases in the Exchange Rate, in
addition to those required or allowed by this Article III, as shall be
determined by it, as evidenced by a resolution of the Company's Board of
Directors, to be advisable in order to avoid or diminish any income tax to
holders of Parent Common Stock resulting from any dividend or distribution of
stock or issuance of rights or warrants to purchase or subscribe for stock or
from any event treated as such for income tax purposes.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Noteholders that:
SECTION 4.01. ORGANIZATION; POWER AND AUTHORITY. Parent is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada, and is duly qualified as a foreign corporation and is in
good standing in each jurisdiction in which such qualification is required by
law, other than those jurisdictions as to which the failure to be so qualified
or in good standing would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Parent. Parent has the corporate
power and authority to own or hold under lease the properties it purports to own
or hold under lease, to transact the business it transacts and proposes to
transact, to execute and deliver this Agreement and the other Transaction
Documents to which it is a party and to perform the provisions hereof and
thereof.
SECTION 4.02. AUTHORIZATION, ETC. This Agreement and the other
Transaction Documents to which it is a party have been duly authorized by all
necessary corporate action on the part of Parent, and this Agreement
constitutes, and upon execution and delivery thereof each other Transaction
Document to which it is a party will constitute, a legal, valid and binding
obligation of Parent enforceable against Parent in accordance with its terms,
except as such enforceability may be limited by (a) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and (b) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
SECTION 4.03. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC. The
execution, delivery and performance by Parent of this Agreement and the other
Transaction Documents to which it is a party will not (a) contravene, result in
any breach of, or constitute a default under, or result in
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.4 - Page 12
<PAGE>
the creation of any Lien in respect of any property of Parent or any of its
Subsidiaries under, any indenture, mortgage, deed of trust, loan, purchase or
credit agreement, lease, corporate charter or by-laws, or any other agreement or
instrument to which Parent or any of its Subsidiaries is bound or by which
Parent or any of its Subsidiaries or any of their respective properties may be
bound or affected (except for Liens created under the Transaction Documents) the
consequence of which would have a Material Adverse Effect on Parent or any of
its Subsidiaries, (b) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority in respect of a proceeding to which Parent
or any of its Subsidiaries is a party or (c) to the knowledge of Parent, violate
any provision of any statute or other rule or regulation of any Governmental
Authority applicable to Parent or any of its Subsidiaries.
SECTION 4.04. GOVERNMENTAL AUTHORIZATIONS, ETC. No consent, approval
or authorization of, or registration, filing or declaration with, any
Governmental Authority is required in connection with the execution, delivery or
performance by Parent of this Agreement or the other Transaction Documents to
which it is a party that has not been obtained.
SECTION 4.05. SUBSIDIARIES. SCHEDULE 4.05 contains complete and
correct lists of Parent's Subsidiaries, showing, as to each Subsidiary, the
correct name thereof, the jurisdiction of its organization, and the percentage
of shares of each class of its capital stock or similar equity interests
outstanding owned by Parent and each other Subsidiary. No Subsidiary is a party
to, or is otherwise subject to any legal restriction or any agreement (other
than the Note Agreement, this Agreement and customary limitations imposed by
corporate law statutes) restricting the ability of such Subsidiary to pay
dividends out of profits or make any other similar distributions of profits to
Parent or any of its Subsidiaries that owns outstanding shares of capital stock
or similar equity interests of such Subsidiary.
SECTION 4.06. FINANCIAL STATEMENTS. The consolidated balance sheet
of Parent and its Subsidiaries as at December 31, 1995, and the related
consolidated statements of income, retained earnings and cash flows for the
12-month period then ended, copies of which Parent has delivered to each
Noteholder, fairly present in all material respects the consolidated financial
position of Parent and its Subsidiaries as of such date and the consolidated
results of their operations and cash flows for such period and have been
prepared in accordance with GAAP consistently applied throughout the periods
involved except as set forth in the notes thereto (subject, in the case of any
interim financial statements, to normal year-end adjustments).
SECTION 4.07. DISCLOSURE. This Agreement, the documents,
certificates or other writings delivered to the Noteholders by or on behalf of
Parent in connection with the transactions contemplated hereby and the financial
statements referred to in SECTION 4.06, taken as a whole, do not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein not misleading. Since December 31, 1995, there
has been no change in the financial condition, operations, business, properties
or prospects of Parent or any of its Subsidiaries except changes that
individually or in the aggregate would not reasonably be expected to have a
Material Adverse Effect on Parent or any of its Subsidiaries. There is no fact
known to
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.4 - Page 13
<PAGE>
Parent that would reasonably be expected to have a Material Adverse Effect on
Parent or any of its Subsidiaries that has not been set forth herein or in the
other documents, certificates and other writings (including the financial
statements referred to in SECTION 4.06) delivered to the Noteholders by or on
behalf of Parent specifically for use in connection with the transactions
contemplated hereby.
SECTION 4.08. LITIGATION. Except as disclosed in SCHEDULE 4.08,
there are no actions, suits or proceedings pending of which Parent has received
notice, or, to the knowledge of Parent, threatened against or affecting Parent
or any of its Subsidiaries or any property of Parent or any of its Subsidiaries
in any court or before any arbitrator of any kind or before or by any
Governmental Authority that, individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect on Parent or any of its
Subsidiaries.
SECTION 4.09. OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS. Neither
Parent nor any Subsidiary is in default under any term of any agreement or
instrument to which it is a party or by which it is bound, or any order,
judgment, decree or ruling of any court, arbitrator or Governmental Authority
arising out of any proceeding to which it is a party or of which it has notice
or in violation of any applicable law, ordinance, rule or regulation (including
without limitation Environmental Laws) of any Governmental Authority, which
default or violation, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on Parent or any of its Subsidiaries.
SECTION 4.10. TAXES. Parent and its Subsidiaries have filed all tax
returns that are required to have been filed in any jurisdiction, and have paid
all taxes shown to be due and payable on such returns and all other taxes and
assessments levied upon them or their properties, assets, income or franchises,
to the extent such taxes and assessments have become due and payable and before
they have become delinquent, except for any taxes and assessments (i) the amount
of which is not individually or in the aggregate Material or (ii) the amount,
applicability or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which Parent or any of its
Subsidiaries, as the case may be, has established adequate reserves in
accordance with GAAP. Parent knows of no basis for any other tax or assessment
that, if imposed, would reasonably be expected to have a Material Adverse Effect
on Parent or any of its Subsidiaries. The charges, accruals and reserves on the
books of Parent and its Subsidiaries in respect of Federal, state or other taxes
for all fiscal periods are adequate in all respects. The Federal income tax
liabilities of Parent and its Subsidiaries have been determined by the Internal
Revenue Service and paid for all fiscal years up to and including the fiscal
year ended December 31, 1995.
SECTION 4.11. TITLE TO PROPERTY. Parent and its Subsidiaries have
good and sufficient title to their respective properties that individually or in
the aggregate are Material, including all such properties reflected in the most
recent audited balance sheet referred to in SECTION 4.06 or purported to have
been acquired by Parent or any Subsidiary after said date, in each case free and
clear of Liens other than Permitted Liens.
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
SECTION 4.12. LICENSES, PERMITS, ETC. Parent and its Subsidiaries
own or possess all licenses, permits, franchises, authorizations, patents,
copyrights, service marks, trademarks and trade names, or rights thereto, that
individually or in the aggregate are Material, without known conflict with the
rights of others. To the best knowledge of Parent, (a) no product of Parent
infringes in any material respect any license, permit, franchise, authorization,
patent, copyright, service mark, trademark, trade name or other right owned by
any other Person; and (b) there is no Material violation by any Person of any
right of Parent or any of its Subsidiaries with respect to any patent,
copyright, service mark, trademark, trade name or other right owned or used by
Parent or any of its Subsidiaries.
SECTION 4.13. COMPLIANCE WITH ERISA.
(a)Parent and each ERISA Affiliate have operated and administered
each Plan in compliance with all applicable laws except for such instances of
noncompliance as have not resulted in and would not reasonably be expected to
result in a Material Adverse Effect on Parent. Neither Parent nor any ERISA
Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to employee benefit plans
(as defined in section 3 of ERISA), and no event, transaction or condition has
occurred or exists that could reasonably be expected to result in the incurrence
of any such liability by Parent or any ERISA Affiliate, or in the imposition of
any Lien on any of the rights, properties or assets of Parent or any ERISA
Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty
or excise tax provisions or to Section 401(a)(29) or 412 of the Code, other than
such liabilities or Liens as would not be individually or in the aggregate
Material.
(b)The present value of the aggregate benefit liabilities under each
of the Plans (other than Multiemployer Plans), determined as of the end of such
Plan's most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan's most recent actuarial valuation
report, did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities. The term "BENEFIT LIABILITIES" has the
meaning specified in section 4001 of ERISA and the terms "CURRENT VALUE" and
"PRESENT VALUE" have the meaning specified in section 3 of ERISA.
(c)Parent and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.
(d)The expected post-retirement benefit obligation (determined as of
the last day of Parent's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by section 4980B or
the Code) of Parent and its Subsidiaries is not Material.
SECTION 4.14. STATUS UNDER CERTAIN STATUTES. Neither Parent nor any
of its Subsidiaries is subject to regulation under the Investment Company Act of
1940, as amended, the
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.4 - Page 15
<PAGE>
Public Utility Holding Company Act of 1935, as amended, the Interstate Commerce
Act, as amended, or the Federal Power Act, as amended.
SECTION 4.15. CAPITALIZATION. The authorized capital stock of Parent
consists solely of 50,000,000 shares of $.01 par common stock, of which
4,157,073 shares are issued and outstanding and 10,000,000 shares of $.01 par
Series A preferred stock, of which 23,000 shares are issued and outstanding.
SECTION 4.16. ENVIRONMENTAL MATTERS. Neither Parent nor any of its
Subsidiaries has knowledge of any claim or has received any notice of any claim,
and no proceeding has been instituted of which Parent has notice raising any
claim against Parent or any of its Subsidiaries or any of their respective real
properties now or formerly owned, leased or operated by any of them or other
assets, alleging any damage to the environment or violation of any Environmental
Laws, except, in each case, such as would not reasonably be expected to result
in a Material Adverse Effect on Parent or any of its Subsidiaries. Except as
otherwise disclosed to the Noteholders in writing, (a) neither Parent nor any of
its Subsidiaries has knowledge of any facts which would give rise to any claim,
public or private, of violation of Environmental Laws or damage to the
environment emanating from, occurring on or in any way related to real
properties now or formerly owned, leased or operated by any of them or to other
assets or their use, except, in each case, such as would not reasonably be
expected to result in a Material Adverse Effect on Parent or any of its
Subsidiaries; (b) neither Parent nor any of its Subsidiaries has stored any
Hazardous Materials on real properties now or formerly owned, leased or operated
by any of them and has not disposed of any Hazardous Materials in a manner
contrary to any Environmental Laws in each case in any manner that would
reasonably be expected to result in a Material Adverse Effect on Parent or any
of its Subsidiaries; and (c) all buildings on all real properties now owned,
leased or operated by Parent or any of its Subsidiaries are in compliance with
applicable Environmental Laws, except where failure to comply would not
reasonably be expected to result in a Material Adverse Effect on Parent or any
of its Subsidiaries.
ARTICLE V
INFORMATION AS TO PARENT
SECTION 5.01. FINANCIAL AND BUSINESS INFORMATION. Parent shall
deliver to each of the Noteholders:
(a)Within 45 days after the end of each quarterly fiscal period in
each fiscal year of Parent, copies of (i) a consolidated balance sheet of Parent
and its Subsidiaries as at the end of such quarter, and (ii) consolidated
statements of income, changes in shareholders' equity and cash flows of Parent
and its Subsidiaries, for such quarter and for the portion of the fiscal year
ending with such quarter, setting forth in each case in comparative form the
figures for the corresponding periods in the previous fiscal year, all in
reasonable detail, prepared in accordance with GAAP applicable to quarterly
financial statements generally, and certified by a Senior Financial Officer of
Parent as fairly presenting, in all material respects, the financial position of
the companies being reported on and their results of operations and cash flows,
subject to changes resulting from year-end adjustments.
::ODMA\PCDOCS\DOCS\88117\1
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(b)Within 90 days after the end of each fiscal year of Parent,
copies of (i) a consolidated balance sheet of Parent and its Subsidiaries, as at
the end of such year, and (ii) consolidated statements of income, changes in
shareholders' equity and cash flows of Parent and its Subsidiaries, for such
year, setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance with
GAAP, and accompanied by (A) an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall state that such
financial statements present fairly, in all material respects, the financial
position of the companies being reported upon and their results of operations
and cash flows and have been prepared in conformity with GAAP, and that the
examination of such accountants in connection with such financial statements has
been made in accordance with generally accepted auditing standards, and that
such audit provides a reasonable basis for such opinion in the circumstances,
and (B) a certificate of such accountants stating that they have reviewed this
Agreement and stating further whether, in making their audit, they have become
aware of any condition or event that then constitutes a Default or an Event of
Default, and, if they are aware that any such condition or event then exists,
specifying the nature and period of the existence thereof.
(c)Within 20 days after the end of each calendar month, copies of
(i) a consolidated balance sheet of Parent and its Subsidiaries as at the end of
such month, and (ii) consolidated statements of income, changes in shareholders'
equity and cash flows of Parent and its Subsidiaries, for such month and for the
portion of the fiscal year ending with such month, setting forth in each case in
comparative form the figures for the corresponding periods in the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP
applicable to monthly financial statements generally, and certified by a Senior
Financial Officer of Parent as fairly presenting, in all material respects, the
financial position of the companies being reported on and their results of
operations and cash flows, subject to changes resulting from year-end
adjustments.
(d)Promptly upon their becoming available, one copy of (i) each
financial statement, report, notice or proxy statement sent by Parent or any
Subsidiary to public securities holders generally, and (ii) each regular or
periodic report, each registration statement (without exhibits except as
expressly requested by such holder), and each prospectus and all amendments
thereto filed by Parent or any Subsidiary with the Securities and Exchange
Commission and of all press releases and other statements made available
generally by Parent or any Subsidiary to the public concerning developments that
are Material.
(e)Promptly, and in any event within five Business Days after a
Responsible Officer of Parent becoming aware of the existence of any Default or
Event of Default or that any Person has given any notice or taken any action
with respect to a claimed default hereunder or that any Person has given any
notice or taken any action with respect to a claimed default of the type
referred to in SECTION 11.01, a written notice specifying the nature and period
of existence thereof and what action the Company is taking or proposes to take
with respect thereto.
(f)Promptly, and in any event within five Business Days after a
Responsible Officer of Parent becoming aware of any of the following, a written
notice setting forth the nature thereof and the action, if any, that Parent or
an ERISA Affiliate proposes to take with respect thereto: (i)
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<PAGE>
with respect to any Plan, any reportable event, as defined in section 4043(b) of
ERISA and the regulations thereunder, for which notice thereof has not been
waived pursuant to such regulations as in effect on the date hereof; or (ii) the
taking by the PBGC of steps to institute, or the threatening by the PBGC of the
institution of, proceedings under section 4042 of ERISA for the termination of,
or the appointment of a trustee to administer, any Plan, or the receipt by
Parent or any ERISA Affiliate of a notice from a Multiemployer Plan that such
action has been taken by the PBGC with respect to such Multiemployer Plan; or
(iii) any event, transaction or condition that could result in the incurrence of
any liability by Parent or any ERISA Affiliate pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the Code relating to employee
benefit plans, or in the imposition of any Lien on any of the rights, properties
or assets of Parent or any ERISA Affiliate pursuant to Title I or IV of ERISA or
such penalty or excise tax provisions, if such liability or Lien, taken together
with any other such liabilities or Liens then existing, could reasonably be
expected to be Material as to Parent.
(g)Promptly, and in any event within five Business Days of receipt
thereof, copies of any notice to Parent or any Subsidiary from any Federal or
state Governmental Authority relating to any order, ruling, statute or other law
or regulation that could reasonably be expected to have a Material Adverse
Effect;
(h)Promptly, and in any event within five Business Days after a
Responsible Officer of Parent becoming aware thereof, any event which would
reasonably be expected to have a Material Adverse Effect on Parent or any of its
Subsidiaries.
(i)With reasonable promptness, such other data and information
relating to the business, operations, affairs, financial condition, assets or
properties of Parent or any of its Subsidiaries or relating to the ability of
Parent to perform its obligations hereunder and under the Notes as from time to
time may be reasonably requested by any of Noteholder.
SECTION 5.02. OFFICER'S CERTIFICATE. Each set of financial
statements delivered to a holder of Notes pursuant to SECTION 5.01(A), SECTION
5.01(B) or SECTION 5.01(C) shall be accompanied by a certificate of a Senior
Financial Officer of Parent setting forth: (a) the information (including
detailed calculations) required in order to establish whether Parent was in
compliance with the requirements of SECTION 7.03 hereof during the monthly,
quarterly or annual period covered by the statements then being furnished
(including with respect to each such Section, where applicable, the calculations
of the maximum or minimum amount, ratio or percentage, as the case may be,
permissible under the terms of such Sections, and the calculation of the amount,
ratio or percentage then in existence); and (b) a statement that such officer
has reviewed the relevant terms hereof and has made, or caused to be made, under
his or her supervision, a review of the transactions and conditions of Parent
and its Subsidiaries from the beginning of the monthly, quarterly or annual
period covered by the statements then being furnished to the date of the
certificate and that such review shall not have disclosed the existence during
such period of any condition or event that constitutes a Default or an Event of
Default or, if any such condition or event existed or exists (including, without
limitation, any such event or condition resulting from the failure of Parent or
any Subsidiary to
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
comply with any Environmental Law), specifying the nature and period of
existence thereof and what action Parent shall have taken or proposes to take
with respect thereto.
SECTION 5.03. INSPECTION. Parent shall permit the representatives of
each Noteholder, at the expense of Parent, upon reasonable prior notice to
Parent and during normal business hours, to visit and inspect any of the offices
or properties of Parent or any Subsidiary, to examine all their respective books
of account, records, reports and other papers, to make copies and extracts
therefrom, and to discuss their respective affairs, finances and accounts with
their respective officers and independent public accountants (and by this
provision Parent authorizes said accountants to discuss the affairs, finances
and accounts of Parent and its Subsidiaries), all at such times and as often as
may be requested.
ARTICLE VI
AFFIRMATIVE COVENANTS
Parent covenants that so long as any of the Commitments remain in
effect or any of the Notes are outstanding:
SECTION 6.01. COMPLIANCE WITH LAW; CONTRACTS. Parent will, and will
cause each of its Subsidiaries to, comply with all laws, ordinances or
governmental rules or regulations to which each of them is subject, including,
without limitation, Environmental Laws, and will obtain and maintain in effect
all licenses, certificates, permits, franchises and other governmental
authorizations necessary to the ownership of their respective properties or to
the conduct of their respective businesses, in each case to the extent necessary
to ensure that non-compliance with such laws, ordinances or governmental rules
or regulations or failures to obtain or maintain in effect such licenses,
certificates, permits, franchises and other governmental authorizations would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Parent or any of its Subsidiaries. Parent will, and will cause
each of its Subsidiaries to, comply with, and perform their respective
obligations under, each contract or agreement to which each is a party, unless,
in the good faith judgment of Parent, the failure to so comply or perform would
not reasonably be expected to have a Material Adverse Effect on Parent or any of
its Subsidiaries.
SECTION 6.02. MAINTENANCE OF PROPERTIES. Parent will, and will cause
each of its Subsidiaries to, maintain and keep, or cause to be maintained and
kept, their respective properties in good repair, working order and condition
(other than ordinary wear and tear), so that the business carried on in
connection therewith may be properly conducted at all times.
SECTION 6.03. PAYMENT OF TAXES AND CLAIMS. Parent will, and will
cause each of its Subsidiaries to, file all tax returns required to be filed in
any jurisdiction and to pay and discharge all taxes shown to be due and payable
on such returns and all other taxes, assessments, governmental charges, or
levies imposed on them or any of their properties, assets, income or franchises,
to the extent such taxes and assessments have become due and payable and before
they have become delinquent and all claims for which sums have become due and
payable that have or might become a Lien on properties or assets of Parent or
any of its Subsidiaries, provided that neither Parent nor
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.4 - Page 19
<PAGE>
any of its Subsidiaries need pay any such tax or assessment or claims if (i) the
amount, applicability or validity thereof is contested by Parent or such
Subsidiary on a timely basis in good faith and in appropriate proceedings, and
Parent or such Subsidiary has established adequate reserves therefor in
accordance with GAAP on the books of Parent or such Subsidiary or (ii) the
nonpayment of all such taxes and assessments in the aggregate would not
reasonably be expected to have a Material Adverse Effect on Parent or any of its
Subsidiaries.
SECTION 6.04. CORPORATE EXISTENCE, ETC. Parent will at all times
preserve and keep in full force and effect its corporate existence. Parent will
at all times preserve and keep in full force and effect the corporate existence
of each of its Subsidiaries and all rights and franchises of Parent and its
Subsidiaries unless, in the good faith judgment of Parent, the termination of or
failure to preserve and keep in full force and effect such corporate existence,
right or franchise would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Parent or any of its Subsidiaries.
ARTICLE VII
NEGATIVE COVENANTS
Parent covenants that so long as any of the Commitments remain in
effect or any of the Notes are outstanding:
SECTION 7.01. RESTRICTIONS ON INDEBTEDNESS. Parent will not, and
will not permit any of its Subsidiaries to, create, incur, assume, Guaranty or
permit to exist any Indebtedness, except:
(a)the Notes;
(b)the Bridge Shareholder Debt; and
(c)the New Shareholder Debt.
SECTION 7.02. RESTRICTIONS ON LIENS. Parent will not, and will not
permit any of its Subsidiaries to, create, incur, assume, or permit to exist any
Lien with respect to any asset now owned or hereafter acquired, except Permitted
Liens.
SECTION 7.03. FINANCIAL COVENANTS. Parent will not permit its
Current Assets at any time, to be less than the sum of (a) its Current
Liabilities as at such date, MINUS (b) any portion of such Current Liabilities
consisting of amounts owing on the Notes.
SECTION 7.04. RESTRICTED DISBURSEMENTS. Parent will not, and will
not permit any of its Subsidiaries, directly or indirectly, make any Restricted
Disbursements except:
(a)Permitted Investments;
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
(b)so long as no Default or Event of Default has occurred and is
continuing, Permitted Preferred Stock Dividends; and
(c)Restricted Disbursements by the Company that are permitted under
SECTION 10.04 of the Note Agreement.
SECTION 7.05. MERGER, CONSOLIDATION, ETC. Parent will not, and will
not permit any of its Subsidiaries to, consolidate with or merge with any other
Person or convey, transfer or lease all or substantially all of its assets in a
single transaction or series of transactions to any Person.
SECTION 7.06. RESTRICTIONS ON ASSET SALES. Parent will not, and will
not permit any of its Subsidiaries to, sell, transfer, assign, convey or
otherwise dispose of an interest in any asset now owned or hereafter acquired,
except for the sale of Hydrocarbon production in the ordinary course of business
by the Company.
SECTION 7.07. TRANSACTIONS WITH AFFILIATES. Parent will not, and
will not permit any of its Subsidiaries to, enter into directly or indirectly
any Material transaction or Material group of related transactions (including
without limitation the purchase, lease, sale or exchange of properties of any
kind or the rendering of any service) with any Affiliate (other than Parent or
another Subsidiary), except in the ordinary course and pursuant to the
reasonable requirements of Parent's or such Subsidiary's business and upon fair
and reasonable terms no less favorable to Parent or such Subsidiary than would
be obtainable in a comparable arm's-length transaction with a Person not an
Affiliate.
SECTION 7.08. CHANGE IN BUSINESS. Parent will not, and will not
permit any of its Subsidiaries to, directly or indirectly engage to a material
extent in any business other than those in which each such Person is presently
engaged or that are directly related thereto, or discontinue any of its existing
lines of business or substantially alter such Person's method of doing business.
SECTION 7.09. SHAREHOLDER DEBT. Parent will not amend the terms of
the Shareholder Debt Restructure Documents without the prior written consent of
the Noteholders. The Parent will not, and will not permit any Subsidiary to,
directly or indirectly, make any payment of principal or interest on the Bridge
Shareholder Debt or the New Shareholder Debt, except for Permitted Shareholder
Debt Payments made by Parent; provided, however, that Parent will not make any
such Permitted Shareholder Debt Payments, if a Default or Event of Default has
occurred and is continuing.
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. TRANSACTION EXPENSES. Whether or not the transactions
contemplated hereby are consummated, Parent will pay all reasonable costs and
expenses (including reasonable attorneys' fees of a special counsel and any
local or other counsel) incurred by the Noteholders or holder of a Note in
connection with such transactions and in connection with any amendments, waivers
or consents under or in respect of this Agreement or the other Transaction
Documents (whether or not such amendment, waiver or consent becomes effective),
including, without limitation: (a) the reasonable costs and expenses incurred in
enforcing or defending (or determining whether or how to enforce or defend) any
rights under this Agreement or the other Transaction Documents or in responding
to any subpoena or other legal process or informal investigative demand issued
in connection with this Agreement or the other Transaction Documents, or by
reason of being a holder of any Note, (b) the reasonable costs and expenses of
negotiation, preparation and execution of this Agreement and the other
Transaction Documents, and (c) the reasonable costs and expenses, including
reasonable financial advisors' fees, incurred in connection with the insolvency
or bankruptcy of Parent or any Subsidiary or in connection with any proposed or
finalized work-out or restructuring of the transactions contemplated hereby and
by the Notes. Parent will pay, and will save the Noteholders and each other
holder of a Note harmless from, all claims in respect of any fees, costs or
expenses, if any, of brokers and finders (other than those retained by the
Noteholders). The obligations of Parent under this SECTION 8.01 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the other Transaction Documents, and the
termination of this Agreement.
SECTION 8.02. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the other Transaction Documents, the purchase or
transfer by the Noteholders of any Note or portion thereof or interest therein
and the payment of any Note, and may be relied upon by any subsequent holder of
a Note, regardless of any investigation made at any time by or on behalf of the
Noteholders or any other holder of a Note. All statements contained in any
certificate or other instrument delivered by or on behalf of Parent pursuant to
this Agreement shall be deemed representations and warranties of Parent under
this Agreement.
SECTION 8.03. AMENDMENT AND WAIVER. This Agreement may be amended,
and the observance of any term hereof may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Required
Holders, except that no amendment or waiver may, without the written consent of
the holder of each Note at the time outstanding affected thereby, release Parent
from its obligations hereunder. Any amendment or waiver consented to as provided
in this SECTION 8.03 applies equally to all holders of Notes and is binding upon
them and upon each future holder of any Note and upon Parent and the Company
without regard to whether such Note has been marked to indicate such amendment
or waiver. No such amendment or waiver will extend to or affect any obligation,
covenant or agreement not expressly amended or waived or impair any right
consequent thereon. No course of dealing between Parent or the Company and the
holder of any
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.4 - Page 22
<PAGE>
Note nor any delay in exercising any rights hereunder or under any Note shall
operate as a waiver of any rights of any holder of such Note.
SECTION 8.04. NOTICES. All notices and communications provided for
hereunder shall be in writing and sent (a) by telecopy if the sender on the same
day sends a confirming copy of such notice by a recognized overnight delivery
service (charges prepaid), or (b) by registered or certified mail with return
receipt requested (postage prepaid), or (c) by a recognized overnight delivery
service (with charges prepaid). Any such notice must be sent: (i) if to a
Noteholder, to its address specified for such communications in Schedule A to
the Note Agreement, or at such other address as it shall have specified to
Parent in writing, (ii) if to Parent, to Parent at 1600 Smith Street, Suite
4000, Houston, Texas 77002, Telecopy No.: 713-652-9601, or at such other address
as Parent shall have specified to the holder of each Note in writing. Notices
under this SECTION 8.04 will be deemed given only when actually received.
SECTION 8.05. LIMITATION ON INTEREST. Each provision in this
Agreement and each other Transaction Document is expressly limited so that in no
event whatsoever shall the amount paid, or otherwise agreed to be paid, by
Parent for the use, forbearance or detention of the money to be loaned to the
Company under the Notes or any other Transaction Document or otherwise
(including any sums paid as required by any covenant or obligation contained
herein or in any other Transaction Document which is for the use, forbearance or
detention of such money), exceed that amount of money which would cause the
effective rate of interest thereon to exceed the Highest Lawful Rate, and all
amounts owed under this Agreement and each other Transaction Document shall be
held to be subject to reduction to the effect that such amounts so paid or
agreed to be paid which are for the use, forbearance or detention of money under
this Agreement or such Transaction Document shall in no event exceed that amount
of money which would cause the effective rate of interest thereon to exceed the
Highest Lawful Rate.
SECTION 8.06. SUCCESSORS AND ASSIGNS. All covenants and other
agreements contained in this Agreement by or on behalf of any of the parties
hereto bind and inure to the benefit of their respective successors and assigns
(including, without limitation, any subsequent holder of a Note) whether so
expressed or not.
SECTION 8.07. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 8.08. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies hereof, each signed by less than all, but together signed by
all, of the parties hereto.
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
SECTION 8.09. FINAL AGREEMENT OF THE PARTIES. THIS AGREEMENT AND THE
OTHER TRANSACTION DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
SECTION 8.10. JURY WAIVER. PARENT, THE COMPANY AND THE NOTEHOLDERS
HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
SECTION 8.11. CHOICE OF FORUM. PARENT, THE COMPANY AND THE
NOTEHOLDERS AGREE THAT ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE BROUGHT IN THE
FEDERAL OR STATE COURTS OF HARRIS COUNTY, TEXAS, OTHER THAN LEGAL PROCEEDINGS
INSTITUTED BY THE NOTEHOLDERS WITH RESPECT TO THEIR RIGHTS AND REMEDIES UNDER
THE SECURITY DOCUMENTS, WHICH PROCEEDINGS MAY BE BROUGHT IN THE FEDERAL OR STATE
COURTS OF HARRIS COUNTY, TEXAS OR THE COURTS OF ANY OTHER JURISDICTION DEEMED
APPROPRIATE BY THE NOTEHOLDERS TO ENFORCE THEIR RIGHTS AND REMEDIES UNDER THE
SECURITY DOCUMENTS.
SECTION 8.12. GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the law of the State of New York excluding choice-of-law principles of the law
of such State that would require the application of the laws of a jurisdiction
other than such State.
IN WITNESS WHEREOF, Parent, the Company and the Noteholders have
caused this Agreement to be executed by their respective representatives
thereunto duly authorized effective as of the date first above written.
TEXOIL, INC.
By: /S/ RUBEN MEDRANO
Name: Ruben Medrano
Title:President
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<PAGE>
TEXOIL COMPANY
By: /S/ RUBEN MEDRANO
Name: Ruben Medrano
Title:President
RIMCO PARTNERS, L.P.
RIMCO PARTNERS, L.P. II,
RIMCO PARTNERS, L.P. III, AND
RIMCO PARTNERS, L.P. IV
By: RESOURCE INVESTORS MANAGEMENT COMPANY
LIMITED PARTNERSHIP, their general partner
By: RIMCO ASSOCIATES, INC.,
its general partner
By: /S/ GARY MILAVEC
Name: Gary Milavec
Title:Vice President
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.4 - Page 25
<PAGE>
SCHEDULE 3.03
CAPITALIZATION SCHEDULE
AS OF JULY 31, 1996
<TABLE>
<CAPTION>
Common
Shares PROCEEDS
Expiration After TO
NUMBER CLASS DATE CONVERSION TEXOIL
<S> <C> <C> <C> <C>
4,058,6481 Common 4,058,648 -0-
98,4232 Employee Salary Compensation-- 98,423 -0-
'95 Plan
29,4633 Employee Salary Compensation-- 29,463 -0-
'96 Plan
23,000 Class "A" Preferred 766,667 -0-
750,000 Class "A" Warrants ($3.50) 05-26-99 750,000 $2,625,000
750,000 Class "B" Warrants ($4.50) 05-26-99 750,000 3,375,000
300,000 Underwriter Warrants ($3.88) 05-26-99 300,000 1,162,500
281,384 Options to J. Graves ($.45) 12-31-99 281,384 126,623
281,384 Options to J. Richardson ($.45) 12-31-99 281,384 126,623
20,000 Employee Options ($3.00) RM 20,000 60,000
5,000 Option to Marc Countiss ($3.50) 09-15-00 5,000 17,500
1,100,000 Convertible May 96 Notes ($.80) 1,375,000 -0-
1,100,000 Convertible May 96 Note 5 years 1,100,000 1,441,000
Warrants ($1.31) - to be
eliminated at Closing.
50,000 Option to Bill Seagle ($1.56) 50,000 78,000
30,000 Option to Ruben Medrano ($1.31) 30,000 39,300
20,000 Option to J. D. Hughes ($1.25) - 20,000 25,000
to be issued upon Closing.
TOTAL FULLY DILUTED 9,915,969 $9,076,546
========= ==========
</TABLE>
- --------
1. Number accurate as of March 31, 1995 (see first quarter 1995 10-QSB)
2. Includes shares issued from April 1995 through February 1996
3. Includes shares to be issued from March 1996 through July 1996
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.4 - Page 26
<PAGE>
SCHEDULE 4.05
SUBSIDIARIES
NAME JURISDICTION OF INCORPORATION
Texoil Company Tennessee
Texoil de Argentina, S.A. Nevada
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
SCHEDULE 4.08
LITIGATION
None
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.4 - Page 28
EXHIBIT 10.5
EXHIBIT 10.5
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "AGREEMENT") dated September 6, 1996 is
made by TEXOIL, INC., a Nevada corporation ("PARENT"), with an office at 1600
Smith Street, Suite 4000, Houston, Texas 77002 to RIMCO PARTNERS, L.P., a
Delaware limited partnership, RIMCO PARTNERS, L.P. II, a Delaware limited
partnership, RIMCO PARTNERS, L.P. III, a Delaware limited partnership, and RIMCO
PARTNERS, L.P. IV, a Delaware limited partnership (collectively, the
"NOTEHOLDERS"), all with an office at 600 Travis, Suite 6875, Houston, Texas
77002.
PRELIMINARY STATEMENT. The Noteholders have entered into a Note
Purchase Agreement dated as of September 6, 1996 (said Agreement, as it may
hereafter be amended or otherwise modified from time to time, being the "NOTE
AGREEMENT") with Parent and Texoil Company, a Tennessee corporation and
wholly-owned subsidiary of Parent (the "COMPANY") whereby the Noteholders have
purchased from the Company its 10% Senior Secured Exchangeable General
Obligation Notes in the maximum aggregate principal amount of $3,000,000 and the
Noteholders (other than RIMCO Partners, L.P.) have purchased from the Company
its 10% Senior Secured General Obligation Notes in the maximum aggregate
principal amount of $5,000,000, subject in each case to the terms of the Note
Agreement (collectively, the "NOTES").
In connection with the Note Agreement, the Noteholders, the Company
and Parent have entered into that certain Guaranty and Exchange Agreement, dated
of even date herewith (as same may be amended from time to time being referred
to herein as the "GUARANTY AGREEMENT"), whereby, among other things, Parent has
unconditionally and irrevocably guaranteed the full and punctual payment when
due, whether at stated maturity or earlier by acceleration or otherwise, of any
and all debts, liabilities and obligations of the Company now or hereafter
existing under the Note Agreement, the Notes or any of the other Transaction
Documents (as such term is defined in the Note Agreement). Parent is the owner
of all of the issued and outstanding shares of common stock of the Company (the
"PLEDGED SHARES"). It is a condition precedent to the obligation of the
Noteholders to purchase and pay for the Notes to be sold under the Note
Agreement and to make Advances under the Notes that Parent shall have made the
pledge contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce the Noteholders to purchase the Notes under the Note Agreement, Parent
hereby agrees as follows:
SECTION 1. DEFINED TERMS AND RELATED MATTERS.
(a) The capitalized terms used herein which are defined in the Note
Agreement and not otherwise defined herein shall have the meanings
specified therein.
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(b) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement.
(c) Unless otherwise defined herein or in the Note Agreement, the
terms defined in Articles 8 and 9 of the Uniform Commercial Code as
currently in effect in the State of Texas are used herein as therein
defined.
SECTION 2. GRANT OF SECURITY. Parent hereby pledges to the
Noteholders, and grants to the Noteholders a security interest in, the following
(the "PLEDGED COLLATERAL"):
(a) the Pledged Shares and the certificates representing the Pledged
Shares, and all dividends, cash, instruments and other property from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Shares;
(b) all additional shares of stock of the Company from time to time
acquired by Parent in any manner, and the certificates representing such
additional shares, and all dividends, cash, instruments and other property
from time to time received, receivable or otherwise distributed in respect
of or in exchange for any or all of such shares; and
(c) all proceeds of any of the foregoing.
This inclusion of proceeds in this Agreement does not authorize Parent
to sell, dispose of or otherwise use the Pledged Collateral in any manner not
specifically authorized hereby.
SECTION 3. SECURITY FOR OBLIGATIONS. This Agreement secures the prompt
and complete (a) payment of all obligations of Parent to the Noteholders now or
hereafter existing under the Guaranty Agreement or the other Transaction
Documents (including, without limitation, any interest accruing after the filing
of any petition or pleading in a bankruptcy or similar proceeding) and (b)
performance and observance by Parent of all obligations, covenants and
conditions contained in the Guaranty Agreement and the other Transaction
Documents (including, without limitation, the obligations, covenants and
conditions contained herein), whether for principal, interest, fees, expenses or
otherwise (all such obligations, covenants and conditions described in the
foregoing clauses (a) and (b) being hereinafter collectively referred to as the
"OBLIGATIONS").
SECTION 4. DELIVERY OF PLEDGED COLLATERAL. All certificates
representing the Pledged Collateral shall be delivered to and held by or on
behalf of the Noteholders pursuant hereto and shall be in suitable form for
transfer by delivery, duly endorsed in blank without restriction, or shall be
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to the Noteholders. The Noteholders shall
have the right, at any time in their sole discretion and without notice to
Parent, to transfer to or to register in the names of the Noteholders any or all
of the Pledged Collateral, subject only to the revocable rights specified in
Section 7(a) hereof. In addition, the Noteholders shall have the right at any
time to exchange certificates representing Pledged Collateral for certificates
of smaller or larger denominations.
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
SECTION 5. REPRESENTATIONS AND WARRANTIES. Parent represents and
warrants as follows:
(a) The Pledged Shares have been duly authorized and validly issued
and are fully paid and non-assessable.
(b) Parent is the legal, record and beneficial owner of the Pledged
Collateral free and clear of any lien, security interest, option or other charge
or encumbrance except for the security interest created by this Agreement.
(c) The delivery of the Pledged Shares to the Noteholders pursuant to
this Agreement creates a valid and perfected first priority security interest in
the Pledged Collateral, securing the payment of the Obligations.
(d) No authorization, approval, or other action by, and no notice to
or filing with, any governmental authority or regulatory body or other Person is
required either (i) for the pledge by Parent of the Pledged Collateral pursuant
to this Agreement or for the execution, delivery or performance of this
Agreement by Parent or (ii) for the exercise by the Noteholders of the voting or
other rights provided for in this Agreement or the remedies in respect of the
Pledged Collateral pursuant to this Agreement (except as may be required in
connection with such disposition by laws affecting the offering and sale of
securities generally).
(e) The Pledged Shares constitute one hundred percent (100%) of the
issued and outstanding shares of stock of the Company.
SECTION 6. FURTHER ASSURANCES. Parent agrees that from time to time,
at the expense of Parent, Parent will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that the Noteholders may request, in order to perfect and protect
any security interest granted or purported to be granted hereby or to enable the
Noteholders to exercise and enforce their rights and remedies hereunder with
respect to any Pledged Collateral. Parent will furnish to the Noteholders from
time to time statements and schedules further identifying and describing the
Pledged Collateral and such other reports in connection with the Pledged
Collateral as the Noteholders may reasonably request, all in reasonable detail.
SECTION 7. VOTING RIGHTS; DIVIDENDS; ETC. (a) So long as no Event of
Default shall have occurred and be continuing and the Noteholders have not
delivered the notice specified in Section 7(b):
(i) Parent shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Pledged Collateral or any part thereof
for any purpose not inconsistent with the terms of this Agreement, the
Guaranty Agreement or the other Transaction Documents.
(ii) Parent shall be entitled to receive and retain any and all
dividends paid in respect of the Pledged Collateral to the extent, and only
to the extent, such dividends are permitted
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
under the Note Agreement, PROVIDED, HOWEVER, that (other than dividends
from the Company to Parent permitted under Section 10.04(d) of the Note
Agreement) all (A) dividends paid or payable other than in cash in respect
of, and instruments and other property received, receivable or otherwise
distributed in respect of, or in exchange for, any Pledged Collateral, (B)
dividends and other distributions paid or payable in cash in respect of any
Pledged Collateral in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital, capital surplus
or paid-in-surplus, and (c) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Pledged Collateral, shall be, and
shall be forthwith delivered to the Noteholders to hold as, Pledged
Collateral and shall, if received by Parent, be received in trust for the
benefit of the Noteholders, be segregated from the other property or funds
of Parent, and be forthwith delivered to the Noteholders as Pledged
Collateral in the same form as so received (with any necessary
endorsement).
(b) Upon the occurrence and during the continuance of an Event of
Default, at the option of the Noteholders exercised in a writing sent to Parent:
(i) All rights of Parent to exercise the voting and other consensual
rights which it would otherwise be entitled to exercise pursuant to Section
7(a)(i) shall cease, and the Noteholders shall thereupon have the sole
right to exercise such voting and other consensual rights.
(ii) All rights of Parent to receive the dividends which it would
otherwise be entitled to receive and retain pursuant to Section 7(a)(ii)
shall cease, and the Noteholders shall thereupon have the right to receive
and hold as Pledged Collateral such dividends.
(iii)All dividend payments which are received by Parent contrary to
the provisions of paragraph (ii) of this Section 7(b) shall be received in
trust for the benefit of the Noteholders, shall be segregated from other
funds of Parent and shall be forthwith paid over the Noteholders as Pledged
Collateral in the same form as so received (with any necessary
endorsement).
SECTION 8. TRANSFERS AND OTHER LIENS. Parent shall not: (a) sell,
assign (by agreement, operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Pledged Collateral; or (b) create
or suffer to exist any Lien upon or with respect to any of the Pledged
Collateral, except for the security interest created by this Agreement. Parent
agrees that it will cause the Company not to issue any stock or other equity
securities in addition to or in substitution for the Pledged Shares.
SECTION 9. NOTEHOLDERS APPOINTED ATTORNEY-IN-FACT. Parent hereby
irrevocably appoints the Noteholders Parent's attorney-in-fact, with full
authority in the place and stead of Parent and in the name of Parent, the
Noteholders or otherwise, from time to time while an Event of Default exists in
the Noteholders' sole discretion, to take any action and to execute any
instrument which the Noteholders may deem necessary or advisable to accomplish
the purposes of this Agreement, including, without limitation, to receive,
endorse and collect all certificates or instruments made payable to Parent
representing any dividend or other distribution in respect of the Pledged
Collateral.
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<PAGE>
SECTION 10. NOTEHOLDERS MAY PERFORM. If Parent fails to perform any
agreement contained herein, the Noteholders may themselves perform, or cause
performance of, such agreement, and the reasonable expenses of the Noteholders
incurred in connection therewith shall be payable by Parent under Section 14.
SECTION 11. THE NOTEHOLDERS' DUTIES. The powers conferred on the
Noteholders hereunder are solely to protect their interest in the Pledged
Collateral and shall not impose any duty upon them to exercise any such powers.
Except for reasonable care in the custody of any Pledged Collateral in their
possession and the accounting for moneys actually received by them hereunder,
the Noteholders shall have no duty as to any Pledged Collateral or as to the
taking of any necessary steps to preserve rights against prior parties or any
other rights pertaining to any Pledged Collateral. The Noteholders shall be
deemed to have exercised reasonable care in the custody and preservation of any
Pledged Collateral in their possession if such Pledged Collateral is accorded
treatment substantially equal to that which the Noteholders accord their own
property, it being understood that the Noteholders shall not have any
responsibility for (a) ascertaining, or taking action with respect to calls,
conversions, exchanges or other matters relative to the Pledged Collateral,
whether the Noteholders have knowledge of such matters, or (b) taking any
necessary steps to preserve rights against any parties with respect to any
Pledged Collateral.
SECTION 12. REMEDIES. If any Event of Default shall have occurred and
be continuing:
(a) The Noteholders may exercise in respect of the Pledged Collateral,
in addition to other rights and remedies provided for herein or otherwise
available to them, all the rights and remedies of a secured party on
default under the Uniform Commercial Code in effect in the State of Texas
(as amended from time to time, the "Code") (whether or not the Code applies
to the affected Pledged Collateral) and the Noteholders may also, without
notice except as specified below, sell the Pledged Collateral or any part
thereof in one or more parcels at public or private sale, at any of the
Noteholders's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Noteholders may deem
commercially reasonable. Parent agrees that, to the extent notice of sale
shall be required by law, at least ten (10) days' notice to Parent of the
time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification thereof. The
Noteholders shall not be obligated to make any sale of Pledged Collateral
regardless of notice of sale having been given. The Noteholders may adjourn
any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.
(b) Any cash held by the Noteholders as Pledged Collateral and all
cash proceeds received by the Noteholders in respect of any sale of,
collection from, or other realization upon all or any part of the Pledged
Collateral may, in the sole discretion of the Noteholders, be held by the
Noteholders as collateral for, and/or then or at any time thereafter
applied (after payment of any amounts payable to the Noteholders pursuant
to Section 14) pro rata to and for the Noteholders in proportion to the
aggregate amount of Obligations then owing to each such Noteholder. Any
surplus of such cash or cash proceeds held by the Noteholders and
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
remaining after payment in full of all the Obligations shall be paid over
to Parent or to whomsoever may be lawfully entitled to receive such
surplus.
(c) All rights and remedies of the Noteholders expressed herein are in
addition to all other rights and remedies possessed by the Noteholders in
the Note Agreement and any other agreement or instrument relating to the
Obligations.
SECTION 13. PRIVATE SALE OF PLEDGED COLLATERAL. Parent recognizes that
the Noteholders may be unable to effect a public sale of any or all of the
Pledged Collateral by reason of certain prohibitions contained in the laws of
any jurisdiction outside the United States or in the Securities Act and
applicable state securities laws, but may instead be compelled to resort to one
or more private sales thereof to a restricted group of purchasers who will be
obliged to agree, among other things, to acquire such Pledged Collateral for
their own account for investment and not with a view to the distribution or
resale thereof. Parent acknowledges and agrees that any such private sale may
result in prices and other terms less favorable to the seller than if such sale
were a public sale and, notwithstanding such circumstances, agrees that no such
private sale shall be deemed not to have been made in a commercially reasonable
manner solely because the sales price received is lower than the price that
could have been obtained at a public sale. The Noteholders shall not be under
any obligation to delay a sale of any of the Pledged Collateral for the period
of time necessary to permit the Company to register such securities under the
laws of any jurisdiction outside the United States, under the Securities Act or
under any applicable state securities laws, even if the Company would agree to
do so.
SECTION 14. INDEMNITY AND EXPENSES.
(a) PARENT HEREBY INDEMNIFIES THE NOTEHOLDERS AND THE OTHER
INDEMNIFIED PERSONS FROM AND AGAINST ANY AND ALL CLAIMS, LOSSES AND
LIABILITIES GROWING OUT OF OR RESULTING FROM THIS AGREEMENT (INCLUDING,
WITHOUT LIMITATION, ENFORCEMENT OF THIS AGREEMENT), EXCEPT CLAIMS, LOSSES
OR LIABILITIES RESULTING FROM THE NOTEHOLDERS' OR OTHER INDEMNIFIED
PERSONS' GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. IT IS THE EXPRESS
INTENTION OF PARENT THAT THE NOTEHOLDERS AND THE OTHER INDEMNIFIED PERSONS
SHALL BE INDEMNIFIED AND HELD HARMLESS AGAINST ANY AND ALL LOSSES,
LIABILITIES, CLAIMS, DEFICIENCIES, JUDGMENTS OR EXPENSES ARISING OUT OF OR
RESULTING FROM THE ORDINARY NEGLIGENCE (WHETHER SOLE OR CONTRIBUTORY) OR
STRICT LIABILITY OF THE NOTEHOLDERS OR THE OTHER INDEMNIFIED PERSONS.
(b) Parent will upon receipt of an invoice pay to the Noteholders the
amount of any and all expenses, including the reasonable fees and
disbursements of their counsel and of any experts and agents, that the
Noteholders may incur in connection with (i) the administration of this
Agreement, (ii) the evaluation, appraisal, custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon,
any of the Pledged Collateral, (iii) the
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<PAGE>
exercise or enforcement of any of the rights of the Noteholders hereunder
or (iv) the failure by Parent to perform or observe any of the provisions
hereof. Parent agrees to pay interest on any expenses or other sums payable
to the Noteholders hereunder that are not paid when due at a rate per annum
equal to the lesser of (i) the Highest Lawful Rate and (ii) the Default
Rate.
SECTION 15. AMENDMENTS, ETC. No amendment or waiver of any provision
of this Agreement, nor consent to any departure by Parent herefrom, shall in any
event be effective unless the same shall be in writing and signed by the
Noteholders and Parent, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 16. ADDRESSES FOR NOTICES. All notices and other
communications provided for hereunder shall be given in the manner and at the
addresses, and shall become effective as, specified in the Note Agreement. The
address and telecopy number for Parent shall be the same as those for Parent set
forth in the Guaranty Agreement.
SECTION 17. WAIVER OF MARSHALING. All rights of marshaling of assets
of Parent, including any such right with respect to the Pledged Collateral, are
hereby waived by Parent.
SECTION 18. LIMITATION BY LAW. All the provisions of this Agreement
are intended to be subject to all applicable mandatory provisions of law which
may be controlling and to be limited to the extent necessary so that they will
not render this Agreement invalid, unenforceable, in whole or in part, or not
entitled to be recorded, registered or filed under the provisions of any
applicable law.
SECTION 19. SEPARABILITY. Should any clause, sentence, paragraph,
subsection or Section of this Agreement be judicially declared to be invalid,
unenforceable or void, such decision will not have the effect of invalidating or
voiding the remainder of this Agreement, and the parties hereto agree that the
part or parts of this Agreement so held to be invalid, unenforceable or void
will be deemed to have been stricken herefrom by the parties hereto, and the
remainder will have the same force and effectiveness as if such stricken part or
parts had never been included herein.
SECTION 20. CAPTIONS. The captions in this Agreement have been
inserted for convenience only and shall be given no substantive meaning or
significance whatever in construing the terms and provisions of this Agreement.
SECTION 21. NO WAIVER; REMEDIES. No failure on the part of the
Noteholders to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 22. EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when
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<PAGE>
so executed shall be deemed to be an original and all of which taken together
shall constitute but one and the same agreement.
SECTION 23. CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (i) remain in full force and effect until payment in full of the
Obligations and termination of the Commitments, (ii) be binding upon Parent, its
successors and assigns and (iii) inure to the benefit of the Noteholders and
their respective successors, transferees and assigns. Without limiting the
generality of the foregoing clause (iii), each Noteholder may assign or
otherwise transfer all or a portion of any of the Notes held by it to any other
Person, and such other Person (other than Parent, the Company or their
Affiliates) shall thereupon become vested with all the benefits in respect
thereof granted to such Noteholder herein or otherwise. Upon the payment in full
of the Obligations and termination of the Commitments, the security interest
granted hereby shall terminate and all rights to the Collateral shall revert to
Parent. Upon any such termination, Parent shall be entitled to the return, upon
its request and at its expense, of such of the Pledged Collateral as shall not
have been sold or otherwise applied against the Obligations pursuant to the
terms hereof.
SECTION 24. SECURITY INTEREST ABSOLUTE. All rights of the Noteholders
and security interests hereunder, and all obligations of Parent hereunder, shall
be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Guaranty Agreement
or the Transaction Documents, unless such lack of validity and
enforceability results from a failure of consideration;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Guaranty Agreement or
the other Transaction Documents;
(c) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to departure from any
guaranty, for all or any of the Obligations; or
(d) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, the Company or Parent.
SECTION 25. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained in this Agreement or made in writing by
or on behalf of Parent in connection herewith shall survive the execution and
delivery of this Agreement and repayment of the Obligations. Any investigation
by the Noteholders shall not diminish in any respect whatsoever their rights to
rely on such representations and warranties.
SECTION 26. JURY WAIVER. PARENT AND THE NOTEHOLDERS HEREBY
IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
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<PAGE>
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 27. CHOICE OF FORUM. PARENT AND THE NOTEHOLDERS AGREE THAT ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY SHALL BE BROUGHT IN THE FEDERAL OR STATE COURTS
OF HARRIS COUNTY, TEXAS.
SECTION 28. GOVERNING LAW; TERMS. This Agreement shall be governed by
and construed in accordance with the laws of the State of Texas, except as
required by mandatory provisions of law and except to the extent that the
validity or perfection of the security interest hereunder, or remedies
hereunder, in respect of any particular Collateral are governed by the laws of a
jurisdiction other than the State of Texas.
IN WITNESS WHEREOF, Parent has caused this Agreement to be duly
executed and delivered by its duly authorized officer thereunto duly authorized
as of the date first above written.
TEXOIL, INC.
By: /S/ RUBEN MEDRANO
Name: Ruben Medrano
Title:President
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Exhibit 10.5 - Page 9
EXHIBIT 10.6
STOCK OWNERSHIP AND
REGISTRATION RIGHTS AGREEMENT
AMONG
TEXOIL, INC.,
TEXOIL COMPANY
AND
RIMCO PARTNERS, L.P.,
RIMCO PARTNERS, L.P. II,
RIMCO PARTNERS, L.P. III
AND
RIMCO PARTNERS, L.P. IV
SEPTEMBER 6, 1996
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.6 - Page 1
<PAGE>
STOCK OWNERSHIP AND REGISTRATION RIGHTS AGREEMENT
AMONG
TEXOIL, INC., TEXOIL COMPANY AND
RIMCO PARTNERS, L.P., RIMCO PARTNERS, L.P. II,
RIMCO PARTNERS, L.P. III AND RIMCO PARTNERS, L.P. IV
THIS STOCK OWNERSHIP AND REGISTRATION RIGHTS AGREEMENT
dated as of September 6, 1996, (this "Agreement") among TEXOIL, INC., a Nevada
corporation ("Parent"), TEXOIL Company, a Tennessee corporation and wholly owned
subsidiary of Parent (the "Company"), and RIMCO Partners, L.P., RIMCO Partners,
L.P. II, RIMCO Partners, L.P. III and RIMCO Partners, L.P. IV (collectively, the
"RIMCO Holders," and together with their distributees, successors and assigns,
the "Holders"), is effective for all purposes as of the date specified in
Article III hereof.
W I T N E S S E T H:
WHEREAS, pursuant to the terms and subject to the conditions of that
certain Note Purchase Agreement (the "Note Purchase Agreement") dated as of even
date herewith among Parent, the Company and the RIMCO Holders, the Company will
issue and sell to the RIMCO Holders the Notes (the Tranche A Notes and Tranche B
Notes); and
WHEREAS, the Tranche A Notes are exchangeable according to their
terms and the terms of that certain Guaranty and Exchange Agreement dated as of
even date herewith among Parent, the Company and the RIMCO Holders (the
"Guaranty and Exchange Agreement") for shares of common stock of Parent, par
value $.01 per share (the "Parent Common Stock"); and
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to the closing of the transactions contemplated by the Note Purchase
Agreement;
NOW, THEREFORE, to induce the parties hereto to close the
transactions contemplated by the Note Purchase Agreement (such closing referred
to herein as the "Closing") and in consideration of the aforesaid and of the
mutual representations, warranties and covenants contained herein and in the
Note Purchase Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS; PARENT AND COMPANY REPRESENTATIONS,
WARRANTIES AND COVENANTS
SECTION 1.01. CERTAIN DEFINED TERMS. Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings set forth in the
Note Purchase Agreement and Annex A attached thereto. For purposes of this
Agreement,
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<PAGE>
"1933 ACT" means the Securities Act of 1933, as amended.
"1934 ACT" means the Securities and Exchange Act of 1934, as amended.
"AGREEMENT" has the meaning specified in the preamble.
"BLUE SKY FILING" has the meaning specified in SECTION 2.09(A).
"CLOSING" has the meaning specified in the recitals.
"COMMISSION" means the Securities and Exchange Commission.
"COMPANY" has the meaning specified in the preamble.
"DEMAND REGISTRATIONS" has the meaning specified in SECTION 2.01(A).
"GUARANTY AND EXCHANGE AGREEMENT" has the meaning specified in the
recitals.
"HOLDERS" has the meaning specified in the preamble.
"NOTE PURCHASE AGREEMENT" has the meaning specified in the recitals.
"NOTES" means the Tranche A Notes and the Tranche B Notes.
"PARENT" has the meaning specified in the preamble.
"PARENT COMMON STOCK" has the meaning specified in the recitals.
"PERMITTED INTERRUPTION" has the meaning specified in SECTION 2.01(G).
"PIGGYBACK REGISTRATION" has the meaning specified in SECTION 2.02(A).
"REGISTRABLE SECURITIES" means the Shares and the Related Securities. As
to any particular Registrable Securities, once issued such securities shall
cease to be Registrable Securities when (a) a registration statement with
respect to the sale of such securities shall have become effective under the
1933 Act and such securities shall have been disposed of in accordance with the
plan of distribution set forth in such registration statement, (b) such
securities shall have been distributed in accordance with Rule 144 under the
1933 Act or (c) such securities shall have been otherwise transferred, new
certificates therefor not bearing a legend restricting further transfer shall
have been delivered in exchange therefor by Parent and subsequent disposition of
such securities shall not require registration or qualification under the 1933
Act or any similar state law then in force.
"REGISTRATION EXPENSES" has the meaning specified in SECTION 2.07.
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<PAGE>
"RELATED SECURITIES" means, collectively, other than the Shares, (i) any
and all securities issued or issuable as a result of adjustments made under the
Note Purchase Agreement, and in each case any and all securities otherwise
exchanged therefor or distributed, issued or issuable with respect thereto and
(ii) any and all securities of Parent or any successor thereto or assignee
thereof that are hereafter transferred, distributed, issued or issuable to the
Holders.
"RIMCO HOLDERS" has the meaning specified in the preamble.
"SHAREHOLDER NOTEHOLDERS" means the holders of New Shareholder Debt, as
defined in the Note Purchase Agreement.
"SHARES" means, collectively, shares of Parent Common Stock issued or
issuable upon exchange of the Tranche A Notes and all shares of Parent Common
Stock exchanged therefor or distributed, issued or issuable with respect
thereto.
SECTION 1.02. UNDERTAKING TO FILE REPORTS AND COOPERATE IN RULE 144
TRANSACTIONS. For as long as any Holder shall continue to hold any Registrable
Securities, Parent shall file, on a timely basis, all annual, quarterly and
other reports required to be filed by it under Sections 13 and 15(d) of the 1934
Act and the rules and regulations promulgated by the Commission thereunder, as
amended from time to time during the term of this Agreement. In the event of any
proposed transfer of Registrable Securities other than pursuant to a sale or
transfer registered under the 1933 Act, Parent shall cooperate with each Holder
so as to enable such sales to be made in accordance with applicable laws, rules
and regulations, the requirements of Parent's transfer agents, and the
reasonable requirements of the broker through which the sales are proposed to be
executed, and shall, upon request and subject to applicable law, furnish
unlegended certificates representing Shares and Related Securities in such
numbers and denominations as any Holder shall reasonably require for delivery
pursuant to such sales. The Holders will have all of the rights set forth in
this Agreement to register the offering of the Registrable Securities
notwithstanding any availability of Rule 144 under the 1933 Act with respect to
the sale of all or part of the Registrable Securities.
SECTION 1.03. ELECTION OF DIRECTOR TO BOARD OF DIRECTORS OF PARENT. (a)
Subject to compliance with applicable law, immediately following the issuance of
any of the Notes by the Company, the RIMCO Holders holding not less than a
majority (in then market value) of the then outstanding Notes held by the RIMCO
Holders, or any designee thereof, shall be entitled to designate one person to
be a member of Parent's Board of Directors. Immediately following the issuance
of any of the Notes, Parent shall commence and diligently pursue such action as
is required under its charter and bylaws to increase the size of Parent's Board
of Directors by one and will use its reasonable best efforts, subject to
compliance with applicable law, to elect or cause to be elected to fill the
vacancy so created the person designated by the RIMCO Holders or their designee,
so long as (i) any of the Notes (or any securities exchanged therefor) are
outstanding or (ii) the RIMCO Holders, together with their Affiliates, own an
aggregate of 5% or more of the Parent Common Stock, however acquired (or a then
comparable proportion of the equity securities of Parent entitled to vote for
the election of directors). In the event of any resignation, removal, death or
other termination of the director so designated by the RIMCO Holders or their
designee, or the failure of
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<PAGE>
the stockholders of Parent for any reason to elect such designee or to reelect
such director, the RIMCO Holders holding not less than a majority (in then
market value) of the then outstanding Notes and Registrable Securities held by
the RIMCO Holders, or any designee thereof, shall be entitled to designate one
person to serve on Parent's Board of Directors in place of such previously
designated person, and Parent will use its reasonable best efforts, subject to
compliance with applicable law, to elect or cause to be elected to the Board of
Directors the person so designated by the RIMCO Holders or their designee. The
RIMCO Holders hereby undertake and agree that, not later than 15 days following
written request from Parent, the RIMCO Holders or their designee shall furnish
to Parent's Board of Directors such information with respect to such director
designee as is required to comply with applicable law, rule or regulation, and
with Items 401 and 404 of Regulation S-K or Regulation S-B or any successor
regulation under the 1933 Act, if then applicable to Parent.
(b) Subject to compliance with applicable law, immediately following any
date on which the aggregate principal of the Notes outstanding shall exceed $5
million, the RIMCO Holders holding not less than a majority (in then market
value) of the then outstanding Notes and Registrable Securities held by the
RIMCO Holders, or any designee thereof, shall be entitled to designate a total
of two persons to be members of Parent's Board of Directors. Immediately
following the date on which the aggregate principal of the Notes outstanding
shall exceed $5 million, Parent shall commence and diligently pursue such action
as is required under its charter and bylaws to increase the size of Parent's
Board of Directors by one and will use its reasonable best efforts, subject to
compliance with applicable law, to elect or cause to be elected to fill the
vacancy so created one additional person designated by the RIMCO Holders or
their designee, which person shall be in addition to the person previously
designated by the RIMCO Holders or their designee. So long as the aggregate
principal amount of the Notes outstanding shall exceed $2.5 million, the RIMCO
Holders or their designee shall be entitled to the benefits of this Section
1.03(b), which shall be applicable to each of the two directors provided for
herein (a total of two directors). In the event of any resignation, removal,
death or other termination of any director so designated by the RIMCO Holders or
their designee, or the failure of the stockholders of Parent for any reason to
elect such designee or to reelect such director, the RIMCO Holders holding not
less than a majority (in then market value) of the then outstanding Notes and
Registrable Securities held by the RIMCO Holders, or any designee thereof, shall
be entitled to designate one person to serve on Parent's Board of Directors in
place of each such previously designated person, and Parent will use its
reasonable best efforts, subject to compliance with applicable law, to elect or
cause to be elected to the Board of Directors each such person so designated by
the RIMCO Holders or their designee (a total of two directors). The RIMCO
Holders hereby undertake and agree that, not later than 15 days following
written request from Parent, the RIMCO Holders or their designee shall furnish
to Parent's Board of Directors such information with respect to each such
director designee as is required to comply with applicable law, rule or
regulation, and with Items 401 and 404 of Regulation S-K or Regulation S-B or
any successor regulation under the 1933 Act, if then applicable to Parent.
SECTION 1.04. SECTIONS 411 THROUGH 444 OF THE NEVADA GENERAL CORPORATION
LAW. If at any time Parent shall be governed by Sections 411 through 444 of the
Nevada General Corporation Law, Parent hereby covenants that it will use its
reasonable best efforts, subject to compliance with applicable law, to take all
actions necessary under Nevada law, including, without limitation, the
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<PAGE>
approval by the Board of Directors of Parent of the Transaction Documents and
the consummation of the transactions contemplated thereby, to render the
provisions of Sections 411 through 444 of the Nevada General Corporation Law
inapplicable to the RIMCO Holders and their affiliates and to the transactions
contemplated in the Transaction Documents, including, without limitation, the
acquisition of shares of Parent Common Stock by the RIMCO Holders pursuant to
the transactions contemplated by the Transaction Documents, as may be amended
from time to time.
SECTION 1.05. EXCHANGE LISTING. Parent shall as promptly as practicable
prepare and file an application to list the Registrable Securities on each
exchange or automated market on which comparable securities of Parent are then
traded, including, without limitation, the Boston Stock Exchange (if
applicable), effective as soon as practicable after the issuance of such
Registrable Securities and shall use its reasonable best efforts to cause such
application to be approved as promptly as practicable.
SECTION 1.06. OTHER REGISTRATION RIGHTS. Parent hereby represents and
warrants that there are no existing rights held by any Person to register the
offering of any securities of Parent under the 1933 Act or any successor statute
("registration rights") other than (a) the rights granted in this Agreement, (b)
the registration rights granted to the Shareholder Noteholders under that
certain Stock Ownership and Registration Rights Agreement dated of even date
herewith among Parent and the Shareholder Noteholders and (c) the registration
rights granted under that certain Underwriters' Warrant Agreement dated June 8,
1994 among Parent and Toluca Pacific Securities Corporation, Tamaron
Investments, Inc. and Grant Bettingen, Inc. Other than the existing registration
rights described in the immediately preceding sentence, Parent will not grant
any registration rights in favor of any Person with respect to any of Parent's
securities without the prior written consent of the Holders.
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.01. DEMAND REGISTRATIONS. (a) GENERAL. Upon the written request
to Parent of Holders of not less than a majority (in then market value) of the
then outstanding Registrable Securities, including not less than a majority (in
then market value) of the then outstanding Registrable Securities held by the
RIMCO Holders, to Parent that Parent effect the registration under the 1933 Act,
such registration to occur at any time, of all or part of the Registrable
Securities and specifying the intended method of disposition thereof, Parent
will give prompt written notice of such request to all other Persons, if any,
who have contractual rights to request that any of their shares be piggybacked
onto any registration form proposed to be used to register the Registrable
Securities requested by such Holders, and thereupon Parent will, subject to the
provisions of this Agreement, use its reasonable best efforts to include in the
registration under the 1933 Act all shares of Parent Common Stock that persons
having contractual registration rights with respect to such shares have
requested in writing that Parent register, PROVIDED such request is given to
Parent within 20 days after the receipt of the aforesaid written notice by
Parent (specifying the intended method of disposition of such Parent Common
Stock), all to the extent requisite to permit the intended disposition of the
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Registrable Securities and shares of Parent Common Stock to be so registered.
All registrations requested pursuant to this SECTION 2.01(A) are referred to
herein as "Demand Registrations."
(b) NUMBER OF DEMAND REGISTRATIONS. Subject to the provisions of SECTION
2.01(A), the Holders shall be entitled to request one Demand Registration;
provided, however, that in the event any Tranche A Notes are exchanged for
Parent Common Stock pursuant to the provisions of Section 3.01(b) of the
Guaranty and Exchange Agreement, the Holders shall be entitled to one additional
Demand Registration with respect to any Tranche A Notes that are still
outstanding following such exchange.
(c) REGISTRATION OF OTHER SECURITIES. Whenever Parent shall effect a
Demand Registration of Parent Common Stock pursuant to SECTION 2.01(A) in
connection with an underwritten offering by the Holders, no securities other
than shares of Parent Common Stock shall be included among the securities
covered by such registration unless (i) the managing underwriter of such
offering shall have advised Parent in writing that the inclusion of such other
securities would not adversely affect such offering or (ii) the Holders of
Registrable Securities participating in such Demand Registration shall have
consented in writing to the inclusion of such other securities.
(d) REGISTRATION STATEMENT FORM. Demand Registrations shall be on such
appropriate registration form of the Commission (excluding Form S-8 or Form S-4
(or any successor form)) (i) as shall be selected by Parent and shall be
reasonably acceptable to the Holders and (ii) as shall permit the disposition of
such Registrable Securities in accordance with the intended method or methods of
disposition specified in the Holders' request for such registration, including,
without limitation, a "shelf offering" or disposition pursuant to Rule 415 under
the 1933 Act. Parent and the Holders agree to include in any such registration
statement all information and exhibits that, in the opinion of counsel to the
Holders or counsel to Parent, is required to be included therein.
(e) EFFECTIVE REGISTRATION STATEMENT. A registration requested pursuant to
SECTION 2.01(A) shall not be deemed to have been effected and will NOT be
considered one of the Demand Registrations which may be requested pursuant to
this Agreement if (i) a registration statement with respect thereto has not
become effective or if the request for the Demand Registration is withdrawn
prior to effectiveness or such registration is interfered with by any stop
order, injunction or other order or requirement of the Commission or other
governmental agency or court for any reason and has not thereafter become
effective, (ii) after it has become effective, it does not remain effective for
a period of at least 120 days or, in the case of a "shelf" registration or
registration pursuant to Rule 415 under the 1933 Act, for a period of at least
two years (unless the Registrable Securities registered thereunder have been
sold or disposed of prior to the expiration of such 120-day period or such
two-year period, as the case may be), (iii) the conditions to closing specified
in any underwriting agreement entered into in connection with such registration
are not satisfied or waived other than by reason of the failure or refusal of
the Holders to satisfy or perform a condition to such closing or (iv) the
Holders are not able to register and sell all of the Registrable Securities
requested to be included in such Demand Registration, but only if such
registration statement is for a "firm commitment underwriting" rather than for
an "at the market sale" by the Holders. In any event,
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Parent shall pay all Registration Expenses in connection with any such
registration initiated but not so effected.
(f) PRIORITY ON DEMAND REGISTRATIONS. In the event that the managing
underwriters of a requested Demand Registration advise Parent in writing that in
their opinion the number of shares of Registrable Securities proposed to be
included in any such registration exceeds the number of securities that can be
sold in such offering, Parent shall include in such registration only the number
of shares of Registrable Securities that in the opinion of such underwriters can
be sold. If the number of Registrable Securities requested to be sold in a
Demand Registration exceeds the number of shares of Registrable Securities that
can be sold, Parent shall include in such Demand Registration (i) FIRST, the
Registrable Securities requested to be included therein by the Holders, and (ii)
SECOND, other securities requested to be included in such registration.
(g) RESTRICTIONS ON DEMAND REGISTRATIONS. Parent shall not be obligated to
effect any Demand Registration within 180 days after the effective date of a
previous Demand Registration or a previous registration under which any Holder
exercised piggyback rights pursuant to SECTION 2.02 hereof. Parent may postpone
(such postponement referred to herein as a "Permitted Interruption") for a
reasonable period of time (not to exceed 90 days, which may not thereafter be
extended without approval by the Holders participating in such Demand
Registration, which approval will not be unreasonably withheld) the filing or
the effectiveness of a registration statement for a Demand Registration if, at
the time it receives a request for such registration (i) Parent is engaged in
any active program for repurchase of Parent Common Stock and furnishes to the
Holders an Officer's Certificate to that effect, (ii) Parent is conducting or
about to conduct an offering of Parent Common Stock or other securities and
Parent is advised by the investment banker engaged by Parent to conduct the
offering that such offering would be affected adversely by the registration so
demanded and Parent furnishes to the Holders an Officer's Certificate to that
effect, or (iii) the board of directors of Parent shall determine in good faith
that such offering will interfere with a pending or contemplated financing,
merger, acquisition, business combination, sale of assets, recapitalization or
other similar corporate action of Parent and Parent furnishes to the Holders an
Officer's Certificate to that effect. After such Permitted Interruption, Parent
shall effect such registration as promptly as practicable without further
request from the Holders unless such request has been withdrawn.
(h) SELECTION OF UNDERWRITERS. The Holders shall have the right to select
such investment bankers and managers as shall be reasonably acceptable to Parent
to administer the offering of Registrable Securities for which a Demand
Registration is requested. The Holders shall, in their sole discretion,
negotiate the terms of the underwriters' fees and expenses, the underwriting
discount and commission and the transfer taxes.
(i) PREEMPTION OF DEMAND REGISTRATION. Notwithstanding anything to the
contrary contained herein, if at any time a Demand Registration has been
requested pursuant to SECTION 2.01(A), Parent may elect to effect an
underwritten primary registration on behalf of Parent if Parent's board of
directors believes that such primary registration would be in the best interests
of Parent or if the managing underwriter for the requested Demand Registration
advises Parent in writing that in their opinion in order to sell the Registrable
Securities subject to such Demand
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Registration Parent should include its own securities. Promptly after receiving
a request for a Demand Registration, Parent shall notify the members of its
board of directors (and the board of directors shall consider the issue within
30 days after receiving such request), and Parent shall meet with the managing
underwriter and shall decide whether or not to effect an underwritten primary
registration on behalf of Parent, and failure to convene such a meeting and make
such determination within such 30-day period shall constitute a waiver by Parent
of its right to preempt a Demand Registration under this SECTION 2.01(I). If
Parent elects to effect a primary registration after receiving a request to
effect a Demand Registration, Parent shall give prompt written notice (and in
any event within 60 days after receiving a request for a Demand Registration) to
each Holder requesting such Demand Registration of Parent's intention to effect
such a primary registration and shall afford such Holder or Holders rights to
Piggyback Registrations contained in SECTION 2.02 hereof. If Parent elects to
effect a primary registration after receiving a request to effect a Demand
Registration, such registration shall not count as one of the Demand
Registrations of the Holders permitted under SECTION 2.01(B) hereof, unless all
Registrable Securities requested to be included in the Demand Registration are
included in such primary registration.
SECTION 2.02. PIGGYBACK REGISTRATIONS. (a) GENERAL. Whenever Parent
proposes to register any shares of Parent Common Stock or other equity
securities under the 1933 Act (other than registrations solely for shares to be
issued in connection with any employee benefit plan or a merger, consolidation
or other business combination registered on Form S-4 (or any successor form
thereto)) and the registration form to be used may be used for the registration
of Shares or Related Securities, as the case may be (a "Piggyback
Registration"), Parent shall give prompt written notice (in any event within 10
business days after its receipt of notice of any exercise of other registration
rights) to each Holder of its intention to effect such a registration and shall
use its reasonable best efforts to include in such registration all of the
Registrable Securities with respect to which Parent receives from any Holder a
written request for inclusion therein within 20 days after the receipt by the
Holders of Parent's notice (five business days if Parent gives telephonic notice
to the Holders, with written confirmation to follow immediately thereafter,
stating that (i) such registration will be on Form S-3 (or any comparable or
successor form or comparable form then applicable to small business issuers) and
(ii) such shorter period of time is required because of a planned filing date),
which request shall specify the number of Registrable Securities requested to be
included in such registration by such Holder. If Parent elects, prior to
effectiveness, not to proceed with a primary registration of Parent Common Stock
or other equity securities, it shall not be obligated to register any
Registrable Securities pursuant to such registration unless such primary
registration was initiated as provided in SECTION 2.01(I) after Parent received
a request for Demand Registration.
(b) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback Registration is an
underwritten primary registration on behalf of Parent and the managing
underwriter of such offering advises Parent in writing that in their opinion the
number of securities requested to be included in such registration exceeds the
number that can reasonably be sold in such offering, then Parent shall include
in such registration (i) FIRST, the securities that Parent proposes to sell,
(ii) SECOND, the Registrable Securities and other securities requested to be
included therein by one or more Holders or Shareholder Noteholders, on a PRO
RATA basis according to the number of securities originally requested to be
included by each Holder and Shareholder Noteholder and (iii) THIRD, securities
requested to be
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included therein by any other persons having registration rights with respect to
securities of Parent. If the managing underwriter of such offering subsequently
advises Parent in writing that the number of securities that can be sold exceeds
the number of securities included in the offering, Parent shall include in the
registration (i) FIRST, the securities that Parent proposes to sell, (ii)
SECOND, such additional securities that one or more Holders or Shareholder
Noteholders had originally requested be included in the registration, on a PRO
RATA basis according to the number of securities originally requested to be
included by each Holder and Shareholder Noteholder and (iii) THIRD, securities
requested to be included therein by any other persons having registration rights
with respect to securities of Parent.
(c) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback Registration is an
underwritten secondary registration on behalf of holders of Parent's securities
other than the Holders and the managing underwriter of such offering advises
Parent in writing that in their opinion the number of securities requested to be
included in such registration exceeds the number that can reasonably be sold in
such offering, then Parent shall include in such registration (i) FIRST, if such
registration is being made on behalf of other stockholders of Parent exercising
demand registration rights, then the securities so requested to be included
therein in accordance with such demand registration rights, (ii) SECOND, the
Registrable Securities and other securities requested to be included in such
registration by one or more Holders or Shareholder Noteholders on a PRO RATA
basis according to the number of securities originally requested to be included
by each Holder and Shareholder Noteholder, and (iii) THIRD, securities requested
to be included therein by any other persons having registration rights with
respect to securities of Parent. If the managing underwriter of such offering
subsequently advises Parent in writing that the number of securities that can be
sold exceeds the number of securities included in the offering, Parent shall
include in the registration (i) FIRST, the securities proposed to be sold on
behalf of the other stockholders of Parent exercising demand registration
rights, (ii) SECOND, such additional securities that one or more Holders or
Shareholder Noteholders had originally requested be included in the
registration, on a PRO RATA basis according to the number of securities
originally requested to be included by each Holder and Shareholder Noteholder
and (iii) THIRD, securities requested to be included therein by any other
persons having registration rights with respect to securities of Parent.
(d) OTHER REGISTRATIONS. If (i) Parent has previously filed a registration
statement with respect to any of the Registrable Securities pursuant to SECTION
2.01(A) OR 2.02(A) and (ii) such previous registration has not been withdrawn or
abandoned, Parent shall not file or cause to be effective any other registration
of any of its equity securities or securities convertible or exchangeable into
or exercisable for its equity securities under the 1933 Act (except on Form S-8
or Form S-4 or any successor form), whether on its own behalf or at the request
of any holder or holders of such securities, until a period of at least 180 days
has elapsed from the effective date of such previous registration (and, during
the period of any "shelf offering" or offering pursuant to Rule 415 under the
1933 Act, during such time as any Holder is engaged in selling efforts pursuant
thereto, except with the prior written consent of the Holders named in the
prospectus for such "shelf offering").
(e) PIGGYBACK NOT A DEMAND REGISTRATION. Should any Holder's participation
in a registration be pursuant to a Piggyback Registration in connection with (i)
an underwritten primary
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registration on behalf of Parent as described in SECTION 2.01(I) OR 2.02(B), or
(ii) an underwritten secondary registration on behalf of holders of Parent's
securities other than the Holders as described in SECTION 2.02(C), then such
participation by any Holder shall not constitute a Demand Registration for
purposes of determining the number of Demand Registrations the Holders are
entitled to pursuant to SECTION 2.01(B).
SECTION 2.03. HOLDBACK AGREEMENTS. (a) GENERAL. Each Holder hereby agrees
not to effect any public sale or distribution of equity securities of Parent, or
any securities convertible into or exchangeable or exercisable for such
securities, including, without limitation, sales pursuant to Rule 144 under the
1933 Act (or any similar rule then in effect), during the 10 days prior to and
the 90 days beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration in which Registrable
Securities are included (except as part of such underwritten registration)
unless the underwriters managing the registered public offering otherwise agree.
(b) AGREEMENT BY PARENT. Parent agrees not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the 10 days prior to and
during the 90 days beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration in which Registrable
Securities are included (except as part of such underwritten registration in
accordance with the provisions of this Agreement) unless the underwriters
managing the registered public offering otherwise agree.
(c) REGISTRATION PROCEDURES. Whenever any Holder requests registration
pursuant to this Agreement, Parent shall use its reasonable best efforts to
effect the registration of Registrable Securities for which registration is
requested in accordance with the intended method of disposition thereof, and
pursuant thereto Parent shall as expeditiously as possible:
(i) prepare and file with the Commission a registration statement with
respect to such 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, Parent will furnish to the counsel selected by the
Holders copies of all documents proposed to be filed, which documents will
be subject to the review of such counsel);
(ii) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection
therewith and prepare and file any related registration statement pursuant
to Rule 462 under the 1933 Act, in each case as necessary to keep such
registration statement or registration statements effective for a period
of not less than 90 days after such registration statement is declared
effective, provided that Parent shall have no obligation pursuant to this
Agreement to maintain the effectiveness of such registration statement
after the sale of the securities registered thereunder, and shall comply
with the provisions of the 1933 Act with respect to the disposition of all
securities
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owned by each Holder that are covered by such registration statement
during such period in accordance with the intended methods of disposition
by such Holder;
(iii) furnish to the Holders such number of copies of such registration
statement, each amendment and supplement thereto, the prospectus included
in such registration statement (including each preliminary prospectus) and
such other documents as any Holder may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such
Holder;
(iv) use its reasonable best efforts to register or qualify such
Registrable Securities under such other securities or Blue Sky Laws of
such jurisdictions as any Holder requests and do any and all other acts
and things that may be necessary or advisable to enable each Holder to
consummate the disposition in such jurisdictions of the Registrable
Securities (provided that Parent will not be required to (A) qualify
generally to do business in any jurisdiction where it would not otherwise
be required to qualify but for this sub-clause (iv), (B) subject itself to
taxation in any such jurisdiction or (c) consent to general service of
process in such jurisdiction);
(v) cause all such shares of Registrable Securities to be listed on each
securities exchange or qualified for trading on each market on which
securities issued by Parent that are of the same class as the Registrable
Securities are then listed or traded;
(vi) provide a transfer agent and registrar for all such Registrable
Securities no later than the effective date of such registration
statement;
(vii) obtain a "cold comfort" letter from Parent's independent public
accountants in customary form, covering such matters of the type
customarily covered by "cold comfort" letters delivered to underwriters,
and covering such other matters as any Holder may reasonably request; and
obtain an opinion of counsel for Parent in customary form, covering such
matters of the type customarily covered in opinions of legal counsel
delivered to underwriters, and covering such other matters as any Holder
may reasonably request;
(viii)if underwriters are engaged in connection with any registration
referred to in this Agreement, Parent shall provide customary
indemnification, representations, covenants, opinions, and other
assurances to the underwriters, in each case in form and substance
reasonably satisfactory to such underwriter;
(ix) notify each Holder and the managing underwriters, if any, promptly,
and (if requested by any such Person) confirm such advice in writing, (A)
when a prospectus or any prospectus supplement or post-effective amendment
(or related registration statement filed pursuant to Rule 462 under the
1933 Act) has been filed, and, with respect to a registration statement or
any post-effective amendment, when the same has become effective, (B) of
any request by the Commission for amendments or supplements to a
registration statement or related prospectus or for additional
information, (C) of the issuance by the Commission of any stop order
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suspending the effectiveness of a registration statement or the initiation
of any proceedings for that purpose, (D) of the receipt by Parent of any
notification with respect to the suspension of the qualification of any of
the registrable securities for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose, (E) of the happening of
any event that requires the making of any changes in a registration
statement or related prospectus so that such documents will not contain
any 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 (F) of Parent's reasonable determination that a
post-effective amendment to a registration statement would be required;
(x) notify each Holder at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act, of the occurrence of any
event as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any
fact necessary to make the statements therein not misleading, and, at the
request of any Holder, Parent shall prepare a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of such
shares such amended or supplemented prospectus shall not contain an untrue
statement of a material fact or omit to state any fact necessary to make
the statements therein not misleading;
(xi) use its reasonable best efforts to obtain as soon as reasonably
practicable the withdrawal of any order suspending the effectiveness of a
registration statement, or the lifting of any suspension of the
qualification of any of the Registrable Securities for sale in any
jurisdiction;
(xii) if requested by the managing underwriters or any Holder, incorporate
in a prospectus supplement or post-effective amendment such information as
the managing underwriter and the Holders agree should be included therein
relating to the sale and distribution of Registrable Securities,
including, without limitation, information with respect to the number of
Registrable Securities being sold to such underwriters, the purchase price
being paid therefor by such underwriters and with respect to any other
terms of the underwritten (or best efforts underwritten) offering of the
Registrable Securities to be sold in such offering; make all required
filings of such prospectus supplement or post-effective amendment as soon
as notified of the matters to be incorporated in such prospectus
supplement or post-effective amendment; and supplement or make amendments
to any registration statement if requested by any Holder or any
underwriter of such securities;
(xiii)furnish to each Holder and each managing underwriter, without
charge, such signed copies of the registration statement or statements and
any post-effective amendment thereto, including financial statements and
schedules, all documents incorporated therein by reference and all
exhibits (including those incorporated by reference) as any Holder or
managing underwriter may reasonably request;
(xiv) cooperate with reasonable requests of the Holders and the managing
underwriter, if any, to facilitate the timely preparation and delivery of
certificates representing Shares or
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Related Securities to be sold and not bearing any restrictive legends
unless required by applicable law; and enable such certificates to be in
such denominations and registered in such names as the managing
underwriter may request at least two business days prior to any sale of
Registrable Securities to the underwriters;
(xv) in the case of an underwritten offering, enter into such customary
agreements (including underwriting agreements in customary form) and take
all such other actions as any Holder or underwriter reasonably requests in
order to expedite or facilitate the disposition of such Registrable
Securities; and
(xvi) make available for inspection by any Holder, any underwriter
participating in any disposition pursuant to such registration statement,
and any attorney, accountant or other agent retained by any such Holder or
underwriter, all financial and other records, pertinent corporate
documents and properties of Parent, and cause Parent's officers,
directors, employees and independent accountants to supply all information
reasonably requested by any such Holder, underwriter, attorney, accountant
or agent in connection with such registration statement.
SECTION 2.04. COMPANY REPORTS. Parent shall file all reports required to
be filed by it under the 1933 Act and the 1934 Act and the rules and regulations
promulgated by the Commission thereunder, and take such further reasonable
action as may be necessary or appropriate for Parent to use Form S-2 or S-3 (or
any similar registration form then applicable to small business issuers or
hereafter adopted by the Commission) to register the Registrable Securities for
sale thereon. Upon request, Parent shall deliver to the Holders a written
statement as to whether it has complied with such requirements.
SECTION 2.05. INFORMATION TO BE FURNISHED BY THE HOLDERS. In connection
with any registration of shares of Registrable Securities hereunder, Parent may
require the Holders to furnish Parent with such information regarding the
Holders and the distribution of such shares as Parent may from time to time
reasonably request in writing in order to comply with the 1933 Act. Each Holder
agrees to notify Parent as promptly as practicable of any inaccuracy or change
in information previously furnished to Parent or of the occurrence of any event
in either case as a result of which any prospectus relating to such registration
contains untrue statements of a material fact regarding the Holders or the
distribution of such shares or omits to state any material fact regarding the
Holders or the distribution of such shares required to be stated therein or
necessary to make the statement therein not misleading in light of the
circumstances under which such statements were made, and to promptly furnish to
Parent any additional information required to correct and update any previously
furnished information or required such that such prospectus shall not contain,
with respect to the Holders or the distribution of such shares, an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which such statements are made.
SECTION 2.06. SUSPENSION OF OFFERING PENDING PROSPECTUS SUPPLEMENT OR
AMENDMENT. Each Holder agrees that, upon receipt of any notice from Parent of
the occurrence of any event of
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the kind described in SECTION 2.03(C)(IX)(B), (C), (D), (E) OR (F) hereof, such
Holder will forthwith discontinue disposition of the Registrable Securities
covered by such registration statement or prospectus until such holder's receipt
of the copies of the supplemented or amended prospectus relating to such
registration statement or prospectus, or until it is advised in writing by
Parent that the use of the applicable prospectus may be resumed, and has
received copies of any additional or supplemental filings which are incorporated
by reference in such prospectus, and, if so directed by Parent, such Holder will
deliver to Parent all copies, other than permanent file copies then in such
Holder's possession, of the prospectus covering the Registrable Securities
current at the time of receipt of such notice.
SECTION 2.07. REGISTRATION EXPENSES. (a) GENERAL. All expenses incident to
Parent's performance and execution of Demand Registrations or Piggyback
Registrations, and Parent's performance of or compliance with this Agreement,
including, without limitation, all registration and filing fees, fees and
expenses of compliance with securities or Blue Sky Laws, expenses and fees for
listing the securities on the appropriate securities exchanges or qualifying
such securities for trading in the appropriate securities markets, costs of
liability insurance, all internal expenses, the expense of any annual audit or
quarterly review, printing expenses, messenger and delivery expenses, fees and
disbursements of counsel for Parent and all independent certified public
accountants (including the expenses of any special audit and "cold comfort"
letters required by or incident to such performance), and fees and costs of
underwriters (excluding discounts and commissions and fees of underwriters,
selling brokers, dealer managers or similar securities industry professionals
relating to the distribution of the Registrable Securities) and other Persons
(all such expenses being herein called "Registration Expenses"), shall be borne
by Parent.
(b) REIMBURSEMENT FOR COUNSEL FEES. In connection with each Demand
Registration and Piggyback Registration, Parent shall reimburse the Holders for
the reasonable fees and disbursements of one law firm chosen by Holders of a
majority (in then market value) of the then outstanding Registrable Securities.
(c) PAYMENT OF EXPENSES BY THE HOLDERS. The Holders shall pay the
underwriters' discount and commissions and the commissions and fees, if any,
payable in respect of selling brokers, dealer managers or similar securities
industry professionals, and transfer taxes allocable to the registration of the
Holders' securities so included in any Demand Registration or Piggyback
Registration pursuant to this Agreement.
SECTION 2.08. UNDERWRITTEN OFFERINGS. (a) UNDERWRITING AGREEMENT. In any
underwritten offering by one or more Holders pursuant to a registration
requested under SECTION 2.01(A) OR 2.02(A), Parent shall enter into an
underwriting agreement which shall be reasonably satisfactory in form and
substance to Parent, such Holder or Holders and the underwriters and which shall
contain representations, warranties and agreements (including indemnification
agreements to the effect and consistent with that provided in SECTION 2.09
hereof) as are customarily included by an issuer in underwriting agreements with
respect to primary distributions.
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(b) CONDITION TO PARTICIPATION AND QUALIFICATIONS TO OBLIGATIONS UNDER
REGISTRATION COVENANTS. The obligations of Parent to use its reasonable best
efforts to cause the Registrable Securities to be registered under the 1933 Act
are subject to each of the conditions that no Holder may participate in any
underwritten offering hereunder unless such Holder (a) agrees to sell such
Registrable Securities on the basis provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably and customarily required
under the terms of such underwriting arrangements.
SECTION 2.09. INDEMNIFICATION. (a) BY PARENT AND THE COMPANY. In the event
of any registration of any Registrable Securities under the 1933 Act, Parent and
the Company will, and hereby do, jointly and severally, indemnify and hold
harmless, to the fullest extent permitted by law, each Holder, its directors and
officers, each other Person who participates as an underwriter in the offering
or sale of such securities and each other Person, if any, who controls such
Holder or any such underwriter within the meaning of the 1933 Act, against any
and all losses, claims, damages, liabilities and expenses, joint or several, (or
actions or proceedings, whether commenced or threatened, in respect thereof) to
which they or any of them may become subject under the 1933 Act or any other
statute or common law, including any amount paid in settlement of any
litigation, commenced or threatened, and to reimburse them for any legal or
other expenses incurred by them in connection with investigating any claims and
defending any actions, insofar as any such losses, claims, damages, liabilities,
expenses or actions arise out of or are based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in the registration
statement relating to the sale of such securities or any post-effective
amendment thereto or any related registration statement filed pursuant to Rule
462 or similar rule under the 1933 Act or in any filing made in connection with
the qualification of the offering under Blue Sky or other securities laws or
jurisdictions in which the Registrable Securities are offered ("Blue Sky
Filing"), or the omission or alleged omission to state therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading or (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus, if used
prior to the effective date of such registration statement (unless such
statement is corrected in the final prospectus and Parent has previously
furnished copies thereof to each Holder and the underwriters), or contained in
the final prospectus (as amended or supplemented if Parent shall have filed with
the Commission, and furnished to each Holder and the underwriters of such
offering copies thereof, prior to the written confirmation of any sale to the
person asserting liability, any amendment thereof or supplement thereto) if used
within the period during which Parent is required to keep the registration
statement to which such prospectus relates current, or the omission or alleged
omission to state therein (if so used) a material fact necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading; PROVIDED, HOWEVER, that the indemnification agreement
contained herein shall not (i) apply to such losses, claims, damages,
liabilities, expenses or actions arising out of, or based upon, any such untrue
statement or alleged untrue statement, or any such omission or alleged omission,
if such statement or omission was made in reliance upon and in conformity with
written information furnished to Parent by a Holder or such underwriter
expressly for use in connection with preparation of the registration statement,
any preliminary prospectus or final prospectus contained in the registration
statement, any such amendment or supplement thereto or any Blue Sky Filing or
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.6 - Page 16
<PAGE>
(ii) inure to the benefit of any underwriter or any person controlling such
underwriter, to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of such person's
failure to send or give a copy of the final prospectus, as the same may be then
supplemented or amended, to the person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Holder or any such director, officer or controlling person and
shall survive the transfer of such securities by such Holder.
(b) BY THE HOLDERS. Parent may require, as a condition to including any
Registrable Securities in any registration statement filed pursuant to SECTION
2.01 OR 2.02, that Parent shall have received an undertaking satisfactory to it
from the Holders to indemnify and hold harmless (in the same manner and to the
same extent as set forth in SECTION 2.09(A)) Parent, each director of Parent,
each officer of Parent and each other person, if any, who controls Parent within
the meaning of the 1933 Act, with respect to any untrue statement or alleged
untrue statement in, or omission or alleged omission from, such registration
statement, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereto, if such statement or omission was made in
reliance upon and in conformity with written information furnished to Parent by
a Holder expressly for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect, regardless of any investigation
made by or on behalf of Parent or any such director, officer or controlling
person and shall survive the transfer of such securities by such Holder. In no
event shall any indemnity paid by any Holder to Parent pursuant to this SECTION
2.09(B), or otherwise, exceed the proceeds received by such Holder in such
offering.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in SECTION 2.09(A) OR 2.09(B), such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action, PROVIDED that
the failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under SECTION 2.09(A) OR
2.09(B), as the case may be. In case any such action is brought against an
indemnified party, the indemnifying party shall be entitled to participate in
and, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may exist in respect
of such claim, to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. In the event that the indemnifying party advises an indemnified
party that it will contest a claim for indemnification hereunder, or fails,
within 30 days of receipt of any indemnification notice to notify, in writing,
such person of its election to defend, settle or compromise, at its sole cost
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.6 - Page 17
<PAGE>
and expense, any action, proceeding or claim (or discontinues its defense at any
time after it commences such defense), then the indemnified party may, at its
option, defend, settle or otherwise compromise or pay such action or claim. In
any event, unless and until the indemnifying party elects in writing to assume
and does so assume the defense of any such claim, proceeding or action, the
indemnified party's costs and expenses arising out of the defense, settlement or
compromise of any such action, claim or proceeding shall be losses subject to
indemnification hereunder. The indemnified party shall cooperate fully with the
indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party which
relates to such action or claim. The indemnifying party shall keep the
indemnified party fully apprised at all times as to the status of the defense or
any settlement negotiations with respect thereto. If the indemnifying party
elects to defend any such action or claim, then the indemnified party shall be
entitled to participate in such defense with counsel of its choice at its sole
cost and expense. If the indemnifying party does not assume such defense, the
indemnified party shall keep the indemnifying party apprised at all times as to
the status of the defense; PROVIDED, HOWEVER, that the failure to keep the
indemnifying party so informed shall not affect the obligations of the
indemnifying party hereunder. No indemnifying party shall be liable for any
settlement of any action, claim or proceeding effected without its written
consent; PROVIDED, HOWEVER, that the indemnifying party shall not unreasonably
withhold, delay or condition its consent. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect to such claim or litigation.
(d) CONTRIBUTION. If the indemnification provided for in or pursuant to
SECTION 2.09(A) OR 2.09(B) is due in accordance with the terms thereof, but is
held by a court to be unavailable or unenforceable in respect of any losses,
claims, damages, liabilities or expenses referred to therein, then each
applicable indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified person as a
result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses as well as any other relevant equitable considerations.
The relative fault of the indemnifying party on the one hand and of the
indemnified person on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party, by such party's
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement, or omission. In no event shall the liability of any
Holder be greater in amount than the amount of proceeds received by such Holder
upon such sale.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.6 - Page 18
<PAGE>
ARTICLE III
EFFECTIVE TIME AND TERM OF THIS AGREEMENT
SECTION 3.01. EFFECTIVE TIME AND TERM OF THIS AGREEMENT. This Agreement
will be effective for all purposes as of the Closing and will continue in full
force and effect until the date that no Holder owns any of the Registrable
Securities.
ARTICLE IV
MISCELLANEOUS
SECTION 4.01. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 4.02. AMENDMENTS. This Agreement contains the entire understanding
of the parties with respect to the Registrable Securities, and may be amended
only by an agreement in writing signed by (i) Parent, (ii) the Company and (iii)
the Holders of not less than a majority (in then market value) of the then
outstanding Registrable Securities, including not less than a majority (in then
market value) of the then outstanding Registrable Securities held by the RIMCO
Holders, PROVIDED, HOWEVER, that in no event shall any amendment impose any
additional material obligations on any Holder without such Holder's written
consent.
SECTION 4.03. DESCRIPTIVE HEADINGS. Descriptive headings are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
SECTION 4.04. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original but all of which together
shall constitute one instrument. Each counterpart may consist of a number of
copies hereof, each signed by less than all, but together signed by all, of the
parties hereto.
SECTION 4.05. NOTICES. All notices and communications provided for
hereunder shall be in writing and sent (a) by telecopy if the sender on the same
day sends a confirming copy of such notice by a recognized overnight delivery
service (charges prepaid) or (ii) by registered or certified mail with return
receipt requested (postage prepaid) or (iii) by a recognized overnight delivery
service (with charges prepaid).
(i) if to a RIMCO Holder, at its addresses set forth below, or such other
address as it shall have specified to Parent in writing,
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.6 - Page 19
<PAGE>
(ii) if to any other Holder, at such address as specified to Parent in
writing in the notice provided in SECTION 4.08(B), or such other address
as such Holder shall have subsequently specified to Parent in writing, and
(iii) if to the Company or Parent, 1600 Smith Street, Suite 4000, Houston,
Texas 77002, Telecopy No.: 713-652-9601, or such other address as it shall
have specified to the Holders in writing.
Notices given under this SECTION 4.05 shall be deemed given only when actually
received.
SECTION 4.06. GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the laws of the State of New York, excluding choice-of-law principles of the law
of such State that would require the application of the laws of a jurisdiction
other than such State.
SECTION 4.07. SURVIVAL. The representations and warranties made by the
Company and Parent herein shall survive the execution and delivery of the
Transaction Documents and the purchase and transfer by the Holders of any of the
Registrable Securities, regardless of any investigation made at any time by or
on behalf of the RIMCO Holders or any other Holder. All statements contained in
any certificate or other instrument delivered by or on behalf of the Company or
Parent pursuant to this Agreement shall be deemed to be representations and
warranties of the Company and Parent under this Agreement.
SECTION 4.08. SUCCESSORS AND ASSIGNS. (a) Subject to the provisions of
SECTION 4.08(B), all covenants and other agreements contained in this Agreement
by or on behalf of any of the parties hereto bind and inure to the benefit of
their respective successors and assigns (including, without limitation, any
subsequent holder of a Note or any Registrable Securities), whether so expressed
or not.
(b) The Registrable Securities and rights of any Holder under this
Agreement with respect to any Registrable Securities may be assigned to any
person who acquires Registrable Securities from a Holder, except that any Person
who acquires such Registrable Securities (x) pursuant to a public offering
registered under the 1933 Act or (y) pursuant to a transfer made in accordance
with Rule 144 under the 1933 Act may not be assigned rights hereunder with
respect to such Registrable Securities. Notwithstanding the foregoing, rights to
cause a Demand Registration under SECTION 2.01(A) may only be assigned if such
rights are expressly assigned in writing from a Holder. Any assignment of
registration rights pursuant to this SECTION 4.08(B) shall be effective upon
receipt by Parent of written notice from such assigning Holder (i) stating the
name and address of any assignee, (ii) describing the manner in which the
assignee acquired the Registrable Securities from such Holder and (iii)
identifying the number of Registrable Securities with respect to which the
rights under this Agreement are being assigned.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.6 - Page 20
<PAGE>
SECTION 4.09. ACTIONS BY HOLDERS OF MAJORITY OF REGISTRABLE SECURITIES.
Each of the parties hereto agrees, in connection with the taking of any action
permitted to be taken hereunder by the Holders or RIMCO Holders (as the case may
be), that the Holders or RIMCO Holders (as the case may be) holding a majority
(in then market value) of the then outstanding Registrable Securities are
entitled to take such action.
IN WITNESS WHEREOF, the Company, Parent and the RIMCO Holders have caused
this Agreement to be executed by their respective representatives thereunto duly
authorized, effective as of the date first above written.
TEXOIL, INC.
By: /S/ RUBEN MEDRANO
Name: Ruben Medrano
Title:President
TEXOIL COMPANY
By: /S/ RUBEN MEDRANO
Name: Ruben Medrano
Title:President
RIMCO PARTNERS, L.P.
RIMCO PARTNERS, L.P. II
RIMCO PARTNERS, L.P. III
RIMCO PARTNERS, L.P. III
By: RESOURCES INVESTORS MANAGEMENT
COMPANY LIMITED PARTNERSHIP,
their general partner
By: RIMCO ASSOCIATES, INC.,
its general partner
By: /S/ GARY MILAVEC
Name: Gary Milavec
Title:Vice President
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.6 - Page 21
<PAGE>
Addresses for Notices:
22 Waterville Road
Avon, Connecticut 06001
Telecopy No.: 860-678-9382
600 Travis Street -Suite 6875
Houston, Texas 77002
Telecopy No.: 713-247-0730
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.6 - Page 22
EXHIBIT 10.7
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "AGREEMENT"), dated September 6,
1996 is among OPAL AIR, INC. (the "SUBORDINATE NOTEHOLDER"), and RIMCO PARTNERS,
L.P., a Delaware limited partnership, RIMCO PARTNERS, L.P. II, a Delaware
limited partnership, RIMCO PARTNERS, L.P. III, a Delaware limited partnership
and RIMCO PARTNERS, L.P. IV, a Delaware limited partnership (collectively, the
"SENIOR NOTEHOLDERS"), TEXOIL, INC., a Nevada corporation ("PARENT"), and TEXOIL
COMPANY, a Tennessee corporation (the "COMPANY").
PRELIMINARY STATEMENTS
The Senior Noteholders have entered into that certain Note Purchase
Agreement, dated of even date herewith (as same may be amended from time to time
being referred to herein as the "NOTE AGREEMENT") with the Company and Parent
whereby the Senior Noteholders have purchased from the Company its 10% Senior
Secured Exchangeable General Obligation Notes in the maximum aggregate principal
amount of $3,000,000 and the Senior Noteholders (other than RIMCO Partners,
L.P.) have purchased from the Company its 10% Senior Secured General Obligation
Notes in the maximum aggregate principal amount of $5,000,000, subject in each
case to the terms of the Note Agreement (collectively, the "SENIOR NOTES").
In connection with the Note Agreement, the Senior Noteholders, the
Company and Parent have entered into that certain Guaranty and Exchange
Agreement, dated of even date herewith (as same may be amended from time to time
being referred to herein as the "GUARANTY AGREEMENT"), whereby, among other
things, Parent has unconditionally and irrevocably guaranteed the full and
punctual payment when due, whether at stated maturity or earlier by acceleration
or otherwise, of any and all debts, liabilities and obligations of the Company
now or hereafter existing under the Note Agreement, the Notes or any of the
other Transaction Documents (as such term is defined in the Note Agreement).
The Subordinate Noteholder has loaned Parent $50,000 and Parent has
issued the Subordinate Noteholder a promissory note dated September 1, 1996 in
the principal amount of $50,000 (the "SUBORDINATE NOTE").
NOW, THEREFORE, in consideration of the premises and in order to
induce the Senior Noteholders to purchase the Senior Notes under the Note
Agreement, the Subordinate Noteholder, Parent, the Company and the Senior
Noteholders hereby agree as follows:
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.7 - Page 1
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"BANKRUPTCY PROCEEDING" means any case, suit or proceeding
instituted under any Debtor Relief Law.
"DEBTOR RELIEF LAW" means the Bankruptcy Code of the United States
of America, as amended from time to time, and all other applicable
dissolution, liquidation, conservatorship, bankruptcy, moratorium,
readjustment of debt, compromise, rearrangement, receivership, insolvency,
reorganization or similar debtor relief laws from time to time in effect
affecting the rights of creditors generally.
"SENIOR LIENS" means all Liens covering real or personal property of
the Company or Parent granted in favor of the Senior Noteholders to secure
the payment and performance of the Senior Obligations.
"SENIOR OBLIGATIONS" means (i) all indebtedness, liabilities and
obligations owing by the Company and/or Parent to the Senior Noteholders
under the Note Agreement, the Senior Notes, the Guaranty Agreement or any
other Transaction Document, whether for principal, premium, interest
(including, without limitation, any interest accruing after the filing of
any petition or pleadings under any Debtor Relief Law), fees, expenses or
otherwise, and including any contingent obligation in respect of any
unfunded portion of the Advances, (ii) any and all other indebtedness,
liabilities and obligations of the Company and/or Parent to the Senior
Noteholders, absolute or contingent, direct or indirect, joint, several or
independent, now outstanding or owing or which may hereafter be existing
or incurred, arising by operation of law or otherwise, due or to become
due, or held or to be held by the Senior Noteholders, whether created
directly or acquired by assignment, and (iii) all renewals, extensions,
refinancings, replacements and modifications of the foregoing.
"SUBORDINATE LOAN DOCUMENTS" means the Subordinate Note, and all
other agreements, instruments, documents, and other writings heretofore,
now, or hereafter executed by or on behalf of Parent or any other Person
in connection with or relating to the Subordinate Obligations, together
with all agreements, instruments and documents referred to therein or
contemplated thereby.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.7 - Page 2
"SUBORDINATE OBLIGATIONS" means (i) all indebtedness, liabilities
and other obligations owing by Parent to the Subordinate Noteholder,
whether for principal, premium, interest (including, without limitation,
any interest accruing after the filing of any petition or pleadings under
any Debtor Relief Law), fees, expenses or otherwise, including, without
limitation, all indebtedness, liabilities and other obligations arising in
connection with the Subordinate Note and any other Subordinate Loan
Documents, (ii) any and all other indebtedness, liabilities, and
obligations of Parent to the Subordinate Noteholder, absolute or
contingent, direct or indirect, joint, several or independent, now
outstanding or owing or which may hereafter be existing or incurred,
arising by operation of law or otherwise, due or to become due, or held or
to be held by the Subordinate Noteholder, whether created directly or
acquired by assignment, and (iii) all extensions, renewals, rearrangements
and modifications of the foregoing.
SECTION 1.02. NOTE AGREEMENT DEFINITIONS. All capitalized terms
defined in the Note Agreement and not otherwise defined herein are used herein
with the respective meanings specified in the Note Agreement.
SECTION 1.03. REFERENCES, ETC. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. All references herein to sections shall, unless the context requires
a different construction, be deemed to be references to the sections of this
Agreement.
ARTICLE II
SUBORDINATION
SECTION 2.01. AGREEMENT TO SUBORDINATE. All Subordinate Obligations
shall be subordinate, inferior and junior in right of payment, to the extent and
in the manner hereinafter set forth, to all Senior Obligations. The Subordinate
Noteholder, Parent and the Company acknowledge that the Senior Noteholders have
purchased the Senior Notes and entered into the Note Agreement, the Guaranty
Agreement and the other Transaction Documents in reliance upon the provisions of
this Agreement.
SECTION 2.02. NO PAYMENT ON THE SUBORDINATE OBLIGATIONS. So long as
any Senior Obligations or Commitments shall remain outstanding, the Subordinate
Noteholder agrees not to ask, demand, sue for, take, receive or accept from
Parent or the Company, directly or indirectly, in cash or other property or by
set-off or in any other manner, payment of all or any of the Subordinate
Obligations, except as expressly permitted by the following sentence. On the
tenth day of each month commencing October 10, 1996, Subordinate Noteholder may
receive from Parent a payment of an amount equal to accrued unpaid interest on
the Subordinate Note and on the tenth day
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.7 - Page 3
of each January, April, July and October commencing on the later of (a) April
10, 1997 and (b) the tenth day of the first January, April, July or October
occurring after the total amounts advanced by the Senior Noteholders under the
Tranche A Notes equals or exceeds $2,800,000, the Subordinate Noteholder may
receive from Parent payments of principal in the amounts provided for in Section
2 of the Subordinate Note, to the extent, and only to the extent, such payments
of interest and principal constitute Permitted Shareholder Debt Payments under
the Note Agreement and no Default or Event of Default has occurred and is
continuing under the Note Agreement.
SECTION 2.03. IN FURTHERANCE OF SUBORDINATION. (a) In the event of
(i) any sale of assets of Parent or the Company under or in accordance with any
judgment or decree rendered in any proceeding by or on behalf of the Subordinate
Noteholder or in respect of the Subordinate Obligations, (ii) any distribution,
division or application, partial or complete, voluntary or involuntary, by
operation of law or otherwise, of all or any part of the assets of Parent or the
Company, or the proceeds thereof, to creditors of Parent or the Company
occurring by reason of any liquidation, dissolution or winding up of Parent or
the Company pursuant to a Bankruptcy Proceeding or otherwise, or (iii) any
Bankruptcy Proceeding, execution sale or other similar proceeding relative to
Parent or the Company or their respective debts or properties, then in any such
event (A) the Senior Noteholders shall be preferred in the payment of their
claims over the claims of the Subordinate Noteholder, and all Senior Obligations
shall be first paid and satisfied in full before any payment or distribution of
any kind or character, whether in cash, property or securities, shall be made
upon any Subordinate Obligations, and (B) any dividend or distribution of any
kind or character, whether in cash, property or securities which shall be made
upon, or in respect of, the Subordinate Obligations, or any renewals or
extensions thereof, shall be paid over to the Senior Noteholders, for
application in payment of the Senior Obligations until such Senior Obligations
shall have been paid and satisfied in full.
(b) All payments or distributions upon or with respect to the
Subordinate Obligations which are received by the Subordinate Noteholder
contrary to the provisions of this Agreement shall be received in trust for the
benefit of the Senior Noteholders, shall be segregated from other funds and
property held by the Subordinate Noteholder and shall be forthwith paid over to
the Senior Noteholders in the same form as so received (with any necessary
endorsement) to be applied (in the case of cash) to or held as collateral (in
the case of non-cash property or securities) for the payment or prepayment of
the Senior Obligations.
(c) The Senior Noteholders are hereby authorized to demand specific
performance of this Agreement, whether or not Parent or the Company shall have
complied with any of the provisions hereof applicable to either of them, at any
time when the Subordinate Noteholder shall have failed to comply with any of the
provisions of this Agreement. The Subordinate Noteholder hereby irrevocably
waives any defense based on the adequacy of a remedy at law, which might be
asserted as a bar to such remedy of specific performance.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.7 - Page 4
(d) The Subordinate Noteholder agrees that, so long as any of the
Senior Obligations shall remain unpaid or the Commitments are outstanding, it
will not commence, or join with any creditor other than the Senior Noteholders
in commencing, any Bankruptcy Proceeding against Parent or the Company.
(e) The Subordinate Noteholder agrees that it will not hold any Lien
on any real or personal property as security for the Subordinate Obligations
unless the Senior Noteholders have given their prior written consent to the
creation thereof. In the event the Subordinate Noteholder shall acquire any Lien
as security for the Subordinate Obligations, regardless of whether such Lien is
permitted by this Agreement, the Subordinate Noteholder will hold such Lien for
the benefit of the Senior Noteholders and shall enforce such Lien in accordance
with the written instructions of the Senior Noteholders. Any cash or other
property received on account of any Lien securing the Subordinate Obligations
shall be delivered to the Senior Noteholders and, in the case of cash, applied
to, or, in the case of other property, held as collateral for, the Senior
Obligations. To the extent that any Subordinate Obligations are now or hereafter
secured by a Lien in favor of the Subordinate Noteholder against any real or
personal property that is also subject to a Senior Lien securing the Senior
Obligations, the Subordinate Noteholder agrees that such Lien in favor of the
Subordinate Noteholder shall be second, junior and subordinate to such Senior
Lien and such Senior Lien shall be first and prior to such Lien in favor of the
Subordinate Noteholder. It is further agreed that the priorities specified in
the preceding sentence are applicable irrespective of the time or order of
attachment or perfection of Liens, or the time or order of filing of Liens, or
the time or order of filing of financing statements, or the giving or failure to
give notice of the acquisition or expected acquisition of purchase money or
other security interests.
(f) The Subordinate Noteholder agrees that, so long as any of the
Senior Obligations shall remain unpaid or the Commitments are outstanding, it
will not declare any or all of the Subordinate Obligations due and payable prior
to the date fixed therefor or take any action to enforce any right or remedy
with respect to any Lien in favor of the Subordinate Noteholder.
(g) This Agreement shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of any Senior Obligation is
rescinded or must otherwise be returned by the Senior Noteholders pursuant to
any Bankruptcy Proceeding of Parent or the Company or otherwise, all as though
such payment had not been made.
SECTION 2.04. WAIVER OF SUBROGATION. The Subordinate Noteholder
agrees not to exercise any rights of subrogation in respect of any payment or
distribution to the Senior Noteholders under the provisions of this Agreement
until the Senior Obligations have been paid in full and the Commitments have
terminated.
SECTION 2.05. SUBORDINATION LEGEND. Parent will cause any promissory
note or other instrument evidencing the Subordinate Obligations to expressly
state that it is subject to this
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.7 - Page 5
Agreement. Each of the Subordinate Noteholder and Parent will mark its books and
records in such a manner as shall be effective to give proper notice of the
effect of this Agreement. If any Subordinate Obligation is not evidenced by a
promissory note or other instrument, upon request of the Senior Noteholders, the
Subordinate Noteholder will cause such Subordinate Obligation to be evidenced by
an appropriate instrument or instruments endorsed with the above legend. Upon
the request of the Senior Noteholders, the Subordinate Noteholder shall deliver
to the possession of the Senior Noteholders all instruments evidencing the
Subordinate Obligations. The Subordinate Noteholder, Parent and the Company each
will, at its expense and at any time and from time to time, promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or that the Senior Noteholders may reasonably
request, in order to protect any right or interest granted or purported to be
granted hereby or to enable the Senior Noteholders to exercise and enforce their
rights and remedies hereunder.
SECTION 2.06. NO CHANGE IN OR DISPOSITION OF SUBORDINATE
OBLIGATIONS. So long as any of the Senior Obligations or Commitments shall
remain outstanding, the Subordinate Noteholder will not (a) cancel or otherwise
discharge any of the Subordinate Obligations (other than upon conversion to
common stock of Parent in accordance with the Subordinate Loan Documents) or
subordinate any of the Subordinate Obligations to any indebtedness of Parent or
the Company other than the Senior Obligations; (b) sell, assign, pledge,
encumber or otherwise dispose of any of the Subordinate Obligations; or (c)
permit the terms of any of the Subordinate Obligations to be amended or modified
in any manner.
SECTION 2.07. WAIVERS, ETC. (a) All rights and interests of the
Senior Noteholders hereunder, and all agreements and obligations of the
Subordinate Noteholder, Parent and the Company under this Agreement, shall
remain in full force and effect irrespective of: (i) any lack of validity or
enforceability of the Note Agreement, the Senior Notes, the Guaranty Agreement
or any other Transaction Documents or any other agreement or instrument relating
thereto; (ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Senior Obligations, any increase in the amount
of the Senior Obligations, or any other amendment or waiver of or any consent to
departure from the Note Agreement, the Senior Notes, the Guaranty Agreement or
any other Transaction Documents; (iii) any exchange, release or non-perfection
of any collateral, or any release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Senior Obligations; (iv) any
other circumstance which might otherwise constitute a defense available to, or a
discharge of, the Company or Parent or any other guarantor of the Senior
Obligations; or (v) any failure to act on the part of the Senior Noteholders, or
by any non-compliance by the Company with the terms, provisions and covenants of
this Agreement or the Note Agreement, the Senior Notes, the Guaranty Agreement
or any other Transaction Documents, regardless of any actual or constructive
knowledge that the Senior Noteholders may have with respect thereto. The
Subordinate Noteholder hereby waives promptness, diligence, notice of acceptance
and any other notice with respect to any of the Senior Obligations and any
requirement that the Senior Noteholders
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.7 - Page 6
protect, secure, perfect or insure any Senior Lien or any property subject
thereto or exhaust any right or take any action against the Company or Parent or
any other Person or any collateral.
(b) The Senior Noteholders may at any time and from time to time,
without the consent of or notice to the Subordinate Noteholder, and without
impairing or releasing any of the rights of the Senior Noteholders under this
Agreement, upon or without any terms or conditions and in whole or in part: (i)
increase the amount of the Senior Obligations, change the manner, place or terms
of payment, and/or change or extend the time of payment of, renew or alter, any
Senior Obligations or any other liability of the Company or Parent to the Senior
Noteholders, any security therefor, or any liability incurred directly or
indirectly in respect thereof, or otherwise amend the Note Agreement, the Senior
Notes, the Guaranty Agreement, the other Transaction Documents or any other
document or instrument related to any Senior Obligation, and the provisions of
this Agreement shall apply to the Senior Obligations as so increased, changed,
extended, renewed, altered or amended; (ii) sell, exchange, release, surrender,
realize upon or otherwise deal with in any manner and in any order any property
by whomsoever owned at any time securing, by agreement, operation of law or
otherwise, any Senior Obligations or any other liability of the Company or
Parent to the Senior Noteholders, or any other liabilities incurred directly or
indirectly in connection with the Senior Obligations, or any offset there
against; (iii) exercise or refrain from exercising any rights and/or remedies
against the Company or Parent or others or otherwise act or refrain from acting
or, for any reason, fail to file, record or otherwise perfect any Senior Lien on
any property of the Company or Parent; (iv) release any Person (including the
Company or Parent) liable in any manner for payment or collection of the Senior
Obligations; (v) settle or compromise any of the Senior Obligations or any other
liability of the Company or Parent to the Senior Noteholders or any security for
such Senior Obligations or such other liabilities, or any liability incurred
directly or indirectly in respect thereof, and may subordinate the payment of
all or any part thereof to the payment of any liability (whether due or not) of
the Company or Parent to any of its other creditors; and (vi) apply any sums
received, by whomsoever paid and howsoever realized, to any of the Senior
Obligations in such manner and order as Senior Noteholders, in their sole
discretion, may deem appropriate.
SECTION 2.08. COLLECTION OF SUBORDINATE OBLIGATIONS. If any
Bankruptcy Proceeding is commenced by or against Parent or the Company, (a) the
Senior Noteholders are hereby irrevocably authorized and empowered (in their own
names or in the name of the Subordinate Noteholder or otherwise), but shall have
no obligation, to demand, sue for, collect and receive every payment or
distribution in respect of the Subordinate Obligations and give acquittance
therefor and to file claims and proofs of claim and take such other action
(including, without limitation, voting the Subordinate Obligations or enforcing
any Lien securing payment of the Subordinate Obligations) as they may deem
necessary or advisable for the exercise or enforcement of any of the rights or
interests of the Senior Noteholders hereunder; and (b) the Subordinate
Noteholder shall duly and promptly take such action as the Senior Noteholders
may request to collect and receive any and all payments or distributions which
may be payable or deliverable upon or with respect to the Subordinate
Obligations for the account of the Senior Noteholders and to file appropriate
claims or proofs of
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.7 - Page 7
claim in respect of the Subordinate Obligations, including, without limitation,
executing and delivering to the Senior Noteholders such powers of attorney,
assignments or other instruments as they may request in order to enable them to
enforce any and all claims with respect to, and any security interests and other
liens securing payment of, the Subordinate Obligations.
SECTION 2.09. OBLIGATIONS OF PARENT AND THE COMPANY. Parent and the
Company hereby agree that no payment or distribution will be made on account of
the Subordinate Obligations, whether principal or interest, except as expressly
permitted by this Agreement. In the event of a breach by Parent or the Company
or the Subordinate Noteholder of any of the provisions of this Agreement, an
Event of Default shall exist under the Note Agreement, and the Senior
Noteholders may exercise all of their rights and remedies under this Agreement,
the Note Agreement and the other Transaction Documents. The rights and remedies
available to the Senior Noteholders pursuant to this paragraph are cumulative
and not exclusive of any other right or remedy available to the Senior
Noteholders under this Agreement, the Note Agreement and the other Transaction
Documents or the law to enforce the performance or observance of the covenants
and agreements contained herein.
SECTION 2.10. OBLIGATION TO PAY SUBORDINATE OBLIGATIONS UNIMPAIRED.
The provisions of this Agreement are solely for the purpose of defining the
relative rights of the Senior Noteholders on the one hand, and the Subordinate
Noteholder on the other hand, and nothing herein shall impair, as between Parent
and the Subordinate Noteholder, the obligation of Parent, which is unconditional
and absolute, to pay the principal of the Subordinate Obligations, and interest
thereon in accordance with its terms, subject to the rights of the Senior
Noteholders as herein provided.
ARTICLE III
MISCELLANEOUS
SECTION 3.01. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement nor consent to any departure by the Subordinate
Noteholder, Parent or the Company therefrom shall in any event be effective
unless the same shall be in writing and signed by the Senior Noteholders,
Subordinate Noteholder, Parent and the Company, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
SECTION 3.02. EXPENSES. The Subordinate Noteholder, Parent and the
Company, jointly and severally, agree to pay, upon demand, to the Senior
Noteholders the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel, which the Senior Noteholders may
incur in connection with the exercise or enforcement of any of their rights or
interests hereunder.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.7 - Page 8
SECTION 3.03. ADDRESSES FOR NOTICES. Notices, consents, requests,
approvals, demands and other communications provided for herein shall be given
in the manner and become effective as specified in the Note Agreement, and shall
be addressed, if to the Company or the Senior Noteholders, at their respective
addresses specified in the Note Agreement, if to Parent, at its address
specified in the Guaranty Agreement, or if to the Subordinate Noteholder, to the
address specified under its signature to this Agreement.
SECTION 3.04. REPRESENTATIONS AND WARRANTIES. In order to induce the
Senior Noteholders to enter into the Note Agreement, the Subordinate Noteholder
hereby represents and warrants to the Senior Noteholders that:
(a) The Subordinate Noteholder has all requisite power and authority
to execute, deliver and perform its obligations under this Agreement and all
action on the Subordinate Noteholder's part requisite for the due execution,
delivery and performance of this Agreement has been duly and effectively taken.
(b) The execution, delivery and performance of this Agreement by the
Subordinate Noteholder do not and will not contravene any law or contractual
restriction binding on or affecting the Subordinate Noteholder.
(c) No consent, authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority or any other Person is
required for the due execution, delivery and performance by the Subordinate
Noteholder of this Agreement.
(d) This Agreement constitutes the legal, valid and binding
obligations of Subordinate Noteholder enforceable against the Subordinate
Noteholder in accordance with its terms.
(e) The Subordinate Noteholder owns the Subordinate Obligations free
and clear of any lien, security interest, charge or encumbrance or any rights of
others. There exists no default in respect of any such Subordinate Obligations.
SECTION 3.05. NO WAIVER; REMEDIES. No failure on the part of the
Senior Noteholders to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 3.06. CONTINUING AGREEMENT; TRANSFER OF SENIOR NOTES. This
Agreement is a continuing agreement and shall (a) remain in full force and
effect until the Senior Obligations shall have been paid in full and the
Commitments have been terminated, (b) be binding upon the Subordinate
Noteholder, Parent, the Company and their respective successors and assigns, and
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.7 - Page 9
(c) inure to the benefit of and be enforceable by the Senior Noteholders and
their respective successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c), the Senior Noteholders may assign or
otherwise transfer all or any portion of the Senior Obligations to any other
Person, and such other Person (other than Parent, the Company or their
Affiliates) shall thereupon become vested with all or a pro rata portion of the
rights in respect thereof granted to the Senior Noteholders herein or otherwise.
SECTION 3.07. CAPTIONS. The captions in this Agreement have been
inserted for convenience only and shall be given no substantive meaning or
significance whatever in construing the terms and provisions of this Agreement.
SECTION 3.08. TRANSACTION DOCUMENTS. The Subordinate Noteholder
acknowledges that it has full and complete access to the Note Agreement, the
Guaranty Agreement and all of the other Transaction Documents, has fully
reviewed same and is fully aware of their contents.
SECTION 3.09 PRO RATA TREATMENT OF SENIOR NOTEHOLDERS. All amounts
to be paid over or delivered to the Senior Noteholders or to which the Senior
Noteholders otherwise may be entitled hereunder, and all amounts at any time
received in trust for the Senior Noteholders, shall be paid over, delivered,
and/or received, as applicable, pro rata to and for the Senior Noteholders in
proportion to the aggregate amount of Senior Obligations then owing (whether or
not then due and payable) to each such Senior Noteholder, it being intended that
the benefits of this Agreement and all rights and privileges created hereby in
favor of the Senior Noteholders be and are for the ratable benefit of the Senior
Noteholders.
SECTION 3.10. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed an original and all of which
taken together shall constitute but one and the same agreement.
SECTION 3.11. SURVIVAL. All warranties, representations and
covenants made by Subordinate Noteholder, Parent and the Company herein shall be
considered to have been relied upon by the Senior Noteholders and shall survive
the execution and delivery of this Agreement and the other Transaction
Documents, regardless of any investigation made by or on behalf of any thereof.
SECTION 3.12. JURY WAIVER. SUBORDINATE NOTEHOLDER, PARENT, THE
COMPANY AND THE NOTEHOLDERS HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL
BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.7 - Page 10
SECTION 3.13. CHOICE OF FORUM. SUBORDINATE NOTEHOLDER, PARENT,
THE COMPANY AND THE NOTEHOLDERS AGREE THAT ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE
BROUGHT IN THE FEDERAL OR STATE COURTS OF HARRIS COUNTY, TEXAS.
SECTION 3.14. GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Texas, excluding
choice of law principles of the law of such State that would require the
application of the laws of a jurisdiction other than such State.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective representatives thereunto duly
authorized effective as of the date first above written.
OPAL AIR, INC.
By: /S/ T. W. HOEHN, JR.
Name: T. W. HOEHN, JR.
Title: PRESIDENT
Address for Notices:
2302 Rue Adriane
La Jolla, California 92037
Attention: T. W. Hoehn, Jr.
Telecopy Number: 619-454-2043
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.7 - Page 11
RIMCO PARTNERS, L.P.,
RIMCO PARTNERS, L.P. II,
RIMCO PARTNERS, L.P. III, AND
RIMCO PARTNERS, L.P. IV
By: RESOURCE INVESTORS MANAGEMENT
COMPANY LIMITED PARTNERSHIP,
THEIR GENERAL PARTNER
By: RIMCO ASSOCIATES, INC.,
its general partner
By: /S/ GARY MILAVEC
Name: Gary Milavec
Title:Vice President
TEXOIL, INC.
By: /S/ RUBEN MEDRANO
Name: Ruben Medrano
Title:President
TEXOIL COMPANY
By: /S/ RUBEN MEDRANO
Name: Ruben Medrano
Title: President
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.7 - Page 12
EXHIBIT 10.8
EXHIBIT 10.8
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "AGREEMENT"), dated September 6,
1996 is among the T. W. HOEHN, JR. AND BETTY JOE HOEHN REVOCABLE TRUST (the
"SUBORDINATE NOTEHOLDER"), and RIMCO PARTNERS, L.P., a Delaware limited
partnership, RIMCO PARTNERS, L.P. II, a Delaware limited partnership, RIMCO
PARTNERS, L.P. III, a Delaware limited partnership and RIMCO PARTNERS, L.P. IV,
a Delaware limited partnership (collectively, the "SENIOR NOTEHOLDERS"), TEXOIL,
INC., a Nevada corporation ("PARENT"), and TEXOIL COMPANY, a Tennessee
corporation (the "COMPANY").
PRELIMINARY STATEMENTS
The Senior Noteholders have entered into that certain Note Purchase
Agreement, dated of even date herewith (as same may be amended from time to time
being referred to herein as the "NOTE AGREEMENT") with the Company and Parent
whereby the Senior Noteholders have purchased from the Company its 10% Senior
Secured Exchangeable General Obligation Notes in the maximum aggregate principal
amount of $3,000,000 and the Senior Noteholders (other than RIMCO Partners,
L.P.) have purchased from the Company its 10% Senior Secured General Obligation
Notes in the maximum aggregate principal amount of $5,000,000, subject in each
case to the terms of the Note Agreement (collectively, the "SENIOR NOTES").
In connection with the Note Agreement, the Senior Noteholders, the
Company and Parent have entered into that certain Guaranty and Exchange
Agreement, dated of even date herewith (as same may be amended from time to time
being referred to herein as the "GUARANTY AGREEMENT"), whereby, among other
things, Parent has unconditionally and irrevocably guaranteed the full and
punctual payment when due, whether at stated maturity or earlier by acceleration
or otherwise, of any and all debts, liabilities and obligations of the Company
now or hereafter existing under the Note Agreement, the Notes or any of the
other Transaction Documents (as such term is defined in the Note Agreement).
The Subordinate Noteholder has loaned Parent $1,000,000 and Parent
has issued the Subordinate Noteholder a promissory note dated September 1, 1996
in the principal amount of $1,000,000 (the "SUBORDINATE NOTE").
NOW, THEREFORE, in consideration of the premises and in order to
induce the Senior Noteholders to purchase the Senior Notes under the Note
Agreement, the Subordinate Noteholder, Parent, the Company and the Senior
Noteholders hereby agree as follows:
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.8 - Page 1
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"BANKRUPTCY PROCEEDING" means any case, suit or proceeding
instituted under any Debtor Relief Law.
"DEBTOR RELIEF LAW" means the Bankruptcy Code of the United States
of America, as amended from time to time, and all other applicable
dissolution, liquidation, conservatorship, bankruptcy, moratorium,
readjustment of debt, compromise, rearrangement, receivership, insolvency,
reorganization or similar debtor relief laws from time to time in effect
affecting the rights of creditors generally.
"SENIOR LIENS" means all Liens covering real or personal property of
the Company or Parent granted in favor of the Senior Noteholders to secure
the payment and performance of the Senior Obligations.
"SENIOR OBLIGATIONS" means (i) all indebtedness, liabilities and
obligations owing by the Company and/or Parent to the Senior Noteholders
under the Note Agreement, the Senior Notes, the Guaranty Agreement or any
other Transaction Document, whether for principal, premium, interest
(including, without limitation, any interest accruing after the filing of
any petition or pleadings under any Debtor Relief Law), fees, expenses or
otherwise, and including any contingent obligation in respect of any
unfunded portion of the Advances, (ii) any and all other indebtedness,
liabilities and obligations of the Company and/or Parent to the Senior
Noteholders, absolute or contingent, direct or indirect, joint, several or
independent, now outstanding or owing or which may hereafter be existing
or incurred, arising by operation of law or otherwise, due or to become
due, or held or to be held by the Senior Noteholders, whether created
directly or acquired by assignment, and (iii) all renewals, extensions,
refinancings, replacements and modifications of the foregoing.
"SUBORDINATE LOAN DOCUMENTS" means the Subordinate Note, and all
other agreements, instruments, documents, and other writings heretofore,
now, or hereafter executed by or on behalf of Parent or any other Person
in connection with or relating to the Subordinate Obligations, together
with all agreements, instruments and documents referred to therein or
contemplated thereby.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.8 - Page 2
<PAGE>
"SUBORDINATE OBLIGATIONS" means (i) all indebtedness, liabilities
and other obligations owing by Parent to the Subordinate Noteholder,
whether for principal, premium, interest (including, without limitation,
any interest accruing after the filing of any petition or pleadings under
any Debtor Relief Law), fees, expenses or otherwise, including, without
limitation, all indebtedness, liabilities and other obligations arising in
connection with the Subordinate Note and any other Subordinate Loan
Documents, (ii) any and all other indebtedness, liabilities, and
obligations of Parent to the Subordinate Noteholder, absolute or
contingent, direct or indirect, joint, several or independent, now
outstanding or owing or which may hereafter be existing or incurred,
arising by operation of law or otherwise, due or to become due, or held or
to be held by the Subordinate Noteholder, whether created directly or
acquired by assignment, and (iii) all extensions, renewals, rearrangements
and modifications of the foregoing.
SECTION 1.02. NOTE AGREEMENT DEFINITIONS. All capitalized terms
defined in the Note Agreement and not otherwise defined herein are used herein
with the respective meanings specified in the Note Agreement.
SECTION 1.03. REFERENCES, ETC. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. All references herein to sections shall, unless the context requires
a different construction, be deemed to be references to the sections of this
Agreement.
ARTICLE II
SUBORDINATION
SECTION 2.01. AGREEMENT TO SUBORDINATE. All Subordinate Obligations
shall be subordinate, inferior and junior in right of payment, to the extent and
in the manner hereinafter set forth, to all Senior Obligations. The Subordinate
Noteholder, Parent and the Company acknowledge that the Senior Noteholders have
purchased the Senior Notes and entered into the Note Agreement, the Guaranty
Agreement and the other Transaction Documents in reliance upon the provisions of
this Agreement.
SECTION 2.02. NO PAYMENT ON THE SUBORDINATE OBLIGATIONS. So long as
any Senior Obligations or Commitments shall remain outstanding, the Subordinate
Noteholder agrees not to ask, demand, sue for, take, receive or accept from
Parent or the Company, directly or indirectly, in cash or other property or by
set-off or in any other manner, payment of all or any of the Subordinate
Obligations, except as expressly permitted by the following sentence. On the
tenth day of each month commencing October 10, 1996, Subordinate Noteholder may
receive from Parent a payment of an amount equal to accrued unpaid interest on
the Subordinate Note and on the tenth day
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.8 - Page 3
<PAGE>
of each January, April, July and October commencing on the later of (a) April
10, 1997 and (b) the tenth day of the first January, April, July or October
occurring after the total amounts advanced by the Senior Noteholders under the
Tranche A Notes equals or exceeds $2,800,000, the Subordinate Noteholder may
receive from Parent payments of principal in the amounts provided for in Section
2 of the Subordinate Note, to the extent, and only to the extent, such payments
of interest and principal constitute Permitted Shareholder Debt Payments under
the Note Agreement and no Default or Event of Default has occurred and is
continuing under the Note Agreement.
SECTION 2.03. IN FURTHERANCE OF SUBORDINATION. (a) In the event of
(i) any sale of assets of Parent or the Company under or in accordance with any
judgment or decree rendered in any proceeding by or on behalf of the Subordinate
Noteholder or in respect of the Subordinate Obligations, (ii) any distribution,
division or application, partial or complete, voluntary or involuntary, by
operation of law or otherwise, of all or any part of the assets of Parent or the
Company, or the proceeds thereof, to creditors of Parent or the Company
occurring by reason of any liquidation, dissolution or winding up of Parent or
the Company pursuant to a Bankruptcy Proceeding or otherwise, or (iii) any
Bankruptcy Proceeding, execution sale or other similar proceeding relative to
Parent or the Company or their respective debts or properties, then in any such
event (A) the Senior Noteholders shall be preferred in the payment of their
claims over the claims of the Subordinate Noteholder, and all Senior Obligations
shall be first paid and satisfied in full before any payment or distribution of
any kind or character, whether in cash, property or securities, shall be made
upon any Subordinate Obligations, and (B) any dividend or distribution of any
kind or character, whether in cash, property or securities which shall be made
upon, or in respect of, the Subordinate Obligations, or any renewals or
extensions thereof, shall be paid over to the Senior Noteholders, for
application in payment of the Senior Obligations until such Senior Obligations
shall have been paid and satisfied in full.
(b) All payments or distributions upon or with respect to the
Subordinate Obligations which are received by the Subordinate Noteholder
contrary to the provisions of this Agreement shall be received in trust for the
benefit of the Senior Noteholders, shall be segregated from other funds and
property held by the Subordinate Noteholder and shall be forthwith paid over to
the Senior Noteholders in the same form as so received (with any necessary
endorsement) to be applied (in the case of cash) to or held as collateral (in
the case of non-cash property or securities) for the payment or prepayment of
the Senior Obligations.
(c) The Senior Noteholders are hereby authorized to demand specific
performance of this Agreement, whether or not Parent or the Company shall have
complied with any of the provisions hereof applicable to either of them, at any
time when the Subordinate Noteholder shall have failed to comply with any of the
provisions of this Agreement. The Subordinate Noteholder hereby irrevocably
waives any defense based on the adequacy of a remedy at law, which might be
asserted as a bar to such remedy of specific performance.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.8 - Page 4
<PAGE>
(d) The Subordinate Noteholder agrees that, so long as any of the
Senior Obligations shall remain unpaid or the Commitments are outstanding, it
will not commence, or join with any creditor other than the Senior Noteholders
in commencing, any Bankruptcy Proceeding against Parent or the Company.
(e) The Subordinate Noteholder agrees that it will not hold any Lien
on any real or personal property as security for the Subordinate Obligations
unless the Senior Noteholders have given their prior written consent to the
creation thereof. In the event the Subordinate Noteholder shall acquire any Lien
as security for the Subordinate Obligations, regardless of whether such Lien is
permitted by this Agreement, the Subordinate Noteholder will hold such Lien for
the benefit of the Senior Noteholders and shall enforce such Lien in accordance
with the written instructions of the Senior Noteholders. Any cash or other
property received on account of any Lien securing the Subordinate Obligations
shall be delivered to the Senior Noteholders and, in the case of cash, applied
to, or, in the case of other property, held as collateral for, the Senior
Obligations. To the extent that any Subordinate Obligations are now or hereafter
secured by a Lien in favor of the Subordinate Noteholder against any real or
personal property that is also subject to a Senior Lien securing the Senior
Obligations, the Subordinate Noteholder agrees that such Lien in favor of the
Subordinate Noteholder shall be second, junior and subordinate to such Senior
Lien and such Senior Lien shall be first and prior to such Lien in favor of the
Subordinate Noteholder. It is further agreed that the priorities specified in
the preceding sentence are applicable irrespective of the time or order of
attachment or perfection of Liens, or the time or order of filing of Liens, or
the time or order of filing of financing statements, or the giving or failure to
give notice of the acquisition or expected acquisition of purchase money or
other security interests.
(f) The Subordinate Noteholder agrees that, so long as any of the
Senior Obligations shall remain unpaid or the Commitments are outstanding, it
will not declare any or all of the Subordinate Obligations due and payable prior
to the date fixed therefor or take any action to enforce any right or remedy
with respect to any Lien in favor of the Subordinate Noteholder.
(g) This Agreement shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of any Senior Obligation is
rescinded or must otherwise be returned by the Senior Noteholders pursuant to
any Bankruptcy Proceeding of Parent or the Company or otherwise, all as though
such payment had not been made.
SECTION 2.04. WAIVER OF SUBROGATION. The Subordinate Noteholder
agrees not to exercise any rights of subrogation in respect of any payment or
distribution to the Senior Noteholders under the provisions of this Agreement
until the Senior Obligations have been paid in full and the Commitments have
terminated.
SECTION 2.05. SUBORDINATION LEGEND. Parent will cause any promissory
note or other instrument evidencing the Subordinate Obligations to expressly
state that it is subject to this
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.8 - Page 5
<PAGE>
Agreement. Each of the Subordinate Noteholder and Parent will mark its books and
records in such a manner as shall be effective to give proper notice of the
effect of this Agreement. If any Subordinate Obligation is not evidenced by a
promissory note or other instrument, upon request of the Senior Noteholders, the
Subordinate Noteholder will cause such Subordinate Obligation to be evidenced by
an appropriate instrument or instruments endorsed with the above legend. Upon
the request of the Senior Noteholders, the Subordinate Noteholder shall deliver
to the possession of the Senior Noteholders all instruments evidencing the
Subordinate Obligations. The Subordinate Noteholder, Parent and the Company each
will, at its expense and at any time and from time to time, promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or that the Senior Noteholders may reasonably
request, in order to protect any right or interest granted or purported to be
granted hereby or to enable the Senior Noteholders to exercise and enforce their
rights and remedies hereunder.
SECTION 2.06. NO CHANGE IN OR DISPOSITION OF SUBORDINATE
OBLIGATIONS. So long as any of the Senior Obligations or Commitments shall
remain outstanding, the Subordinate Noteholder will not (a) cancel or otherwise
discharge any of the Subordinate Obligations (other than upon conversion to
common stock of Parent in accordance with the Subordinate Loan Documents) or
subordinate any of the Subordinate Obligations to any indebtedness of Parent or
the Company other than the Senior Obligations; (b) sell, assign, pledge,
encumber or otherwise dispose of any of the Subordinate Obligations; or (c)
permit the terms of any of the Subordinate Obligations to be amended or modified
in any manner.
SECTION 2.07. WAIVERS, ETC. (a) All rights and interests of the
Senior Noteholders hereunder, and all agreements and obligations of the
Subordinate Noteholder, Parent and the Company under this Agreement, shall
remain in full force and effect irrespective of: (i) any lack of validity or
enforceability of the Note Agreement, the Senior Notes, the Guaranty Agreement
or any other Transaction Documents or any other agreement or instrument relating
thereto; (ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Senior Obligations, any increase in the amount
of the Senior Obligations, or any other amendment or waiver of or any consent to
departure from the Note Agreement, the Senior Notes, the Guaranty Agreement or
any other Transaction Documents; (iii) any exchange, release or non-perfection
of any collateral, or any release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Senior Obligations; (iv) any
other circumstance which might otherwise constitute a defense available to, or a
discharge of, the Company or Parent or any other guarantor of the Senior
Obligations; or (v) any failure to act on the part of the Senior Noteholders, or
by any non-compliance by the Company with the terms, provisions and covenants of
this Agreement or the Note Agreement, the Senior Notes, the Guaranty Agreement
or any other Transaction Documents, regardless of any actual or constructive
knowledge that the Senior Noteholders may have with respect thereto. The
Subordinate Noteholder hereby waives promptness, diligence, notice of acceptance
and any other notice with respect to any of the Senior Obligations and any
requirement that the Senior Noteholders
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.8 - Page 6
<PAGE>
protect, secure, perfect or insure any Senior Lien or any property subject
thereto or exhaust any right or take any action against the Company or Parent or
any other Person or any collateral.
(b) The Senior Noteholders may at any time and from time to time,
without the consent of or notice to the Subordinate Noteholder, and without
impairing or releasing any of the rights of the Senior Noteholders under this
Agreement, upon or without any terms or conditions and in whole or in part: (i)
increase the amount of the Senior Obligations, change the manner, place or terms
of payment, and/or change or extend the time of payment of, renew or alter, any
Senior Obligations or any other liability of the Company or Parent to the Senior
Noteholders, any security therefor, or any liability incurred directly or
indirectly in respect thereof, or otherwise amend the Note Agreement, the Senior
Notes, the Guaranty Agreement, the other Transaction Documents or any other
document or instrument related to any Senior Obligation, and the provisions of
this Agreement shall apply to the Senior Obligations as so increased, changed,
extended, renewed, altered or amended; (ii) sell, exchange, release, surrender,
realize upon or otherwise deal with in any manner and in any order any property
by whomsoever owned at any time securing, by agreement, operation of law or
otherwise, any Senior Obligations or any other liability of the Company or
Parent to the Senior Noteholders, or any other liabilities incurred directly or
indirectly in connection with the Senior Obligations, or any offset there
against; (iii) exercise or refrain from exercising any rights and/or remedies
against the Company or Parent or others or otherwise act or refrain from acting
or, for any reason, fail to file, record or otherwise perfect any Senior Lien on
any property of the Company or Parent; (iv) release any Person (including the
Company or Parent) liable in any manner for payment or collection of the Senior
Obligations; (v) settle or compromise any of the Senior Obligations or any other
liability of the Company or Parent to the Senior Noteholders or any security for
such Senior Obligations or such other liabilities, or any liability incurred
directly or indirectly in respect thereof, and may subordinate the payment of
all or any part thereof to the payment of any liability (whether due or not) of
the Company or Parent to any of its other creditors; and (vi) apply any sums
received, by whomsoever paid and howsoever realized, to any of the Senior
Obligations in such manner and order as Senior Noteholders, in their sole
discretion, may deem appropriate.
SECTION 2.08. COLLECTION OF SUBORDINATE OBLIGATIONS. If any
Bankruptcy Proceeding is commenced by or against Parent or the Company, (a) the
Senior Noteholders are hereby irrevocably authorized and empowered (in their own
names or in the name of the Subordinate Noteholder or otherwise), but shall have
no obligation, to demand, sue for, collect and receive every payment or
distribution in respect of the Subordinate Obligations and give acquittance
therefor and to file claims and proofs of claim and take such other action
(including, without limitation, voting the Subordinate Obligations or enforcing
any Lien securing payment of the Subordinate Obligations) as they may deem
necessary or advisable for the exercise or enforcement of any of the rights or
interests of the Senior Noteholders hereunder; and (b) the Subordinate
Noteholder shall duly and promptly take such action as the Senior Noteholders
may request to collect and receive any and all payments or distributions which
may be payable or deliverable upon or with respect to the Subordinate
Obligations for the account of the Senior Noteholders and to file appropriate
claims or proofs of
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.8 - Page 7
<PAGE>
claim in respect of the Subordinate Obligations, including, without limitation,
executing and delivering to the Senior Noteholders such powers of attorney,
assignments or other instruments as they may request in order to enable them to
enforce any and all claims with respect to, and any security interests and other
liens securing payment of, the Subordinate Obligations.
SECTION 2.09. OBLIGATIONS OF PARENT AND THE COMPANY. Parent and the
Company hereby agree that no payment or distribution will be made on account of
the Subordinate Obligations, whether principal or interest, except as expressly
permitted by this Agreement. In the event of a breach by Parent or the Company
or the Subordinate Noteholder of any of the provisions of this Agreement, an
Event of Default shall exist under the Note Agreement, and the Senior
Noteholders may exercise all of their rights and remedies under this Agreement,
the Note Agreement and the other Transaction Documents. The rights and remedies
available to the Senior Noteholders pursuant to this paragraph are cumulative
and not exclusive of any other right or remedy available to the Senior
Noteholders under this Agreement, the Note Agreement and the other Transaction
Documents or the law to enforce the performance or observance of the covenants
and agreements contained herein.
SECTION 2.10. OBLIGATION TO PAY SUBORDINATE OBLIGATIONS UNIMPAIRED.
The provisions of this Agreement are solely for the purpose of defining the
relative rights of the Senior Noteholders on the one hand, and the Subordinate
Noteholder on the other hand, and nothing herein shall impair, as between Parent
and the Subordinate Noteholder, the obligation of Parent, which is unconditional
and absolute, to pay the principal of the Subordinate Obligations, and interest
thereon in accordance with its terms, subject to the rights of the Senior
Noteholders as herein provided.
ARTICLE III
MISCELLANEOUS
SECTION 3.01. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement nor consent to any departure by the Subordinate
Noteholder, Parent or the Company therefrom shall in any event be effective
unless the same shall be in writing and signed by the Senior Noteholders,
Subordinate Noteholder, Parent and the Company, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
SECTION 3.02. EXPENSES. The Subordinate Noteholder, Parent and the
Company, jointly and severally, agree to pay, upon demand, to the Senior
Noteholders the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel, which the Senior Noteholders may
incur in connection with the exercise or enforcement of any of their rights or
interests hereunder.
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
SECTION 3.03. ADDRESSES FOR NOTICES. Notices, consents, requests,
approvals, demands and other communications provided for herein shall be given
in the manner and become effective as specified in the Note Agreement, and shall
be addressed, if to the Company or the Senior Noteholders, at their respective
addresses specified in the Note Agreement, if to Parent, at its address
specified in the Guaranty Agreement, or if to the Subordinate Noteholder, to the
address specified under its signature to this Agreement.
SECTION 3.04. REPRESENTATIONS AND WARRANTIES. In order to induce the
Senior Noteholders to enter into the Note Agreement, the Subordinate Noteholder
hereby represents and warrants to the Senior Noteholders that:
(a) The Subordinate Noteholder has all requisite power and authority
to execute, deliver and perform its obligations under this Agreement and all
action on the Subordinate Noteholder's part requisite for the due execution,
delivery and performance of this Agreement has been duly and effectively taken.
(b) The execution, delivery and performance of this Agreement by the
Subordinate Noteholder do not and will not contravene any law or contractual
restriction binding on or affecting the Subordinate Noteholder.
(c) No consent, authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority or any other Person is
required for the due execution, delivery and performance by the Subordinate
Noteholder of this Agreement.
(d) This Agreement constitutes the legal, valid and binding
obligations of Subordinate Noteholder enforceable against the Subordinate
Noteholder in accordance with its terms.
(e) The Subordinate Noteholder owns the Subordinate Obligations free
and clear of any lien, security interest, charge or encumbrance or any rights of
others. There exists no default in respect of any such Subordinate Obligations.
SECTION 3.05. NO WAIVER; REMEDIES. No failure on the part of the
Senior Noteholders to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 3.06. CONTINUING AGREEMENT; TRANSFER OF SENIOR NOTES. This
Agreement is a continuing agreement and shall (a) remain in full force and
effect until the Senior Obligations shall have been paid in full and the
Commitments have been terminated, (b) be binding upon the Subordinate
Noteholder, Parent, the Company and their respective successors and assigns, and
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.8 - Page 9
<PAGE>
(c) inure to the benefit of and be enforceable by the Senior Noteholders and
their respective successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c), the Senior Noteholders may assign or
otherwise transfer all or any portion of the Senior Obligations to any other
Person, and such other Person (other than Parent, the Company or their
Affiliates) shall thereupon become vested with all or a pro rata portion of the
rights in respect thereof granted to the Senior Noteholders herein or otherwise.
SECTION 3.07. CAPTIONS. The captions in this Agreement have been
inserted for convenience only and shall be given no substantive meaning or
significance whatever in construing the terms and provisions of this Agreement.
SECTION 3.08. TRANSACTION DOCUMENTS. The Subordinate Noteholder
acknowledges that it has full and complete access to the Note Agreement, the
Guaranty Agreement and all of the other Transaction Documents, has fully
reviewed same and is fully aware of their contents.
SECTION 3.09 PRO RATA TREATMENT OF SENIOR NOTEHOLDERS. All amounts
to be paid over or delivered to the Senior Noteholders or to which the Senior
Noteholders otherwise may be entitled hereunder, and all amounts at any time
received in trust for the Senior Noteholders, shall be paid over, delivered,
and/or received, as applicable, pro rata to and for the Senior Noteholders in
proportion to the aggregate amount of Senior Obligations then owing (whether or
not then due and payable) to each such Senior Noteholder, it being intended that
the benefits of this Agreement and all rights and privileges created hereby in
favor of the Senior Noteholders be and are for the ratable benefit of the Senior
Noteholders.
SECTION 3.10. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed an original and all of which
taken together shall constitute but one and the same agreement.
SECTION 3.11. SURVIVAL. All warranties, representations and
covenants made by Subordinate Noteholder, Parent and the Company herein shall be
considered to have been relied upon by the Senior Noteholders and shall survive
the execution and delivery of this Agreement and the other Transaction
Documents, regardless of any investigation made by or on behalf of any thereof.
SECTION 3.12. JURY WAIVER. SUBORDINATE NOTEHOLDER, PARENT, THE
COMPANY AND THE NOTEHOLDERS HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL
BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
SECTION 3.13. CHOICE OF FORUM. SUBORDINATE NOTEHOLDER, PARENT,
THE COMPANY AND THE NOTEHOLDERS AGREE THAT ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE
BROUGHT IN THE FEDERAL OR STATE COURTS OF HARRIS COUNTY, TEXAS.
SECTION 3.14. GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Texas, excluding
choice of law principles of the law of such State that would require the
application of the laws of a jurisdiction other than such State.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective representatives thereunto duly
authorized effective as of the date first above written.
T.W. HOEHN, JR. AND BETTY JOE HOEHN
REVOCABLE TRUST
By: /S/ T. W. HOEHN, JR., TRUSTEE
Name: T.W. Hoehn, Jr.
Title: Trustee
Address for Notices:
2302 Rue Adriane
La Jolla, California 92037
Attention: T. W. Hoehn, Jr.
Telecopy Number: 619-454-2043
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.8 - Page 11
<PAGE>
RIMCO PARTNERS, L.P.,
RIMCO PARTNERS, L.P. II,
RIMCO PARTNERS, L.P. III, AND
RIMCO PARTNERS, L.P. IV
By: RESOURCE INVESTORS MANAGEMENT
COMPANY LIMITED PARTNERSHIP,
THEIR GENERAL PARTNER
By: RIMCO ASSOCIATES, INC.,
its general partner
By: /S/ GARY MILAVEC
Name: Gary Milavec
Title:Vice President
TEXOIL, INC.
By: /S/ RUBEN MEDRANO
Name: Ruben Medrano
Title: President
TEXOIL COMPANY
By: /S/ RUBEN MEDRANO
Name: Ruben Medrano
Title: President
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.8 - Page 12
EXHIBIT 10.9
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "AGREEMENT"), dated September 6,
1996 is among T.W. HOEHN, JR. (the "SUBORDINATE NOTEHOLDER"), and RIMCO
PARTNERS, L.P., a Delaware limited partnership, RIMCO PARTNERS, L.P. II, a
Delaware limited partnership, RIMCO PARTNERS, L.P. III, a Delaware limited
partnership and RIMCO PARTNERS, L.P. IV, a Delaware limited partnership
(collectively, the "SENIOR NOTEHOLDERS"), TEXOIL, INC., a Nevada corporation
("PARENT"), and TEXOIL COMPANY, a Tennessee corporation (the "COMPANY").
PRELIMINARY STATEMENTS
The Senior Noteholders have entered into that certain Note Purchase
Agreement, dated of even date herewith (as same may be amended from time to time
being referred to herein as the "NOTE AGREEMENT") with the Company and Parent
whereby the Senior Noteholders have purchased from the Company its 10% Senior
Secured Exchangeable General Obligation Notes in the maximum aggregate principal
amount of $3,000,000 and the Senior Noteholders (other than RIMCO Partners,
L.P.) have purchased from the Company its 10% Senior Secured General Obligation
Notes in the maximum aggregate principal amount of $5,000,000, subject in each
case to the terms of the Note Agreement (collectively, the "SENIOR NOTES").
In connection with the Note Agreement, the Senior Noteholders, the
Company and Parent have entered into that certain Guaranty and Exchange
Agreement, dated of even date herewith (as same may be amended from time to time
being referred to herein as the "GUARANTY AGREEMENT"), whereby, among other
things, Parent has unconditionally and irrevocably guaranteed the full and
punctual payment when due, whether at stated maturity or earlier by acceleration
or otherwise, of any and all debts, liabilities and obligations of the Company
now or hereafter existing under the Note Agreement, the Notes or any of the
other Transaction Documents (as such term is defined in the Note Agreement).
The Subordinate Noteholder and Parent have entered into that certain
Amended and Restated Agreement of Purchase and Sale dated of even date herewith
(as same may be amended from time to time being referred to herein as the
"SUBORDINATE NOTE AGREEMENT"), whereby the Subordinate Noteholder has loaned
Parent $550,000 and Parent has issued the Subordinate Noteholder a promissory
note in the principal amount of $550,000 (the "SUBORDINATE NOTE").
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.9 - Page 1
NOW, THEREFORE, in consideration of the premises and in order to
induce the Senior Noteholders to purchase the Senior Notes under the Note
Agreement, the Subordinate Noteholder, Parent, the Company and the Senior
Noteholders hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"BANKRUPTCY PROCEEDING" means any case, suit or proceeding
instituted under any Debtor Relief Law.
"DEBTOR RELIEF LAW" means the Bankruptcy Code of the United States
of America, as amended from time to time, and all other applicable
dissolution, liquidation, conservatorship, bankruptcy, moratorium,
readjustment of debt, compromise, rearrangement, receivership, insolvency,
reorganization or similar debtor relief laws from time to time in effect
affecting the rights of creditors generally.
"SENIOR LIENS" means all Liens covering real or personal property of
the Company or Parent granted in favor of the Senior Noteholders to secure
the payment and performance of the Senior Obligations.
"SENIOR OBLIGATIONS" means (i) all indebtedness, liabilities and
obligations owing by the Company and/or Parent to the Senior Noteholders
under the Note Agreement, the Senior Notes, the Guaranty Agreement or any
other Transaction Document, whether for principal, premium, interest
(including, without limitation, any interest accruing after the filing of
any petition or pleadings under any Debtor Relief Law), fees, expenses or
otherwise, and including any contingent obligation in respect of any
unfunded portion of the Advances, (ii) any and all other indebtedness,
liabilities and obligations of the Company and/or Parent to the Senior
Noteholders, absolute or contingent, direct or indirect, joint, several or
independent, now outstanding or owing or which may hereafter be existing
or incurred, arising by operation of law or otherwise, due or to become
due, or held or to be held by the Senior Noteholders, whether created
directly or acquired by assignment, and (iii) all renewals, extensions,
refinancings, replacements and modifications of the foregoing.
"SUBORDINATE LOAN DOCUMENTS" means the Subordinate Note Agreement,
the Subordinate Note, and all other agreements, instruments, documents,
and other writings
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.9 - Page 2
heretofore, now, or hereafter executed by or on behalf of Parent or any
other Person in connection with or relating to the Subordinate
Obligations, together with all agreements, instruments and documents
referred to therein or contemplated thereby.
"SUBORDINATE OBLIGATIONS" means (i) all indebtedness, liabilities
and other obligations owing by Parent to the Subordinate Noteholder,
whether for principal, premium, interest (including, without limitation,
any interest accruing after the filing of any petition or pleadings under
any Debtor Relief Law), fees, expenses or otherwise, including, without
limitation, all indebtedness, liabilities and other obligations arising in
connection with the Subordinate Note and any other Subordinate Loan
Documents, (ii) any and all other indebtedness, liabilities, and
obligations of Parent to the Subordinate Noteholder, absolute or
contingent, direct or indirect, joint, several or independent, now
outstanding or owing or which may hereafter be existing or incurred,
arising by operation of law or otherwise, due or to become due, or held or
to be held by the Subordinate Noteholder, whether created directly or
acquired by assignment, and (iii) all extensions, renewals, rearrangements
and modifications of the foregoing.
SECTION 1.02. NOTE AGREEMENT DEFINITIONS. All capitalized terms
defined in the Note Agreement and not otherwise defined herein are used herein
with the respective meanings specified in the Note Agreement.
SECTION 1.03. REFERENCES, ETC. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. All references herein to sections shall, unless the context requires
a different construction, be deemed to be references to the sections of this
Agreement.
ARTICLE II
SUBORDINATION
SECTION 2.01. AGREEMENT TO SUBORDINATE. All Subordinate Obligations
shall be subordinate, inferior and junior in right of payment, to the extent and
in the manner hereinafter set forth, to all Senior Obligations. The Subordinate
Noteholder, Parent and the Company acknowledge that the Senior Noteholders have
purchased the Senior Notes and entered into the Note Agreement, the Guaranty
Agreement and the other Transaction Documents in reliance upon the provisions of
this Agreement.
SECTION 2.02. NO PAYMENT ON THE SUBORDINATE OBLIGATIONS. So long as
any Senior Obligations or Commitments shall remain outstanding, the Subordinate
Noteholder agrees not to ask, demand, sue for, take, receive or accept from
Parent or the Company, directly or indirectly,
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.9 - Page 3
in cash or other property or by set-off or in any other manner, payment of all
or any of the Subordinate Obligations, except as expressly permitted by the
following sentence. On the tenth day of each month commencing October 10, 1996,
Subordinate Noteholder may receive from Parent a payment of an amount equal to
accrued unpaid interest on the Subordinate Note to the extent, and only to the
extent, such payment constitutes a Permitted Shareholder Debt Payment under the
Note Agreement and no Default or Event of Default has occurred and is continuing
under the Note Agreement.
SECTION 2.03. IN FURTHERANCE OF SUBORDINATION. (a) In the event of
(i) any sale of assets of Parent or the Company under or in accordance with any
judgment or decree rendered in any proceeding by or on behalf of the Subordinate
Noteholder or in respect of the Subordinate Obligations, (ii) any distribution,
division or application, partial or complete, voluntary or involuntary, by
operation of law or otherwise, of all or any part of the assets of Parent or the
Company, or the proceeds thereof, to creditors of Parent or the Company
occurring by reason of any liquidation, dissolution or winding up of Parent or
the Company pursuant to a Bankruptcy Proceeding or otherwise, or (iii) any
Bankruptcy Proceeding, execution sale or other similar proceeding relative to
Parent or the Company or their respective debts or properties, then in any such
event (A) the Senior Noteholders shall be preferred in the payment of their
claims over the claims of the Subordinate Noteholder, and all Senior Obligations
shall be first paid and satisfied in full before any payment or distribution of
any kind or character, whether in cash, property or securities, shall be made
upon any Subordinate Obligations, and (B) any dividend or distribution of any
kind or character, whether in cash, property or securities which shall be made
upon, or in respect of, the Subordinate Obligations, or any renewals or
extensions thereof, shall be paid over to the Senior Noteholders, for
application in payment of the Senior Obligations until such Senior Obligations
shall have been paid and satisfied in full.
(b) All payments or distributions upon or with respect to the
Subordinate Obligations which are received by the Subordinate Noteholder
contrary to the provisions of this Agreement shall be received in trust for the
benefit of the Senior Noteholders, shall be segregated from other funds and
property held by the Subordinate Noteholder and shall be forthwith paid over to
the Senior Noteholders in the same form as so received (with any necessary
endorsement) to be applied (in the case of cash) to or held as collateral (in
the case of non-cash property or securities) for the payment or prepayment of
the Senior Obligations.
(c) The Senior Noteholders are hereby authorized to demand specific
performance of this Agreement, whether or not Parent or the Company shall have
complied with any of the provisions hereof applicable to either of them, at any
time when the Subordinate Noteholder shall have failed to comply with any of the
provisions of this Agreement. The Subordinate Noteholder hereby irrevocably
waives any defense based on the adequacy of a remedy at law, which might be
asserted as a bar to such remedy of specific performance.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.9 - Page 4
(d) The Subordinate Noteholder agrees that, so long as any of the
Senior Obligations shall remain unpaid or the Commitments are outstanding, it
will not commence, or join with any creditor other than the Senior Noteholders
in commencing, any Bankruptcy Proceeding against Parent or the Company.
(e) The Subordinate Noteholder agrees that it will not hold any Lien
on any real or personal property as security for the Subordinate Obligations
unless the Senior Noteholders have given their prior written consent to the
creation thereof. In the event the Subordinate Noteholder shall acquire any Lien
as security for the Subordinate Obligations, regardless of whether such Lien is
permitted by this Agreement, the Subordinate Noteholder will hold such Lien for
the benefit of the Senior Noteholders and shall enforce such Lien in accordance
with the written instructions of the Senior Noteholders. Any cash or other
property received on account of any Lien securing the Subordinate Obligations
shall be delivered to the Senior Noteholders and, in the case of cash, applied
to, or, in the case of other property, held as collateral for, the Senior
Obligations. To the extent that any Subordinate Obligations are now or hereafter
secured by a Lien in favor of the Subordinate Noteholder against any real or
personal property that is also subject to a Senior Lien securing the Senior
Obligations, the Subordinate Noteholder agrees that such Lien in favor of the
Subordinate Noteholder shall be second, junior and subordinate to such Senior
Lien and such Senior Lien shall be first and prior to such Lien in favor of the
Subordinate Noteholder. It is further agreed that the priorities specified in
the preceding sentence are applicable irrespective of the time or order of
attachment or perfection of Liens, or the time or order of filing of Liens, or
the time or order of filing of financing statements, or the giving or failure to
give notice of the acquisition or expected acquisition of purchase money or
other security interests.
(f) The Subordinate Noteholder agrees that, so long as any of the
Senior Obligations shall remain unpaid or the Commitments are outstanding, it
will not declare any or all of the Subordinate Obligations due and payable prior
to the date fixed therefor or take any action to enforce any right or remedy
with respect to any Lien in favor of the Subordinate Noteholder.
(g) This Agreement shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of any Senior Obligation is
rescinded or must otherwise be returned by the Senior Noteholders pursuant to
any Bankruptcy Proceeding of Parent or the Company or otherwise, all as though
such payment had not been made.
SECTION 2.04. WAIVER OF SUBROGATION. The Subordinate Noteholder
agrees not to exercise any rights of subrogation in respect of any payment or
distribution to the Senior Noteholders under the provisions of this Agreement
until the Senior Obligations have been paid in full and the Commitments have
terminated.
SECTION 2.05. SUBORDINATION LEGEND. Parent will cause any promissory
note or other instrument evidencing the Subordinate Obligations to expressly
state that it is subject to this
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.9 - Page 5
Agreement. Each of the Subordinate Noteholder and Parent will mark its books and
records in such a manner as shall be effective to give proper notice of the
effect of this Agreement. If any Subordinate Obligation is not evidenced by a
promissory note or other instrument, upon request of the Senior Noteholders, the
Subordinate Noteholder will cause such Subordinate Obligation to be evidenced by
an appropriate instrument or instruments endorsed with the above legend. Upon
the request of the Senior Noteholders, the Subordinate Noteholder shall deliver
to the possession of the Senior Noteholders all instruments evidencing the
Subordinate Obligations. The Subordinate Noteholder, Parent and the Company each
will, at its expense and at any time and from time to time, promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or that the Senior Noteholders may reasonably
request, in order to protect any right or interest granted or purported to be
granted hereby or to enable the Senior Noteholders to exercise and enforce their
rights and remedies hereunder.
SECTION 2.06. NO CHANGE IN OR DISPOSITION OF SUBORDINATE
OBLIGATIONS. So long as any of the Senior Obligations or Commitments shall
remain outstanding, the Subordinate Noteholder will not (a) cancel or otherwise
discharge any of the Subordinate Obligations (other than upon conversion to
common stock of Parent in accordance with the Subordinate Loan Documents) or
subordinate any of the Subordinate Obligations to any indebtedness of Parent or
the Company other than the Senior Obligations; (b) sell, assign, pledge,
encumber or otherwise dispose of any of the Subordinate Obligations; or (c)
permit the terms of any of the Subordinate Obligations to be amended or modified
in any manner.
SECTION 2.07. WAIVERS, ETC. (a) All rights and interests of the
Senior Noteholders hereunder, and all agreements and obligations of the
Subordinate Noteholder, Parent and the Company under this Agreement, shall
remain in full force and effect irrespective of: (i) any lack of validity or
enforceability of the Note Agreement, the Senior Notes, the Guaranty Agreement
or any other Transaction Documents or any other agreement or instrument relating
thereto; (ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Senior Obligations, any increase in the amount
of the Senior Obligations, or any other amendment or waiver of or any consent to
departure from the Note Agreement, the Senior Notes, the Guaranty Agreement or
any other Transaction Documents; (iii) any exchange, release or non-perfection
of any collateral, or any release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Senior Obligations; (iv) any
other circumstance which might otherwise constitute a defense available to, or a
discharge of, the Company or Parent or any other guarantor of the Senior
Obligations; or (v) any failure to act on the part of the Senior Noteholders, or
by any non-compliance by the Company with the terms, provisions and covenants of
this Agreement or the Note Agreement, the Senior Notes, the Guaranty Agreement
or any other Transaction Documents, regardless of any actual or constructive
knowledge that the Senior Noteholders may have with respect thereto. The
Subordinate Noteholder hereby waives promptness, diligence, notice of acceptance
and any other notice with respect to any of the Senior Obligations and any
requirement that the Senior Noteholders
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.9 - Page 6
protect, secure, perfect or insure any Senior Lien or any property subject
thereto or exhaust any right or take any action against the Company or Parent or
any other Person or any collateral.
(b) The Senior Noteholders may at any time and from time to time,
without the consent of or notice to the Subordinate Noteholder, and without
impairing or releasing any of the rights of the Senior Noteholders under this
Agreement, upon or without any terms or conditions and in whole or in part: (i)
increase the amount of the Senior Obligations, change the manner, place or terms
of payment, and/or change or extend the time of payment of, renew or alter, any
Senior Obligations or any other liability of the Company or Parent to the Senior
Noteholders, any security therefor, or any liability incurred directly or
indirectly in respect thereof, or otherwise amend the Note Agreement, the Senior
Notes, the Guaranty Agreement, the other Transaction Documents or any other
document or instrument related to any Senior Obligation, and the provisions of
this Agreement shall apply to the Senior Obligations as so increased, changed,
extended, renewed, altered or amended; (ii) sell, exchange, release, surrender,
realize upon or otherwise deal with in any manner and in any order any property
by whomsoever owned at any time securing, by agreement, operation of law or
otherwise, any Senior Obligations or any other liability of the Company or
Parent to the Senior Noteholders, or any other liabilities incurred directly or
indirectly in connection with the Senior Obligations, or any offset there
against; (iii) exercise or refrain from exercising any rights and/or remedies
against the Company or Parent or others or otherwise act or refrain from acting
or, for any reason, fail to file, record or otherwise perfect any Senior Lien on
any property of the Company or Parent; (iv) release any Person (including the
Company or Parent) liable in any manner for payment or collection of the Senior
Obligations; (v) settle or compromise any of the Senior Obligations or any other
liability of the Company or Parent to the Senior Noteholders or any security for
such Senior Obligations or such other liabilities, or any liability incurred
directly or indirectly in respect thereof, and may subordinate the payment of
all or any part thereof to the payment of any liability (whether due or not) of
the Company or Parent to any of its other creditors; and (vi) apply any sums
received, by whomsoever paid and howsoever realized, to any of the Senior
Obligations in such manner and order as Senior Noteholders, in their sole
discretion, may deem appropriate.
SECTION 2.08. COLLECTION OF SUBORDINATE OBLIGATIONS. If any
Bankruptcy Proceeding is commenced by or against Parent or the Company, (a) the
Senior Noteholders are hereby irrevocably authorized and empowered (in their own
names or in the name of the Subordinate Noteholder or otherwise), but shall have
no obligation, to demand, sue for, collect and receive every payment or
distribution in respect of the Subordinate Obligations and give acquittance
therefor and to file claims and proofs of claim and take such other action
(including, without limitation, voting the Subordinate Obligations or enforcing
any Lien securing payment of the Subordinate Obligations) as they may deem
necessary or advisable for the exercise or enforcement of any of the rights or
interests of the Senior Noteholders hereunder; and (b) the Subordinate
Noteholder shall duly and promptly take such action as the Senior Noteholders
may request to collect and receive any and all payments or distributions which
may be payable or deliverable upon or with respect to the Subordinate
Obligations for the account of the Senior Noteholders and to file appropriate
claims or proofs of
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.9 - Page 7
claim in respect of the Subordinate Obligations, including, without limitation,
executing and delivering to the Senior Noteholders such powers of attorney,
assignments or other instruments as they may request in order to enable them to
enforce any and all claims with respect to, and any security interests and other
liens securing payment of, the Subordinate Obligations.
SECTION 2.09. OBLIGATIONS OF PARENT AND THE COMPANY. Parent and the
Company hereby agree that no payment or distribution will be made on account of
the Subordinate Obligations, whether principal or interest, except as expressly
permitted by this Agreement. In the event of a breach by Parent or the Company
or the Subordinate Noteholder of any of the provisions of this Agreement, an
Event of Default shall exist under the Note Agreement, and the Senior
Noteholders may exercise all of their rights and remedies under this Agreement,
the Note Agreement and the other Transaction Documents. The rights and remedies
available to the Senior Noteholders pursuant to this paragraph are cumulative
and not exclusive of any other right or remedy available to the Senior
Noteholders under this Agreement, the Note Agreement and the other Transaction
Documents or the law to enforce the performance or observance of the covenants
and agreements contained herein.
SECTION 2.10. OBLIGATION TO PAY SUBORDINATE OBLIGATIONS UNIMPAIRED.
The provisions of this Agreement are solely for the purpose of defining the
relative rights of the Senior Noteholders on the one hand, and the Subordinate
Noteholder on the other hand, and nothing herein shall impair, as between Parent
and the Subordinate Noteholder, the obligation of Parent, which is unconditional
and absolute, to pay the principal of the Subordinate Obligations, and interest
thereon in accordance with its terms, subject to the rights of the Senior
Noteholders as herein provided.
ARTICLE III
MISCELLANEOUS
SECTION 3.01. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement nor consent to any departure by the Subordinate
Noteholder, Parent or the Company therefrom shall in any event be effective
unless the same shall be in writing and signed by the Senior Noteholders,
Subordinate Noteholder, Parent and the Company, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
SECTION 3.02. EXPENSES. The Subordinate Noteholder, Parent and the
Company, jointly and severally, agree to pay, upon demand, to the Senior
Noteholders the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel, which the Senior Noteholders may
incur in connection with the exercise or enforcement of any of their rights or
interests hereunder.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.9 - Page 8
SECTION 3.03. ADDRESSES FOR NOTICES. Notices, consents, requests,
approvals, demands and other communications provided for herein shall be given
in the manner and become effective as specified in the Note Agreement, and shall
be addressed, if to the Company or the Senior Noteholders, at their respective
addresses specified in the Note Agreement, if to Parent, at its address
specified in the Guaranty Agreement, or if to the Subordinate Noteholder, to the
address specified under its signature to this Agreement.
SECTION 3.04. REPRESENTATIONS AND WARRANTIES. In order to induce the
Senior Noteholders to enter into the Note Agreement, the Subordinate Noteholder
hereby represents and warrants to the Senior Noteholders that:
(a) The Subordinate Noteholder has all requisite power and authority
to execute, deliver and perform its obligations under this Agreement and all
action on the Subordinate Noteholder's part requisite for the due execution,
delivery and performance of this Agreement has been duly and effectively taken.
(b) The execution, delivery and performance of this Agreement by the
Subordinate Noteholder do not and will not contravene any law or contractual
restriction binding on or affecting the Subordinate Noteholder.
(c) No consent, authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority or any other Person is
required for the due execution, delivery and performance by the Subordinate
Noteholder of this Agreement.
(d) This Agreement constitutes the legal, valid and binding
obligations of Subordinate Noteholder enforceable against the Subordinate
Noteholder in accordance with its terms.
(e) The Subordinate Noteholder owns the Subordinate Obligations free
and clear of any lien, security interest, charge or encumbrance or any rights of
others. There exists no default in respect of any such Subordinate Obligations.
SECTION 3.05. NO WAIVER; REMEDIES. No failure on the part of the
Senior Noteholders to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 3.06. CONTINUING AGREEMENT; TRANSFER OF SENIOR NOTES. This
Agreement is a continuing agreement and shall (a) remain in full force and
effect until the Senior Obligations shall have been paid in full and the
Commitments have been terminated, (b) be binding upon the Subordinate
Noteholder, Parent, the Company and their respective successors and assigns, and
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.9 - Page 9
(c) inure to the benefit of and be enforceable by the Senior Noteholders and
their respective successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c), the Senior Noteholders may assign or
otherwise transfer all or any portion of the Senior Obligations to any other
Person, and such other Person (other than Parent, the Company or their
Affiliates) shall thereupon become vested with all or a pro rata portion of the
rights in respect thereof granted to the Senior Noteholders herein or otherwise.
SECTION 3.07. CAPTIONS. The captions in this Agreement have been
inserted for convenience only and shall be given no substantive meaning or
significance whatever in construing the terms and provisions of this Agreement.
SECTION 3.08. TRANSACTION DOCUMENTS. The Subordinate Noteholder
acknowledges that it has full and complete access to the Note Agreement, the
Guaranty Agreement and all of the other Transaction Documents, has fully
reviewed same and is fully aware of their contents.
SECTION 3.09 PRO RATA TREATMENT OF SENIOR NOTEHOLDERS. All amounts
to be paid over or delivered to the Senior Noteholders or to which the Senior
Noteholders otherwise may be entitled hereunder, and all amounts at any time
received in trust for the Senior Noteholders, shall be paid over, delivered,
and/or received, as applicable, pro rata to and for the Senior Noteholders in
proportion to the aggregate amount of Senior Obligations then owing (whether or
not then due and payable) to each such Senior Noteholder, it being intended that
the benefits of this Agreement and all rights and privileges created hereby in
favor of the Senior Noteholders be and are for the ratable benefit of the Senior
Noteholders.
SECTION 3.10. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed an original and all of which
taken together shall constitute but one and the same agreement.
SECTION 3.11. SURVIVAL. All warranties, representations and
covenants made by Subordinate Noteholder, Parent and the Company herein shall be
considered to have been relied upon by the Senior Noteholders and shall survive
the execution and delivery of this Agreement and the other Transaction
Documents, regardless of any investigation made by or on behalf of any thereof.
SECTION 3.12. JURY WAIVER. SUBORDINATE NOTEHOLDER, PARENT, THE
COMPANY AND THE NOTEHOLDERS HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL
BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.9 - Page 10
SECTION 3.13. CHOICE OF FORUM. SUBORDINATE NOTEHOLDER, PARENT,
THE COMPANY AND THE NOTEHOLDERS AGREE THAT ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE
BROUGHT IN THE FEDERAL OR STATE COURTS OF HARRIS COUNTY, TEXAS.
SECTION 3.14. GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Texas, excluding
choice of law principles of the law of such State that would require the
application of the laws of a jurisdiction other than such State.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective representatives thereunto duly
authorized effective as of the date first above written.
/S/ T. W. HOEHN, JR.
T. W. Hoehn, Jr.
Address for Notices:
2302 Rue Adriane
La Jolla, California 92037
Telecopy Number: 619-454-2043
RIMCO PARTNERS, L.P.,
RIMCO PARTNERS, L.P. II,
RIMCO PARTNERS, L.P. III, AND
RIMCO PARTNERS, L.P. IV
By: RESOURCE INVESTORS MANAGEMENT
COMPANY LIMITED PARTNERSHIP,
THEIR GENERAL PARTNER
By: RIMCO ASSOCIATES, INC.,
its general partner
By: /S/ GARY MILAVEC
Name: Gary Milavec
Title:Vice President
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.9 - Page 11
TEXOIL, INC.
By: /S/ RUBEN MEDRANO
Name: Ruben Medrano
Title: President
TEXOIL COMPANY
By: /S/ RUBEN MEDRANO
Name: Ruben Medrano
Title: President
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.9 - Page 12
EXHIBIT 10.10
EXHIBIT 10.10
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "AGREEMENT"), dated September 6,
1996 is among T.W. HOEHN, III (the "SUBORDINATE NOTEHOLDER"), and RIMCO
PARTNERS, L.P., a Delaware limited partnership, RIMCO PARTNERS, L.P. II, a
Delaware limited partnership, RIMCO PARTNERS, L.P. III, a Delaware limited
partnership and RIMCO PARTNERS, L.P. IV, a Delaware limited partnership
(collectively, the "SENIOR NOTEHOLDERS"), TEXOIL, INC., a Nevada corporation
("PARENT"), and TEXOIL COMPANY, a Tennessee corporation (the "COMPANY").
PRELIMINARY STATEMENTS
The Senior Noteholders have entered into that certain Note Purchase
Agreement, dated of even date herewith (as same may be amended from time to time
being referred to herein as the "NOTE AGREEMENT") with the Company and Parent
whereby the Senior Noteholders have purchased from the Company its 10% Senior
Secured Exchangeable General Obligation Notes in the maximum aggregate principal
amount of $3,000,000 and the Senior Noteholders (other than RIMCO Partners,
L.P.) have purchased from the Company its 10% Senior Secured General Obligation
Notes in the maximum aggregate principal amount of $5,000,000, subject in each
case to the terms of the Note Agreement (collectively, the "SENIOR NOTES").
In connection with the Note Agreement, the Senior Noteholders, the
Company and Parent have entered into that certain Guaranty and Exchange
Agreement, dated of even date herewith (as same may be amended from time to time
being referred to herein as the "GUARANTY AGREEMENT"), whereby, among other
things, Parent has unconditionally and irrevocably guaranteed the full and
punctual payment when due, whether at stated maturity or earlier by acceleration
or otherwise, of any and all debts, liabilities and obligations of the Company
now or hereafter existing under the Note Agreement, the Notes or any of the
other Transaction Documents (as such term is defined in the Note Agreement).
The Subordinate Noteholder and Parent have entered into that certain
Amended and Restated Agreement of Purchase and Sale dated of even date herewith
(as same may be amended from time to time being referred to herein as the
"SUBORDINATE NOTE AGREEMENT"), whereby the Subordinate Noteholder has loaned
Parent $300,000 and Parent has issued the Subordinate Noteholder a promissory
note in the principal amount of $300,000 (the "SUBORDINATE NOTE").
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.10 - Page 1
<PAGE>
NOW, THEREFORE, in consideration of the premises and in order to
induce the Senior Noteholders to purchase the Senior Notes under the Note
Agreement, the Subordinate Noteholder, Parent, the Company and the Senior
Noteholders hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"BANKRUPTCY PROCEEDING" means any case, suit or proceeding
instituted under any Debtor Relief Law.
"DEBTOR RELIEF LAW" means the Bankruptcy Code of the United States
of America, as amended from time to time, and all other applicable
dissolution, liquidation, conservatorship, bankruptcy, moratorium,
readjustment of debt, compromise, rearrangement, receivership, insolvency,
reorganization or similar debtor relief laws from time to time in effect
affecting the rights of creditors generally.
"SENIOR LIENS" means all Liens covering real or personal property of
the Company or Parent granted in favor of the Senior Noteholders to secure
the payment and performance of the Senior Obligations.
"SENIOR OBLIGATIONS" means (i) all indebtedness, liabilities and
obligations owing by the Company and/or Parent to the Senior Noteholders
under the Note Agreement, the Senior Notes, the Guaranty Agreement or any
other Transaction Document, whether for principal, premium, interest
(including, without limitation, any interest accruing after the filing of
any petition or pleadings under any Debtor Relief Law), fees, expenses or
otherwise, and including any contingent obligation in respect of any
unfunded portion of the Advances, (ii) any and all other indebtedness,
liabilities and obligations of the Company and/or Parent to the Senior
Noteholders, absolute or contingent, direct or indirect, joint, several or
independent, now outstanding or owing or which may hereafter be existing
or incurred, arising by operation of law or otherwise, due or to become
due, or held or to be held by the Senior Noteholders, whether created
directly or acquired by assignment, and (iii) all renewals, extensions,
refinancings, replacements and modifications of the foregoing.
"SUBORDINATE LOAN DOCUMENTS" means the Subordinate Note Agreement,
the Subordinate Note, and all other agreements, instruments, documents,
and other writings
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.10 - Page 2
<PAGE>
heretofore, now, or hereafter executed by or on behalf of Parent or any
other Person in connection with or relating to the Subordinate
Obligations, together with all agreements, instruments and documents
referred to therein or contemplated thereby.
"SUBORDINATE OBLIGATIONS" means (i) all indebtedness, liabilities
and other obligations owing by Parent to the Subordinate Noteholder,
whether for principal, premium, interest (including, without limitation,
any interest accruing after the filing of any petition or pleadings under
any Debtor Relief Law), fees, expenses or otherwise, including, without
limitation, all indebtedness, liabilities and other obligations arising in
connection with the Subordinate Note and any other Subordinate Loan
Documents, (ii) any and all other indebtedness, liabilities, and
obligations of Parent to the Subordinate Noteholder, absolute or
contingent, direct or indirect, joint, several or independent, now
outstanding or owing or which may hereafter be existing or incurred,
arising by operation of law or otherwise, due or to become due, or held or
to be held by the Subordinate Noteholder, whether created directly or
acquired by assignment, and (iii) all extensions, renewals, rearrangements
and modifications of the foregoing.
SECTION 1.02. NOTE AGREEMENT DEFINITIONS. All capitalized terms
defined in the Note Agreement and not otherwise defined herein are used herein
with the respective meanings specified in the Note Agreement.
SECTION 1.03. REFERENCES, ETC. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. All references herein to sections shall, unless the context requires
a different construction, be deemed to be references to the sections of this
Agreement.
ARTICLE II
SUBORDINATION
SECTION 2.01. AGREEMENT TO SUBORDINATE. All Subordinate Obligations
shall be subordinate, inferior and junior in right of payment, to the extent and
in the manner hereinafter set forth, to all Senior Obligations. The Subordinate
Noteholder, Parent and the Company acknowledge that the Senior Noteholders have
purchased the Senior Notes and entered into the Note Agreement, the Guaranty
Agreement and the other Transaction Documents in reliance upon the provisions of
this Agreement.
SECTION 2.02. NO PAYMENT ON THE SUBORDINATE OBLIGATIONS. So long as
any Senior Obligations or Commitments shall remain outstanding, the Subordinate
Noteholder agrees not to ask, demand, sue for, take, receive or accept from
Parent or the Company, directly or indirectly,
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.10 - Page 3
<PAGE>
in cash or other property or by set-off or in any other manner, payment of all
or any of the Subordinate Obligations, except as expressly permitted by the
following sentence. On the tenth day of each month commencing October 10, 1996,
Subordinate Noteholder may receive from Parent a payment of an amount equal to
accrued unpaid interest on the Subordinate Note to the extent, and only to the
extent, such payment constitutes a Permitted Shareholder Debt Payment under the
Note Agreement and no Default or Event of Default has occurred and is continuing
under the Note Agreement.
SECTION 2.03. IN FURTHERANCE OF SUBORDINATION. (a) In the event of
(i) any sale of assets of Parent or the Company under or in accordance with any
judgment or decree rendered in any proceeding by or on behalf of the Subordinate
Noteholder or in respect of the Subordinate Obligations, (ii) any distribution,
division or application, partial or complete, voluntary or involuntary, by
operation of law or otherwise, of all or any part of the assets of Parent or the
Company, or the proceeds thereof, to creditors of Parent or the Company
occurring by reason of any liquidation, dissolution or winding up of Parent or
the Company pursuant to a Bankruptcy Proceeding or otherwise, or (iii) any
Bankruptcy Proceeding, execution sale or other similar proceeding relative to
Parent or the Company or their respective debts or properties, then in any such
event (A) the Senior Noteholders shall be preferred in the payment of their
claims over the claims of the Subordinate Noteholder, and all Senior Obligations
shall be first paid and satisfied in full before any payment or distribution of
any kind or character, whether in cash, property or securities, shall be made
upon any Subordinate Obligations, and (B) any dividend or distribution of any
kind or character, whether in cash, property or securities which shall be made
upon, or in respect of, the Subordinate Obligations, or any renewals or
extensions thereof, shall be paid over to the Senior Noteholders, for
application in payment of the Senior Obligations until such Senior Obligations
shall have been paid and satisfied in full.
(b) All payments or distributions upon or with respect to the
Subordinate Obligations which are received by the Subordinate Noteholder
contrary to the provisions of this Agreement shall be received in trust for the
benefit of the Senior Noteholders, shall be segregated from other funds and
property held by the Subordinate Noteholder and shall be forthwith paid over to
the Senior Noteholders in the same form as so received (with any necessary
endorsement) to be applied (in the case of cash) to or held as collateral (in
the case of non-cash property or securities) for the payment or prepayment of
the Senior Obligations.
(c) The Senior Noteholders are hereby authorized to demand specific
performance of this Agreement, whether or not Parent or the Company shall have
complied with any of the provisions hereof applicable to either of them, at any
time when the Subordinate Noteholder shall have failed to comply with any of the
provisions of this Agreement. The Subordinate Noteholder hereby irrevocably
waives any defense based on the adequacy of a remedy at law, which might be
asserted as a bar to such remedy of specific performance.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.10 - Page 4
<PAGE>
(d) The Subordinate Noteholder agrees that, so long as any of the
Senior Obligations shall remain unpaid or the Commitments are outstanding, it
will not commence, or join with any creditor other than the Senior Noteholders
in commencing, any Bankruptcy Proceeding against Parent or the Company.
(e) The Subordinate Noteholder agrees that it will not hold any Lien
on any real or personal property as security for the Subordinate Obligations
unless the Senior Noteholders have given their prior written consent to the
creation thereof. In the event the Subordinate Noteholder shall acquire any Lien
as security for the Subordinate Obligations, regardless of whether such Lien is
permitted by this Agreement, the Subordinate Noteholder will hold such Lien for
the benefit of the Senior Noteholders and shall enforce such Lien in accordance
with the written instructions of the Senior Noteholders. Any cash or other
property received on account of any Lien securing the Subordinate Obligations
shall be delivered to the Senior Noteholders and, in the case of cash, applied
to, or, in the case of other property, held as collateral for, the Senior
Obligations. To the extent that any Subordinate Obligations are now or hereafter
secured by a Lien in favor of the Subordinate Noteholder against any real or
personal property that is also subject to a Senior Lien securing the Senior
Obligations, the Subordinate Noteholder agrees that such Lien in favor of the
Subordinate Noteholder shall be second, junior and subordinate to such Senior
Lien and such Senior Lien shall be first and prior to such Lien in favor of the
Subordinate Noteholder. It is further agreed that the priorities specified in
the preceding sentence are applicable irrespective of the time or order of
attachment or perfection of Liens, or the time or order of filing of Liens, or
the time or order of filing of financing statements, or the giving or failure to
give notice of the acquisition or expected acquisition of purchase money or
other security interests.
(f) The Subordinate Noteholder agrees that, so long as any of the
Senior Obligations shall remain unpaid or the Commitments are outstanding, it
will not declare any or all of the Subordinate Obligations due and payable prior
to the date fixed therefor or take any action to enforce any right or remedy
with respect to any Lien in favor of the Subordinate Noteholder.
(g) This Agreement shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of any Senior Obligation is
rescinded or must otherwise be returned by the Senior Noteholders pursuant to
any Bankruptcy Proceeding of Parent or the Company or otherwise, all as though
such payment had not been made.
SECTION 2.04. WAIVER OF SUBROGATION. The Subordinate Noteholder
agrees not to exercise any rights of subrogation in respect of any payment or
distribution to the Senior Noteholders under the provisions of this Agreement
until the Senior Obligations have been paid in full and the Commitments have
terminated.
SECTION 2.05. SUBORDINATION LEGEND. Parent will cause any promissory
note or other instrument evidencing the Subordinate Obligations to expressly
state that it is subject to this
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
Agreement. Each of the Subordinate Noteholder and Parent will mark its books and
records in such a manner as shall be effective to give proper notice of the
effect of this Agreement. If any Subordinate Obligation is not evidenced by a
promissory note or other instrument, upon request of the Senior Noteholders, the
Subordinate Noteholder will cause such Subordinate Obligation to be evidenced by
an appropriate instrument or instruments endorsed with the above legend. Upon
the request of the Senior Noteholders, the Subordinate Noteholder shall deliver
to the possession of the Senior Noteholders all instruments evidencing the
Subordinate Obligations. The Subordinate Noteholder, Parent and the Company each
will, at its expense and at any time and from time to time, promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or that the Senior Noteholders may reasonably
request, in order to protect any right or interest granted or purported to be
granted hereby or to enable the Senior Noteholders to exercise and enforce their
rights and remedies hereunder.
SECTION 2.06. NO CHANGE IN OR DISPOSITION OF SUBORDINATE
OBLIGATIONS. So long as any of the Senior Obligations or Commitments shall
remain outstanding, the Subordinate Noteholder will not (a) cancel or otherwise
discharge any of the Subordinate Obligations (other than upon conversion to
common stock of Parent in accordance with the Subordinate Loan Documents) or
subordinate any of the Subordinate Obligations to any indebtedness of Parent or
the Company other than the Senior Obligations; (b) sell, assign, pledge,
encumber or otherwise dispose of any of the Subordinate Obligations; or (c)
permit the terms of any of the Subordinate Obligations to be amended or modified
in any manner.
SECTION 2.07. WAIVERS, ETC. (a) All rights and interests of the
Senior Noteholders hereunder, and all agreements and obligations of the
Subordinate Noteholder, Parent and the Company under this Agreement, shall
remain in full force and effect irrespective of: (i) any lack of validity or
enforceability of the Note Agreement, the Senior Notes, the Guaranty Agreement
or any other Transaction Documents or any other agreement or instrument relating
thereto; (ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Senior Obligations, any increase in the amount
of the Senior Obligations, or any other amendment or waiver of or any consent to
departure from the Note Agreement, the Senior Notes, the Guaranty Agreement or
any other Transaction Documents; (iii) any exchange, release or non-perfection
of any collateral, or any release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Senior Obligations; (iv) any
other circumstance which might otherwise constitute a defense available to, or a
discharge of, the Company or Parent or any other guarantor of the Senior
Obligations; or (v) any failure to act on the part of the Senior Noteholders, or
by any non-compliance by the Company with the terms, provisions and covenants of
this Agreement or the Note Agreement, the Senior Notes, the Guaranty Agreement
or any other Transaction Documents, regardless of any actual or constructive
knowledge that the Senior Noteholders may have with respect thereto. The
Subordinate Noteholder hereby waives promptness, diligence, notice of acceptance
and any other notice with respect to any of the Senior Obligations and any
requirement that the Senior Noteholders
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protect, secure, perfect or insure any Senior Lien or any property subject
thereto or exhaust any right or take any action against the Company or Parent or
any other Person or any collateral.
(b) The Senior Noteholders may at any time and from time to time,
without the consent of or notice to the Subordinate Noteholder, and without
impairing or releasing any of the rights of the Senior Noteholders under this
Agreement, upon or without any terms or conditions and in whole or in part: (i)
increase the amount of the Senior Obligations, change the manner, place or terms
of payment, and/or change or extend the time of payment of, renew or alter, any
Senior Obligations or any other liability of the Company or Parent to the Senior
Noteholders, any security therefor, or any liability incurred directly or
indirectly in respect thereof, or otherwise amend the Note Agreement, the Senior
Notes, the Guaranty Agreement, the other Transaction Documents or any other
document or instrument related to any Senior Obligation, and the provisions of
this Agreement shall apply to the Senior Obligations as so increased, changed,
extended, renewed, altered or amended; (ii) sell, exchange, release, surrender,
realize upon or otherwise deal with in any manner and in any order any property
by whomsoever owned at any time securing, by agreement, operation of law or
otherwise, any Senior Obligations or any other liability of the Company or
Parent to the Senior Noteholders, or any other liabilities incurred directly or
indirectly in connection with the Senior Obligations, or any offset there
against; (iii) exercise or refrain from exercising any rights and/or remedies
against the Company or Parent or others or otherwise act or refrain from acting
or, for any reason, fail to file, record or otherwise perfect any Senior Lien on
any property of the Company or Parent; (iv) release any Person (including the
Company or Parent) liable in any manner for payment or collection of the Senior
Obligations; (v) settle or compromise any of the Senior Obligations or any other
liability of the Company or Parent to the Senior Noteholders or any security for
such Senior Obligations or such other liabilities, or any liability incurred
directly or indirectly in respect thereof, and may subordinate the payment of
all or any part thereof to the payment of any liability (whether due or not) of
the Company or Parent to any of its other creditors; and (vi) apply any sums
received, by whomsoever paid and howsoever realized, to any of the Senior
Obligations in such manner and order as Senior Noteholders, in their sole
discretion, may deem appropriate.
SECTION 2.08. COLLECTION OF SUBORDINATE OBLIGATIONS. If any
Bankruptcy Proceeding is commenced by or against Parent or the Company, (a) the
Senior Noteholders are hereby irrevocably authorized and empowered (in their own
names or in the name of the Subordinate Noteholder or otherwise), but shall have
no obligation, to demand, sue for, collect and receive every payment or
distribution in respect of the Subordinate Obligations and give acquittance
therefor and to file claims and proofs of claim and take such other action
(including, without limitation, voting the Subordinate Obligations or enforcing
any Lien securing payment of the Subordinate Obligations) as they may deem
necessary or advisable for the exercise or enforcement of any of the rights or
interests of the Senior Noteholders hereunder; and (b) the Subordinate
Noteholder shall duly and promptly take such action as the Senior Noteholders
may request to collect and receive any and all payments or distributions which
may be payable or deliverable upon or with respect to the Subordinate
Obligations for the account of the Senior Noteholders and to file appropriate
claims or proofs of
::ODMA\PCDOCS\DOCS\88117\1
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claim in respect of the Subordinate Obligations, including, without limitation,
executing and delivering to the Senior Noteholders such powers of attorney,
assignments or other instruments as they may request in order to enable them to
enforce any and all claims with respect to, and any security interests and other
liens securing payment of, the Subordinate Obligations.
SECTION 2.09. OBLIGATIONS OF PARENT AND THE COMPANY. Parent and the
Company hereby agree that no payment or distribution will be made on account of
the Subordinate Obligations, whether principal or interest, except as expressly
permitted by this Agreement. In the event of a breach by Parent or the Company
or the Subordinate Noteholder of any of the provisions of this Agreement, an
Event of Default shall exist under the Note Agreement, and the Senior
Noteholders may exercise all of their rights and remedies under this Agreement,
the Note Agreement and the other Transaction Documents. The rights and remedies
available to the Senior Noteholders pursuant to this paragraph are cumulative
and not exclusive of any other right or remedy available to the Senior
Noteholders under this Agreement, the Note Agreement and the other Transaction
Documents or the law to enforce the performance or observance of the covenants
and agreements contained herein.
SECTION 2.10. OBLIGATION TO PAY SUBORDINATE OBLIGATIONS UNIMPAIRED.
The provisions of this Agreement are solely for the purpose of defining the
relative rights of the Senior Noteholders on the one hand, and the Subordinate
Noteholder on the other hand, and nothing herein shall impair, as between Parent
and the Subordinate Noteholder, the obligation of Parent, which is unconditional
and absolute, to pay the principal of the Subordinate Obligations, and interest
thereon in accordance with its terms, subject to the rights of the Senior
Noteholders as herein provided.
ARTICLE III
MISCELLANEOUS
SECTION 3.01. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement nor consent to any departure by the Subordinate
Noteholder, Parent or the Company therefrom shall in any event be effective
unless the same shall be in writing and signed by the Senior Noteholders,
Subordinate Noteholder, Parent and the Company, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
SECTION 3.02. EXPENSES. The Subordinate Noteholder, Parent and the
Company, jointly and severally, agree to pay, upon demand, to the Senior
Noteholders the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel, which the Senior Noteholders may
incur in connection with the exercise or enforcement of any of their rights or
interests hereunder.
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SECTION 3.03. ADDRESSES FOR NOTICES. Notices, consents, requests,
approvals, demands and other communications provided for herein shall be given
in the manner and become effective as specified in the Note Agreement, and shall
be addressed, if to the Company or the Senior Noteholders, at their respective
addresses specified in the Note Agreement, if to Parent, at its address
specified in the Guaranty Agreement, or if to the Subordinate Noteholder, to the
address specified under its signature to this Agreement.
SECTION 3.04. REPRESENTATIONS AND WARRANTIES. In order to induce the
Senior Noteholders to enter into the Note Agreement, the Subordinate Noteholder
hereby represents and warrants to the Senior Noteholders that:
(a) The Subordinate Noteholder has all requisite power and authority
to execute, deliver and perform its obligations under this Agreement and all
action on the Subordinate Noteholder's part requisite for the due execution,
delivery and performance of this Agreement has been duly and effectively taken.
(b) The execution, delivery and performance of this Agreement by the
Subordinate Noteholder do not and will not contravene any law or contractual
restriction binding on or affecting the Subordinate Noteholder.
(c) No consent, authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority or any other Person is
required for the due execution, delivery and performance by the Subordinate
Noteholder of this Agreement.
(d) This Agreement constitutes the legal, valid and binding
obligations of Subordinate Noteholder enforceable against the Subordinate
Noteholder in accordance with its terms.
(e) The Subordinate Noteholder owns the Subordinate Obligations free
and clear of any lien, security interest, charge or encumbrance or any rights of
others. There exists no default in respect of any such Subordinate Obligations.
SECTION 3.05. NO WAIVER; REMEDIES. No failure on the part of the
Senior Noteholders to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 3.06. CONTINUING AGREEMENT; TRANSFER OF SENIOR NOTES. This
Agreement is a continuing agreement and shall (a) remain in full force and
effect until the Senior Obligations shall have been paid in full and the
Commitments have been terminated, (b) be binding upon the Subordinate
Noteholder, Parent, the Company and their respective successors and assigns, and
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(c) inure to the benefit of and be enforceable by the Senior Noteholders and
their respective successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c), the Senior Noteholders may assign or
otherwise transfer all or any portion of the Senior Obligations to any other
Person, and such other Person (other than Parent, the Company or their
Affiliates) shall thereupon become vested with all or a pro rata portion of the
rights in respect thereof granted to the Senior Noteholders herein or otherwise.
SECTION 3.07. CAPTIONS. The captions in this Agreement have been
inserted for convenience only and shall be given no substantive meaning or
significance whatever in construing the terms and provisions of this Agreement.
SECTION 3.08. TRANSACTION DOCUMENTS. The Subordinate Noteholder
acknowledges that it has full and complete access to the Note Agreement, the
Guaranty Agreement and all of the other Transaction Documents, has fully
reviewed same and is fully aware of their contents.
SECTION 3.09 PRO RATA TREATMENT OF SENIOR NOTEHOLDERS. All amounts
to be paid over or delivered to the Senior Noteholders or to which the Senior
Noteholders otherwise may be entitled hereunder, and all amounts at any time
received in trust for the Senior Noteholders, shall be paid over, delivered,
and/or received, as applicable, pro rata to and for the Senior Noteholders in
proportion to the aggregate amount of Senior Obligations then owing (whether or
not then due and payable) to each such Senior Noteholder, it being intended that
the benefits of this Agreement and all rights and privileges created hereby in
favor of the Senior Noteholders be and are for the ratable benefit of the Senior
Noteholders.
SECTION 3.10. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed an original and all of which
taken together shall constitute but one and the same agreement.
SECTION 3.11. SURVIVAL. All warranties, representations and
covenants made by Subordinate Noteholder, Parent and the Company herein shall be
considered to have been relied upon by the Senior Noteholders and shall survive
the execution and delivery of this Agreement and the other Transaction
Documents, regardless of any investigation made by or on behalf of any thereof.
SECTION 3.12. JURY WAIVER. SUBORDINATE NOTEHOLDER, PARENT, THE
COMPANY AND THE NOTEHOLDERS HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL
BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
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SECTION 3.13. CHOICE OF FORUM. SUBORDINATE NOTEHOLDER, PARENT,
THE COMPANY AND THE NOTEHOLDERS AGREE THAT ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE
BROUGHT IN THE FEDERAL OR STATE COURTS OF HARRIS COUNTY, TEXAS.
SECTION 3.14. GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Texas, excluding
choice of law principles of the law of such State that would require the
application of the laws of a jurisdiction other than such State.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective representatives thereunto duly
authorized effective as of the date first above written.
/S/ T. W. HOEHN, III
T. W. Hoehn, III
Address for Notices:
Hoehn Motors
5454 Paseo del Norte
Carlsbad, California 92008
Telecopy Number: 619-438-0568
RIMCO PARTNERS, L.P.,
RIMCO PARTNERS, L.P. II,
RIMCO PARTNERS, L.P. III, AND
RIMCO PARTNERS, L.P. IV
By: RESOURCE INVESTORS MANAGEMENT
COMPANY LIMITED PARTNERSHIP,
THEIR GENERAL PARTNER
By: RIMCO ASSOCIATES, INC.,
its general partner
By: /S/ GARY MILAVEC
Name: Gary Milavec
Title:Vice President
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TEXOIL, INC.
By: /S/ RUBEN MEDRANO
Name: Ruben Medrano
Title: President
TEXOIL COMPANY
By: /S/ RUBEN MEDRANO
Name: Ruben Medrano
Title: President
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.10 - Page 12
EXHIBIT 10.11
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "AGREEMENT"), dated September 6,
1996 is among WILLIAM F. SEAGLE (the "SUBORDINATE NOTEHOLDER"), and RIMCO
PARTNERS, L.P., a Delaware limited partnership, RIMCO PARTNERS, L.P. II, a
Delaware limited partnership, RIMCO PARTNERS, L.P. III, a Delaware limited
partnership and RIMCO PARTNERS, L.P. IV, a Delaware limited partnership
(collectively, the "SENIOR NOTEHOLDERS"), TEXOIL, INC., a Nevada corporation
("PARENT"), and TEXOIL COMPANY, a Tennessee corporation (the "COMPANY").
PRELIMINARY STATEMENTS
The Senior Noteholders have entered into that certain Note Purchase
Agreement, dated of even date herewith (as same may be amended from time to time
being referred to herein as the "NOTE AGREEMENT") with the Company and Parent
whereby the Senior Noteholders have purchased from the Company its 10% Senior
Secured Exchangeable General Obligation Notes in the maximum aggregate principal
amount of $3,000,000 and the Senior Noteholders (other than RIMCO Partners,
L.P.) have purchased from the Company its 10% Senior Secured General Obligation
Notes in the maximum aggregate principal amount of $5,000,000, subject in each
case to the terms of the Note Agreement (collectively, the "SENIOR NOTES").
In connection with the Note Agreement, the Senior Noteholders, the
Company and Parent have entered into that certain Guaranty and Exchange
Agreement, dated of even date herewith (as same may be amended from time to time
being referred to herein as the "GUARANTY AGREEMENT"), whereby, among other
things, Parent has unconditionally and irrevocably guaranteed the full and
punctual payment when due, whether at stated maturity or earlier by acceleration
or otherwise, of any and all debts, liabilities and obligations of the Company
now or hereafter existing under the Note Agreement, the Notes or any of the
other Transaction Documents (as such term is defined in the Note Agreement).
The Subordinate Noteholder and Parent have entered into that certain
Amended and Restated Agreement of Purchase and Sale dated of even date herewith
(as same may be amended from time to time being referred to herein as the
"SUBORDINATE NOTE AGREEMENT"), whereby the Subordinate Noteholder has loaned
Parent $50,000 and Parent has issued the Subordinate Noteholder a promissory
note in the principal amount of $50,000 (the "SUBORDINATE NOTE").
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NOW, THEREFORE, in consideration of the premises and in order to
induce the Senior Noteholders to purchase the Senior Notes under the Note
Agreement, the Subordinate Noteholder, Parent, the Company and the Senior
Noteholders hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"BANKRUPTCY PROCEEDING" means any case, suit or proceeding
instituted under any Debtor Relief Law.
"DEBTOR RELIEF LAW" means the Bankruptcy Code of the United States
of America, as amended from time to time, and all other applicable
dissolution, liquidation, conservatorship, bankruptcy, moratorium,
readjustment of debt, compromise, rearrangement, receivership, insolvency,
reorganization or similar debtor relief laws from time to time in effect
affecting the rights of creditors generally.
"SENIOR LIENS" means all Liens covering real or personal property of
the Company or Parent granted in favor of the Senior Noteholders to secure
the payment and performance of the Senior Obligations.
"SENIOR OBLIGATIONS" means (i) all indebtedness, liabilities and
obligations owing by the Company and/or Parent to the Senior Noteholders
under the Note Agreement, the Senior Notes, the Guaranty Agreement or any
other Transaction Document, whether for principal, premium, interest
(including, without limitation, any interest accruing after the filing of
any petition or pleadings under any Debtor Relief Law), fees, expenses or
otherwise, and including any contingent obligation in respect of any
unfunded portion of the Advances, (ii) any and all other indebtedness,
liabilities and obligations of the Company and/or Parent to the Senior
Noteholders, absolute or contingent, direct or indirect, joint, several or
independent, now outstanding or owing or which may hereafter be existing
or incurred, arising by operation of law or otherwise, due or to become
due, or held or to be held by the Senior Noteholders, whether created
directly or acquired by assignment, and (iii) all renewals, extensions,
refinancings, replacements and modifications of the foregoing.
"SUBORDINATE LOAN DOCUMENTS" means the Subordinate Note Agreement,
the Subordinate Note, and all other agreements, instruments, documents,
and other writings
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heretofore, now, or hereafter executed by or on behalf of Parent or any
other Person in connection with or relating to the Subordinate
Obligations, together with all agreements, instruments and documents
referred to therein or contemplated thereby.
"SUBORDINATE OBLIGATIONS" means (i) all indebtedness, liabilities
and other obligations owing by Parent to the Subordinate Noteholder,
whether for principal, premium, interest (including, without limitation,
any interest accruing after the filing of any petition or pleadings under
any Debtor Relief Law), fees, expenses or otherwise, including, without
limitation, all indebtedness, liabilities and other obligations arising in
connection with the Subordinate Note and any other Subordinate Loan
Documents, (ii) any and all other indebtedness, liabilities, and
obligations of Parent to the Subordinate Noteholder, absolute or
contingent, direct or indirect, joint, several or independent, now
outstanding or owing or which may hereafter be existing or incurred,
arising by operation of law or otherwise, due or to become due, or held or
to be held by the Subordinate Noteholder, whether created directly or
acquired by assignment, and (iii) all extensions, renewals, rearrangements
and modifications of the foregoing.
SECTION 1.02. NOTE AGREEMENT DEFINITIONS. All capitalized terms
defined in the Note Agreement and not otherwise defined herein are used herein
with the respective meanings specified in the Note Agreement.
SECTION 1.03. REFERENCES, ETC. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. All references herein to sections shall, unless the context requires
a different construction, be deemed to be references to the sections of this
Agreement.
ARTICLE II
SUBORDINATION
SECTION 2.01. AGREEMENT TO SUBORDINATE. All Subordinate Obligations
shall be subordinate, inferior and junior in right of payment, to the extent and
in the manner hereinafter set forth, to all Senior Obligations. The Subordinate
Noteholder, Parent and the Company acknowledge that the Senior Noteholders have
purchased the Senior Notes and entered into the Note Agreement, the Guaranty
Agreement and the other Transaction Documents in reliance upon the provisions of
this Agreement.
SECTION 2.02. NO PAYMENT ON THE SUBORDINATE OBLIGATIONS. So long as
any Senior Obligations or Commitments shall remain outstanding, the Subordinate
Noteholder agrees not to ask, demand, sue for, take, receive or accept from
Parent or the Company, directly or indirectly,
::ODMA\PCDOCS\DOCS\88117\1
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in cash or other property or by set-off or in any other manner, payment of all
or any of the Subordinate Obligations, except as expressly permitted by the
following sentence. On the tenth day of each month commencing October 10, 1996,
Subordinate Noteholder may receive from Parent a payment of an amount equal to
accrued unpaid interest on the Subordinate Note to the extent, and only to the
extent, such payment constitutes a Permitted Shareholder Debt Payment under the
Note Agreement and no Default or Event of Default has occurred and is continuing
under the Note Agreement.
SECTION 2.03. IN FURTHERANCE OF SUBORDINATION. (a) In the event of
(i) any sale of assets of Parent or the Company under or in accordance with any
judgment or decree rendered in any proceeding by or on behalf of the Subordinate
Noteholder or in respect of the Subordinate Obligations, (ii) any distribution,
division or application, partial or complete, voluntary or involuntary, by
operation of law or otherwise, of all or any part of the assets of Parent or the
Company, or the proceeds thereof, to creditors of Parent or the Company
occurring by reason of any liquidation, dissolution or winding up of Parent or
the Company pursuant to a Bankruptcy Proceeding or otherwise, or (iii) any
Bankruptcy Proceeding, execution sale or other similar proceeding relative to
Parent or the Company or their respective debts or properties, then in any such
event (A) the Senior Noteholders shall be preferred in the payment of their
claims over the claims of the Subordinate Noteholder, and all Senior Obligations
shall be first paid and satisfied in full before any payment or distribution of
any kind or character, whether in cash, property or securities, shall be made
upon any Subordinate Obligations, and (B) any dividend or distribution of any
kind or character, whether in cash, property or securities which shall be made
upon, or in respect of, the Subordinate Obligations, or any renewals or
extensions thereof, shall be paid over to the Senior Noteholders, for
application in payment of the Senior Obligations until such Senior Obligations
shall have been paid and satisfied in full.
(b) All payments or distributions upon or with respect to the
Subordinate Obligations which are received by the Subordinate Noteholder
contrary to the provisions of this Agreement shall be received in trust for the
benefit of the Senior Noteholders, shall be segregated from other funds and
property held by the Subordinate Noteholder and shall be forthwith paid over to
the Senior Noteholders in the same form as so received (with any necessary
endorsement) to be applied (in the case of cash) to or held as collateral (in
the case of non-cash property or securities) for the payment or prepayment of
the Senior Obligations.
(c) The Senior Noteholders are hereby authorized to demand specific
performance of this Agreement, whether or not Parent or the Company shall have
complied with any of the provisions hereof applicable to either of them, at any
time when the Subordinate Noteholder shall have failed to comply with any of the
provisions of this Agreement. The Subordinate Noteholder hereby irrevocably
waives any defense based on the adequacy of a remedy at law, which might be
asserted as a bar to such remedy of specific performance.
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(d) The Subordinate Noteholder agrees that, so long as any of the
Senior Obligations shall remain unpaid or the Commitments are outstanding, it
will not commence, or join with any creditor other than the Senior Noteholders
in commencing, any Bankruptcy Proceeding against Parent or the Company.
(e) The Subordinate Noteholder agrees that it will not hold any Lien
on any real or personal property as security for the Subordinate Obligations
unless the Senior Noteholders have given their prior written consent to the
creation thereof. In the event the Subordinate Noteholder shall acquire any Lien
as security for the Subordinate Obligations, regardless of whether such Lien is
permitted by this Agreement, the Subordinate Noteholder will hold such Lien for
the benefit of the Senior Noteholders and shall enforce such Lien in accordance
with the written instructions of the Senior Noteholders. Any cash or other
property received on account of any Lien securing the Subordinate Obligations
shall be delivered to the Senior Noteholders and, in the case of cash, applied
to, or, in the case of other property, held as collateral for, the Senior
Obligations. To the extent that any Subordinate Obligations are now or hereafter
secured by a Lien in favor of the Subordinate Noteholder against any real or
personal property that is also subject to a Senior Lien securing the Senior
Obligations, the Subordinate Noteholder agrees that such Lien in favor of the
Subordinate Noteholder shall be second, junior and subordinate to such Senior
Lien and such Senior Lien shall be first and prior to such Lien in favor of the
Subordinate Noteholder. It is further agreed that the priorities specified in
the preceding sentence are applicable irrespective of the time or order of
attachment or perfection of Liens, or the time or order of filing of Liens, or
the time or order of filing of financing statements, or the giving or failure to
give notice of the acquisition or expected acquisition of purchase money or
other security interests.
(f) The Subordinate Noteholder agrees that, so long as any of the
Senior Obligations shall remain unpaid or the Commitments are outstanding, it
will not declare any or all of the Subordinate Obligations due and payable prior
to the date fixed therefor or take any action to enforce any right or remedy
with respect to any Lien in favor of the Subordinate Noteholder.
(g) This Agreement shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of any Senior Obligation is
rescinded or must otherwise be returned by the Senior Noteholders pursuant to
any Bankruptcy Proceeding of Parent or the Company or otherwise, all as though
such payment had not been made.
SECTION 2.04. WAIVER OF SUBROGATION. The Subordinate Noteholder
agrees not to exercise any rights of subrogation in respect of any payment or
distribution to the Senior Noteholders under the provisions of this Agreement
until the Senior Obligations have been paid in full and the Commitments have
terminated.
SECTION 2.05. SUBORDINATION LEGEND. Parent will cause any promissory
note or other instrument evidencing the Subordinate Obligations to expressly
state that it is subject to this
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Agreement. Each of the Subordinate Noteholder and Parent will mark its books and
records in such a manner as shall be effective to give proper notice of the
effect of this Agreement. If any Subordinate Obligation is not evidenced by a
promissory note or other instrument, upon request of the Senior Noteholders, the
Subordinate Noteholder will cause such Subordinate Obligation to be evidenced by
an appropriate instrument or instruments endorsed with the above legend. Upon
the request of the Senior Noteholders, the Subordinate Noteholder shall deliver
to the possession of the Senior Noteholders all instruments evidencing the
Subordinate Obligations. The Subordinate Noteholder, Parent and the Company each
will, at its expense and at any time and from time to time, promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or that the Senior Noteholders may reasonably
request, in order to protect any right or interest granted or purported to be
granted hereby or to enable the Senior Noteholders to exercise and enforce their
rights and remedies hereunder.
SECTION 2.06. NO CHANGE IN OR DISPOSITION OF SUBORDINATE
OBLIGATIONS. So long as any of the Senior Obligations or Commitments shall
remain outstanding, the Subordinate Noteholder will not (a) cancel or otherwise
discharge any of the Subordinate Obligations (other than upon conversion to
common stock of Parent in accordance with the Subordinate Loan Documents) or
subordinate any of the Subordinate Obligations to any indebtedness of Parent or
the Company other than the Senior Obligations; (b) sell, assign, pledge,
encumber or otherwise dispose of any of the Subordinate Obligations; or (c)
permit the terms of any of the Subordinate Obligations to be amended or modified
in any manner.
SECTION 2.07. WAIVERS, ETC. (a) All rights and interests of the
Senior Noteholders hereunder, and all agreements and obligations of the
Subordinate Noteholder, Parent and the Company under this Agreement, shall
remain in full force and effect irrespective of: (i) any lack of validity or
enforceability of the Note Agreement, the Senior Notes, the Guaranty Agreement
or any other Transaction Documents or any other agreement or instrument relating
thereto; (ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Senior Obligations, any increase in the amount
of the Senior Obligations, or any other amendment or waiver of or any consent to
departure from the Note Agreement, the Senior Notes, the Guaranty Agreement or
any other Transaction Documents; (iii) any exchange, release or non-perfection
of any collateral, or any release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Senior Obligations; (iv) any
other circumstance which might otherwise constitute a defense available to, or a
discharge of, the Company or Parent or any other guarantor of the Senior
Obligations; or (v) any failure to act on the part of the Senior Noteholders, or
by any non-compliance by the Company with the terms, provisions and covenants of
this Agreement or the Note Agreement, the Senior Notes, the Guaranty Agreement
or any other Transaction Documents, regardless of any actual or constructive
knowledge that the Senior Noteholders may have with respect thereto. The
Subordinate Noteholder hereby waives promptness, diligence, notice of acceptance
and any other notice with respect to any of the Senior Obligations and any
requirement that the Senior Noteholders
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protect, secure, perfect or insure any Senior Lien or any property subject
thereto or exhaust any right or take any action against the Company or Parent or
any other Person or any collateral.
(b) The Senior Noteholders may at any time and from time to time,
without the consent of or notice to the Subordinate Noteholder, and without
impairing or releasing any of the rights of the Senior Noteholders under this
Agreement, upon or without any terms or conditions and in whole or in part: (i)
increase the amount of the Senior Obligations, change the manner, place or terms
of payment, and/or change or extend the time of payment of, renew or alter, any
Senior Obligations or any other liability of the Company or Parent to the Senior
Noteholders, any security therefor, or any liability incurred directly or
indirectly in respect thereof, or otherwise amend the Note Agreement, the Senior
Notes, the Guaranty Agreement, the other Transaction Documents or any other
document or instrument related to any Senior Obligation, and the provisions of
this Agreement shall apply to the Senior Obligations as so increased, changed,
extended, renewed, altered or amended; (ii) sell, exchange, release, surrender,
realize upon or otherwise deal with in any manner and in any order any property
by whomsoever owned at any time securing, by agreement, operation of law or
otherwise, any Senior Obligations or any other liability of the Company or
Parent to the Senior Noteholders, or any other liabilities incurred directly or
indirectly in connection with the Senior Obligations, or any offset there
against; (iii) exercise or refrain from exercising any rights and/or remedies
against the Company or Parent or others or otherwise act or refrain from acting
or, for any reason, fail to file, record or otherwise perfect any Senior Lien on
any property of the Company or Parent; (iv) release any Person (including the
Company or Parent) liable in any manner for payment or collection of the Senior
Obligations; (v) settle or compromise any of the Senior Obligations or any other
liability of the Company or Parent to the Senior Noteholders or any security for
such Senior Obligations or such other liabilities, or any liability incurred
directly or indirectly in respect thereof, and may subordinate the payment of
all or any part thereof to the payment of any liability (whether due or not) of
the Company or Parent to any of its other creditors; and (vi) apply any sums
received, by whomsoever paid and howsoever realized, to any of the Senior
Obligations in such manner and order as Senior Noteholders, in their sole
discretion, may deem appropriate.
SECTION 2.08. COLLECTION OF SUBORDINATE OBLIGATIONS. If any
Bankruptcy Proceeding is commenced by or against Parent or the Company, (a) the
Senior Noteholders are hereby irrevocably authorized and empowered (in their own
names or in the name of the Subordinate Noteholder or otherwise), but shall have
no obligation, to demand, sue for, collect and receive every payment or
distribution in respect of the Subordinate Obligations and give acquittance
therefor and to file claims and proofs of claim and take such other action
(including, without limitation, voting the Subordinate Obligations or enforcing
any Lien securing payment of the Subordinate Obligations) as they may deem
necessary or advisable for the exercise or enforcement of any of the rights or
interests of the Senior Noteholders hereunder; and (b) the Subordinate
Noteholder shall duly and promptly take such action as the Senior Noteholders
may request to collect and receive any and all payments or distributions which
may be payable or deliverable upon or with respect to the Subordinate
Obligations for the account of the Senior Noteholders and to file appropriate
claims or proofs of
::ODMA\PCDOCS\DOCS\88117\1
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claim in respect of the Subordinate Obligations, including, without limitation,
executing and delivering to the Senior Noteholders such powers of attorney,
assignments or other instruments as they may request in order to enable them to
enforce any and all claims with respect to, and any security interests and other
liens securing payment of, the Subordinate Obligations.
SECTION 2.09. OBLIGATIONS OF PARENT AND THE COMPANY. Parent and the
Company hereby agree that no payment or distribution will be made on account of
the Subordinate Obligations, whether principal or interest, except as expressly
permitted by this Agreement. In the event of a breach by Parent or the Company
or the Subordinate Noteholder of any of the provisions of this Agreement, an
Event of Default shall exist under the Note Agreement, and the Senior
Noteholders may exercise all of their rights and remedies under this Agreement,
the Note Agreement and the other Transaction Documents. The rights and remedies
available to the Senior Noteholders pursuant to this paragraph are cumulative
and not exclusive of any other right or remedy available to the Senior
Noteholders under this Agreement, the Note Agreement and the other Transaction
Documents or the law to enforce the performance or observance of the covenants
and agreements contained herein.
SECTION 2.10. OBLIGATION TO PAY SUBORDINATE OBLIGATIONS UNIMPAIRED.
The provisions of this Agreement are solely for the purpose of defining the
relative rights of the Senior Noteholders on the one hand, and the Subordinate
Noteholder on the other hand, and nothing herein shall impair, as between Parent
and the Subordinate Noteholder, the obligation of Parent, which is unconditional
and absolute, to pay the principal of the Subordinate Obligations, and interest
thereon in accordance with its terms, subject to the rights of the Senior
Noteholders as herein provided.
ARTICLE III
MISCELLANEOUS
SECTION 3.01. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement nor consent to any departure by the Subordinate
Noteholder, Parent or the Company therefrom shall in any event be effective
unless the same shall be in writing and signed by the Senior Noteholders,
Subordinate Noteholder, Parent and the Company, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
SECTION 3.02. EXPENSES. The Subordinate Noteholder, Parent and the
Company, jointly and severally, agree to pay, upon demand, to the Senior
Noteholders the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel, which the Senior Noteholders may
incur in connection with the exercise or enforcement of any of their rights or
interests hereunder.
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SECTION 3.03. ADDRESSES FOR NOTICES. Notices, consents, requests,
approvals, demands and other communications provided for herein shall be given
in the manner and become effective as specified in the Note Agreement, and shall
be addressed, if to the Company or the Senior Noteholders, at their respective
addresses specified in the Note Agreement, if to Parent, at its address
specified in the Guaranty Agreement, or if to the Subordinate Noteholder, to the
address specified under its signature to this Agreement.
SECTION 3.04. REPRESENTATIONS AND WARRANTIES. In order to induce the
Senior Noteholders to enter into the Note Agreement, the Subordinate Noteholder
hereby represents and warrants to the Senior Noteholders that:
(a) The Subordinate Noteholder has all requisite power and authority
to execute, deliver and perform its obligations under this Agreement and all
action on the Subordinate Noteholder's part requisite for the due execution,
delivery and performance of this Agreement has been duly and effectively taken.
(b) The execution, delivery and performance of this Agreement by the
Subordinate Noteholder do not and will not contravene any law or contractual
restriction binding on or affecting the Subordinate Noteholder.
(c) No consent, authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority or any other Person is
required for the due execution, delivery and performance by the Subordinate
Noteholder of this Agreement.
(d) This Agreement constitutes the legal, valid and binding
obligations of Subordinate Noteholder enforceable against the Subordinate
Noteholder in accordance with its terms.
(e) The Subordinate Noteholder owns the Subordinate Obligations free
and clear of any lien, security interest, charge or encumbrance or any rights of
others. There exists no default in respect of any such Subordinate Obligations.
SECTION 3.05. NO WAIVER; REMEDIES. No failure on the part of the
Senior Noteholders to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 3.06. CONTINUING AGREEMENT; TRANSFER OF SENIOR NOTES. This
Agreement is a continuing agreement and shall (a) remain in full force and
effect until the Senior Obligations shall have been paid in full and the
Commitments have been terminated, (b) be binding upon the Subordinate
Noteholder, Parent, the Company and their respective successors and assigns, and
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(c) inure to the benefit of and be enforceable by the Senior Noteholders and
their respective successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c), the Senior Noteholders may assign or
otherwise transfer all or any portion of the Senior Obligations to any other
Person, and such other Person (other than Parent, the Company or their
Affiliates) shall thereupon become vested with all or a pro rata portion of the
rights in respect thereof granted to the Senior Noteholders herein or otherwise.
SECTION 3.07. CAPTIONS. The captions in this Agreement have been
inserted for convenience only and shall be given no substantive meaning or
significance whatever in construing the terms and provisions of this Agreement.
SECTION 3.08. TRANSACTION DOCUMENTS. The Subordinate Noteholder
acknowledges that it has full and complete access to the Note Agreement, the
Guaranty Agreement and all of the other Transaction Documents, has fully
reviewed same and is fully aware of their contents.
SECTION 3.09 PRO RATA TREATMENT OF SENIOR NOTEHOLDERS. All amounts
to be paid over or delivered to the Senior Noteholders or to which the Senior
Noteholders otherwise may be entitled hereunder, and all amounts at any time
received in trust for the Senior Noteholders, shall be paid over, delivered,
and/or received, as applicable, pro rata to and for the Senior Noteholders in
proportion to the aggregate amount of Senior Obligations then owing (whether or
not then due and payable) to each such Senior Noteholder, it being intended that
the benefits of this Agreement and all rights and privileges created hereby in
favor of the Senior Noteholders be and are for the ratable benefit of the Senior
Noteholders.
SECTION 3.10. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed an original and all of which
taken together shall constitute but one and the same agreement.
SECTION 3.11. SURVIVAL. All warranties, representations and
covenants made by Subordinate Noteholder, Parent and the Company herein shall be
considered to have been relied upon by the Senior Noteholders and shall survive
the execution and delivery of this Agreement and the other Transaction
Documents, regardless of any investigation made by or on behalf of any thereof.
SECTION 3.12. JURY WAIVER. SUBORDINATE NOTEHOLDER, PARENT, THE
COMPANY AND THE NOTEHOLDERS HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL
BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
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SECTION 3.13. CHOICE OF FORUM. SUBORDINATE NOTEHOLDER, PARENT,
THE COMPANY AND THE NOTEHOLDERS AGREE THAT ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE
BROUGHT IN THE FEDERAL OR STATE COURTS OF HARRIS COUNTY, TEXAS.
SECTION 3.14. GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Texas, excluding
choice of law principles of the law of such State that would require the
application of the laws of a jurisdiction other than such State.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective representatives thereunto duly
authorized effective as of the date first above written.
/S/ WILLIAM F. SEAGLE
William F. Seagle
Address for Notices:
c/o Wade Hampton Golf Club
Highway 107 South
Cashiers, North Carolina 28717
Telecopy Number: 704-743-2120
RIMCO PARTNERS, L.P.,
RIMCO PARTNERS, L.P. II,
RIMCO PARTNERS, L.P. III, AND
RIMCO PARTNERS, L.P. IV
By: RESOURCE INVESTORS MANAGEMENT
COMPANY LIMITED PARTNERSHIP,
THEIR GENERAL PARTNER
By: RIMCO ASSOCIATES, INC.,
its general partner
By: /S/ GARY MILAVEC
Name: Gary Milavec
Title:Vice President
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
TEXOIL, INC.
By: /S/ RUBEN MEDRANO
Name: Ruben Medrano
Title: President
TEXOIL COMPANY
By: /S/ RUBEN MEDRANO
Name: Ruben Medrano
Title: President
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.11 - Page 12
EXHIBIT 10.12
EXHIBIT 10.12
MORTGAGE, ASSIGNMENT OF PRODUCTION, SECURITY
AGREEMENT AND FINANCING STATEMENT
BE IT KNOWN, that on this 6th day of September, 1996, before me, the
undersigned Notary Public, duly commissioned and qualified in and for the State
of Texas, and in the presence of the undersigned competent witnesses:
Personally came and appeared:
TEXOIL COMPANY, a Tennessee corporation ("MORTGAGOR"), represented
herein by Ruben Medrano, its President, duly authorized by virtue of resolutions
of Mortgagor's Board of Directors, a certified copy of which is attached hereto
as Exhibit B and made a part hereof, who, being sworn, did declare and say as
follows:
RECITALS
WHEREAS, Mortgagor and Texoil, Inc., a Nevada corporation, have
entered into a Note Purchase Agreement, dated as of September 6, 1996 with RIMCO
PARTNERS, L.P., a Delaware limited partnership, RIMCO PARTNERS, L.P. II, a
Delaware limited partnership, RIMCO PARTNERS, L.P. III, a Delaware limited
partnership, and RIMCO PARTNERS, L.P. IV, a Delaware limited partnership
(collectively, "MORTGAGEES") (such Note Purchase Agreement, as same may from
time to time be amended or modified and in effect, being herein called the "NOTE
AGREEMENT"); and
WHEREAS, pursuant to the Note Agreement, Mortgagees have purchased
from Mortgagor and Mortgagor has sold (a) to Mortgagees Mortgagor's 10% Senior
Secured Exchangeable General Obligation Notes in the maximum aggregate principal
amount of $3,000,000 and (b) to Mortgagees (other than RIMCO Partners, L.P.)
Mortgagor's 10% Senior Secured General Obligation Notes in the maximum aggregate
principal amount of $5,000,000; and
WHEREAS, Mortgagor is granting this Mortgage to Mortgagees pursuant
to its obligations under the Note Agreement and for the purpose of, among other
things, securing and providing for the repayment of all amounts at any time
owing and from time to time owing by Mortgagor to Mortgagees in connection with
or under the Note Agreement or the Notes;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
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<PAGE>
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. Unless the context otherwise requires, as
used in this Mortgage and all amendments, extensions, modifications, renewals,
supplements or waivers hereof or hereto, the following terms shall have the
following meanings, which meanings shall be equally applicable to both the
singular and plural form of such terms.
"AFFILIATE" shall have the meaning assigned to that term in the Note
Agreement.
"BUSINESS DAY" shall have the meaning assigned to that term in the
Note Agreement.
"COLLATERAL" shall have the meaning assigned to that term in ARTICLE
VIII of this Mortgage.
"DEBTOR" shall have the meaning assigned to that term in ARTICLE
VIII hereof.
"DEBTOR RELIEF LAW(S)" shall mean the Bankruptcy Code of the United
States, as amended from time to time, and all other applicable
dissolution, liquidation, conservatorship, bankruptcy, moratorium,
readjustment of debt, compromise, rearrangement, receivership, insolvency,
reorganization or similar debtor relief laws from time to time in effect
affecting the rights of creditors generally.
"DEFAULT" shall have the meaning assigned to that term in the Note
Agreement.
"DEFAULT RATE" shall have the meaning assigned to that term in the
Note Agreement.
"EVENT OF DEFAULT" shall have the meaning assigned to that term in
ARTICLE VI hereof.
"EXPLORATION AGREEMENTS" shall mean, collectively, (a) that certain
Raceland 3-D Exploration Agreement dated December 6, 1995 among Mortgagor,
as Operator and Pogo Producing Company, et al., as Participants, (b) that
certain Greens Lake 3-D Exploration Agreement dated October 16, 1995
between Mortgagor and Meridian Oil Inc., as Operator, (c) that certain
Laurel Grove 3-D Exploration Agreement dated May 1, 1996 between Mortgagor
and Phillips Petroleum Company, as Operator, and (d) all operating
agreements, area of mutual interest agreements and other agreements
attached or related to any of the foregoing exploration agreements.
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<PAGE>
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any
federal, state, province, city, town, municipality, county, local or other
political subdivision thereof or thereto and any court, tribunal,
department, commission, board, bureau, instrumentality, agency or other
entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"HIGHEST LAWFUL RATE" shall have the meaning assigned to that term
in the Note Agreement.
"HYDROCARBONS" shall mean oil, natural gas, condensate and all other
liquid or gaseous hydrocarbons and all products produced or separated
therefrom.
"INDEBTEDNESS" shall mean all principal, interest and other amounts
now or hereafter owing by Mortgagor to Mortgagees, and their successors,
transferees and assigns, under the Notes and the other Transaction
Documents and all other obligations, debts, liabilities, covenants and
duties of Mortgagor under the Note Agreement and the other Transaction
Documents, absolute or contingent, due or to become due, now existing or
hereafter arising. The term includes, without limitation, all principal,
interest, reasonable charges, expenses, fees, attorneys' fees and
disbursements chargeable to Mortgagor under the Note Agreement or the
other Transaction Documents, including without limitation, all obligations
of Mortgagor now or hereafter existing under this Mortgage, and all
interest that accrues, to the extent permitted under applicable law, on
all or any part of the obligations after the filing of any petition or
pleading against Mortgagor for a proceeding under any Debtor Relief Laws.
"LANDS" shall mean the lands that are covered by the Leases and the
lands that are pooled or unitized therewith.
"LEASES" shall mean the Oil and Gas Leases described in Exhibit A,
together with extensions, renewals or replacements thereof and new leases
covering all or any portion of the Lands covered thereby.
"LIEN" shall mean any mortgage, lien, pledge, charge, security
interest or other encumbrance.
"MATERIAL ADVERSE EFFECT" shall have the meaning assigned to that
term in the Note Agreement.
"MORTGAGE" shall mean this Mortgage, Assignment of Production,
Security Agreement and Financing Statement, as same may from time to time
be amended, modified, supplemented or restated.
::ODMA\PCDOCS\DOCS\88117\1
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"MORTGAGED PROPERTY" shall have the meaning assigned to that term in
ARTICLE II to this Mortgage.
"MORTGAGEES" shall have the meaning assigned to that term in the
introduction of this Mortgage and, after transfer of any of the Notes in
accordance with the Note Agreement, shall include all subsequent holders
of any of the Notes (other than Mortgagor and its Affiliates).
"MORTGAGOR" shall have the meaning assigned to that term in the
introduction to this Mortgage.
"NOTE AGREEMENT" shall have the meaning assigned to that term in the
recitals of this Mortgage.
"NOTES" shall be the collective reference to (i) those four 10%
Senior Secured Exchangeable General Obligation Notes, each dated as of
September 6, 1996 issued by Mortgagor in the aggregate principal sum not
to exceed $3,000,000 and payable to the order of each Mortgagee bearing
interest at the rates provided for in the Notes and providing for the
payment of attorneys' fees and acceleration of maturity as set forth in
the Note Agreement, and with a present maturity date of September 1, 1999
or such earlier date as provided for in the Note Agreement, all as more
particularly described therein or in the Note Agreement, (ii) and those
three 10% Senior Secured General Obligation Notes, each dated as of
September 6, 1996 issued by Mortgagor in the aggregate principal sum not
to exceed $5,000,000 and payable to the order of each Mortgagee (other
than RIMCO Partners, L.P.) bearing interest at the rates provided for in
the Notes and providing for the payment of attorneys' fees and
acceleration of maturity as set forth in the Note Agreement, and with a
present maturity date of September 1, 2002 or such earlier date as
provided for in the Note Agreement, and (iii) any note given in
substitution therefor, or in modification, renewal, extension or
restatement thereof, in whole or in part, as any of the same may be
endorsed, amended, modified or supplemented.
"OIL AND GAS LEASES" shall include oil and gas leases, oil, gas and
mineral leases and shall also include subleases thereof and operating
rights thereto.
"OPERATING EQUIPMENT" shall mean all personal property, surface or
subsurface machinery, equipment, facilities, supplies or other property of
whatsoever kind or nature now or hereafter located on or under or affixed
to any of the Lands or Leases or now or hereafter used, held for use or
useful in connection with the exploration, development and operation of
the Lands or Leases and the production, treatment, storage, processing or
transportation of Hydrocarbons produced or to be produced from or
attributable thereto, including, but not
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
by way of limitation, all oil wells, gas wells, water wells, injection
wells, gas processing plants, casing, tubing, rods, pumps, pumping units
and engines, christmas trees, derricks, separators, gun barrels, flow
lines, tanks, tank batteries, gas systems (for gathering, treating,
compression, disposal or injection), chemicals, solutions, water systems
(for treating, disposal and injection), pipe, pipelines, meters,
apparatus, boilers, compressors, liquid extractors, connectors, valves,
fittings, power plants, poles, lines, cables, wires, transformers,
starters and controllers, machine shops, tools, machinery and parts,
storage yards and equipment stored therein, buildings and camps,
telegraph, telephone and other communication systems, roads, loading
docks, loading racks and shipping facilities, fixtures, and other
appurtenances, appliances and property of every kind and character,
movable or immovable, together with all improvements, betterments and
additions, accessions and attachments thereto and replacements thereof.
"PERMITTED ENCUMBRANCES" shall mean (i) the Lien hereof, (ii) any
Lien permitted under SECTION 10.02 of the Note Agreement, and (iii) those
restrictions, exceptions, reservations, conditions, limitations, interests
and other matters, if any, set forth or referred to in Exhibit A.
"PRODUCTION SALE CONTRACTS" shall mean contracts now or hereafter in
effect and entered into by Mortgagor, or Mortgagor's predecessors in
interest, for the production, sale, purchase, exchange, processing,
gathering, or transporting of Hydrocarbons produced from or attributable
to the Subject Interests.
"REQUIRED HOLDERS" shall mean, at any time, the holder or holders of
at least 51% of the then outstanding principal amount of the Notes
(exclusive of Notes then owned by Mortgagor or any of its Affiliates).
"REQUIREMENTS OF LAW" shall mean any federal, state or local law,
rule or regulation, permit or other binding determination of any
Governmental Authority.
"SUBJECT INTERESTS" shall mean each kind and character of right,
title, interest or estate, whether now owned or hereafter acquired, which
Mortgagor has in and to the Leases and each kind and character of right,
title, interest or estate, whether now owned or hereafter acquired, which
Mortgagor has in and to the Lands, together with each kind and character
of right, title, interest or estate now or hereafter vested in Mortgagor
in and to all oil and gas leasehold interests, overriding royalty
interests, mineral interests, royalty interests, net profits interests,
oil payments, production payments, carried interests, operating rights,
and all other properties or interests of every kind or character which
relate to any of the Lands and/or the Leases, including, without
limitation, Mortgagor's undivided interests in those certain Leases and
wells located on the Lands, as same may be specified in Exhibit A attached
hereto,
::ODMA\PCDOCS\DOCS\88117\1
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whether such right, title, interest or estate be under and by virtue of a
Lease, a unitization or pooling agreement, a unitization or pooling order,
an assignment, a mineral deed, a royalty deed, an operating agreement, a
revenue sharing agreement, a division order, a transfer order, a farmout
agreement, a fee simple conveyance or any other type of contract,
conveyance or instrument or under any other type of claim or title, legal
or equitable, recorded or unrecorded, even though the Mortgagor's interest
may be incorrectly or incompletely described in Exhibit A, all as the same
shall be enlarged by the discharge of any payments out of production or by
the removal of any charges or encumbrances to which any of same are
subject.
"SUBJECT MINERALS" shall mean all Hydrocarbons in, under, upon,
produced or to be produced or which may be produced, saved and sold from
or which shall accrue and be attributable to, the Subject Interests,
including without limitation, all oil in tanks and all rents, issues,
profits, proceeds, products, revenues, and other income arising from or
attributable to the Subject Interests.
"TRANSACTION DOCUMENTS" shall have the meaning assigned to that term
in the Note Agreement.
"UNIFORM COMMERCIAL CODE" shall mean the Louisiana Commercial Laws
(La. R.S. 10:1-101 et seq.) and shall include without limitation Chapter 9
thereof, as amended from time to time and in effect.
"WELL DATA" shall mean all logs, engineering data, formation tests,
drilling reports, division orders, transfer orders, operating agreements,
abstracts, title opinions, files, records, memoranda, data bases,
information systems, wellcores, fluid samples, production data and
reports, well testing data and reports, maps, seismic and geophysical,
geological and chemical data and information, interpretive and analytical
reports of any kind or nature (including, without limitation, reserve
studies and reserve evaluations), computer hardware and software and all
documentation therefor or relating thereto (including, without limitation,
all licenses relating to or covering such computer hardware, software
and/or documentation), and other written information in the possession or
control of Mortgagor relating directly or indirectly to (a) any of the
Leases or the wells located on any of the Lands or (b) the Exploration
Agreements.
::ODMA\PCDOCS\DOCS\88117\1
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ARTICLE II
MORTGAGE
2.1 GRANT OF MORTGAGE ON REAL PROPERTY AND SECURITY INTEREST IN
PERSONAL PROPERTY. In order to secure the payment and performance of the
Indebtedness, Mortgagor has mortgaged, pledged and hypothecated and conveyed a
security interest in, and by these presents does mortgage, pledge and
hypothecate unto Mortgagees, and grant Mortgagees a continuing security interest
in and to, the following described real and personal property, whether now owned
or hereafter acquired, namely:
(a) the Subject Interests;
(b) the Subject Minerals;
(c) the Production Sale Contracts;
(d) the Exploration Agreements;
(e) the Operating Equipment;
(f) all unitization, communitization, operating agreements, pooling
agreements and declarations of pooled units and the properties covered and
the units created thereby (including all units formed under orders,
regulations, rules or other official acts of any federal, state or other
governmental agency providing for pooling or unitization, spacing orders
or other well permits and other instruments) which relate to or affect all
or any portion of the Subject Interests;
(g) all accounts receivable and other accounts, contract rights,
operating rights, general intangibles, chattel paper, documents and
instruments arising under the Production Sale Contracts or pertaining to
the Subject Interests;
(h) all oil and gas produced, and/or general intangibles, accounts
and other rights to payment under any and all contracts under which
Mortgagor is entitled to share in the production from or the proceeds of
production from any oil and/or gas wells located on the Lands and Leases
described in Exhibit A hereto;
(i) all subleases, farmout agreements, assignments of interest,
assignments of operating rights, contracts, operating agreements, bidding
agreements, advance payment agreements, rights-of-way, surface leases,
franchises, servitudes, privileges, permits, licenses, easements,
tenements, hereditaments, improvements, appurtenances and benefits now
existing or in the future obtained and incident and appurtenant to any of
the foregoing;
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(j) all Well Data, subject to confidentiality agreements or
restrictions existing in favor of third parties;
(k) any Liens and security interests in the Subject Interests
securing payment of proceeds from the sale of the Subject Minerals;
(l) any other property not included within subparagraphs (a) through
(k) above that may from time to time hereafter be subjected to the Lien
created hereby and security interest hereof by the express consent of
Mortgagor; and
(m) any and all proceeds, returns, rents, issues, profits, products,
revenues and other income arising from or by virtue of the sale, lease or
other disposition of, or from any condemnation proceeds payable with
respect to loss of Lands, or from any insurance payable with respect to
damage, loss or destruction of, the items described in subparagraphs (a)
through (l) above;
together with any and all corrections or amendments to, or renewals, extensions
or ratifications of, any of the same, or of any instrument relating thereto, all
the aforesaid properties, rights and interests which are hereby subjected to the
Lien of this instrument, together with any additions thereto which may be
subjected to the Lien of this instrument by means of supplements or amendments
hereto, being hereinafter called the "MORTGAGED PROPERTY."
Subject, however, to the condition that Mortgagees shall not be
liable in any respect for the performance of any covenant or obligation of
Mortgagor in respect of the Mortgaged Property.
TO HAVE AND TO HOLD the Mortgaged Property unto Mortgagees and their
respective successors and assigns forever to secure the payment and performance
of the Indebtedness and to secure the performance of the covenants, agreements
and obligations of Mortgagor herein contained.
ARTICLE III
PARTICULAR WARRANTIES AND REPRESENTATIONS OF MORTGAGOR
Mortgagor hereby warrants and represents to Mortgagees as follows:
3.1 LEASES. The Leases are in full force and effect, are valid,
subsisting leases covering the entire estates to which they pertain and all
rentals, royalties and other amounts due and payable in accordance with the
terms of the Leases have been duly paid or provided for, the
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obligations to be performed under the Leases have been duly performed (and
Mortgagor is not aware of any default by any third party with respect to such
third party's obligations).
3.2 TITLE. With respect to each well or unit described in Exhibit A,
Mortgagor owns good and marketable title to a sufficient interest in the Leases
pertaining to such well or unit described in Exhibit A, free and clear of Liens,
other than Permitted Encumbrances, that will (a) entitle Mortgagor to receive
(subject to the terms of this Mortgage and after deducting all royalties and
other burdens payable out of, or measured by, production) a percentage share of
all of the Hydrocarbons produced from, or to be produced from, such well or unit
equal to not less than the net revenue interest percentage share for such well
or unit set forth in Exhibit A and (b) cause Mortgagor to bear a percentage
share of all costs of exploration, development and operation of such well or
unit not greater than the working interest percentage share for such well or
unit set forth in Exhibit A. All such shares of production which Mortgagor is
entitled to receive, and shares of costs that Mortgagor is obligated to bear are
not subject to change unless and only to the extent such changes are reflected
in Exhibit A. Subject to Permitted Encumbrances, Mortgagor has good and
defensible title to all other Mortgaged Property. The warranty made by Mortgagor
hereunder with respect to its title or interest in the Mortgaged Property shall
not in any manner limit the quantum of interest affected by this Mortgage. It is
intended that this Mortgage shall cover and affect Mortgagor's entire present
and future interest in the Mortgaged Property without regard to any recited
warranted interest. The reference to Permitted Encumbrances in this Mortgage is
made for the purpose of giving effect to the warranties of Mortgagor contained
herein, and is not intended to limit or restrict the description of the
Mortgaged Property, nor is it intended that this Mortgage or the rights of
Mortgagees hereunder shall be subject to, or encumbered by, the Permitted
Encumbrances solely by reference thereto. Each of the Production Sale Contracts
and each of the operating agreements governing any Lease described on Exhibit A
attached hereto is free from any material credit, deduction, allowance, defense,
dispute, setoff, or counterclaim (other than current charges provided for in
such instruments but not yet due and payable) and there is no extension or
indulgence with respect thereto.
3.3 POWER AND AUTHORITY. Mortgagor has the full power and legal
right to grant, bargain, sell, mortgage, assign, transfer and convey a security
interest in all of the Mortgaged Property in the manner and form herein provided
and without obtaining the waiver, consent or approval of any lessor, sublessor,
governmental agency or entity or party whomsoever or whatsoever which has not
been obtained.
3.4 IMBALANCES, ETC. As of the date hereof, (i) neither Mortgagor
nor Mortgagor's predecessors in title have received prepayments (including, but
not limited to, payments for gas not taken pursuant to "take or pay"
arrangements) for any Hydrocarbons produced from the Mortgaged Properties after
the date hereof; (ii) no Mortgaged Property is subject at the present time to
any regulatory refund obligation and, to the best of Mortgagor's knowledge, no
situations exist
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where the same might be imposed; (iii) no Mortgaged Property is subject to a gas
balancing arrangement under which an imbalance exists with respect to which
imbalance Mortgagor is in an overproduced status and is required to (A) permit
one or more third parties to take a portion of the production attributable to
such Mortgaged Property without payment (or without full payment) therefor
and/or (B) make payment in cash, in order to correct such imbalance; or (iv) to
the best of Mortgagor's knowledge, no Mortgaged Property is subject to having
allowable production after the date of this Mortgage reduced below the full and
regular allowable because of any over-production prior to the date of this
Mortgage.
3.5 NO GOVERNMENTAL APPROVALS. Mortgagor warrants that no approval
or consent of any regulatory or administrative commission or authority, or of
any other governmental body, is necessary to authorize the execution and
delivery of this Mortgage, or that such approvals as are required have been
obtained; and that no such approval or consent is necessary to authorize the
observance or performance by Mortgagor of the covenants herein contained, or
that such approvals as are required have been obtained.
3.6 PRODUCING WELLS. All producing wells located on the Lands have
been drilled, operated and produced in all material respects in conformity with
all applicable laws, rules, regulations and orders of all regulatory authorities
having jurisdiction, and are subject to no penalties on account of past
production, and are bottomed under and are producing from, and the well bores
are wholly within, the Lands.
3.7 PRINCIPAL PLACE OF BUSINESS. The principal place of business and
chief executive office of Mortgagor and the place where Mortgagor's books and
records of account are kept is located at 1600 Smith Street, Suite 4000,
Houston, Texas 77002. Mortgagor's taxpayer identification number is 741483196.
ARTICLE IV
PARTICULAR COVENANTS AND AGREEMENTS OF MORTGAGOR
Mortgagor hereby covenants to and agrees with Mortgagees as follows:
4.1 OPERATION OF MORTGAGED PROPERTY. So long as the Indebtedness or
any part thereof remains unpaid, and whether or not Mortgagor is the operator of
the Mortgaged Property, Mortgagor shall, at Mortgagor's own expense:
(a) Do all things necessary to keep unimpaired in all material
respects Mortgagor's rights and remedies in or under the Mortgaged
Property and shall not, except in the ordinary course of business as a
reasonably prudent operator would do under similar
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circumstances, abandon any well or forfeit, surrender, release or default
under any Lease or any Production Sale Contract, or consent to any of the
foregoing, directly or indirectly;
(b) Perform or cause to be performed, each and all covenants,
agreements, terms, conditions and limitations imposed upon Mortgagor or
its predecessors in interest and expressly contained in (i) the Leases,
the operating agreements governing any of the Leases, any Production Sale
Contract, or any instrument or document relating thereto, and (ii) any
assignment or other form of conveyance, under or through which the Leases
or an undivided interest therein are now held, except where the failure to
so perform, individually or in the aggregate, will not have a Material
Adverse Effect, and to perform or cause to be performed all implied
covenants and obligations imposed upon Mortgagor in connection with the
Leases, the operating agreements governing any of the Leases, any
Production Sale Contract or any document or instrument relating thereto,
except where the failure to so perform, individually or in the aggregate,
will not have a Material Adverse Effect;
(c) Cause, or in the event Mortgagor is not the operator of the
Subject Interests, use reasonable efforts to cause, the Subject Interests
to be maintained, developed, protected against drainage, and continuously
operated for the production of Hydrocarbons in a good and workmanlike
manner as would a prudent operator and in compliance with all applicable
operating agreements and contracts;
(d) Except to the extent such amounts are being contested in good
faith and by appropriate proceedings, cause to be paid, promptly as and
when due and payable, (i) all rentals, delay rentals and royalties and
indebtedness payable in respect of the Subject Interests, and all expenses
incurred in or arising from the operation or development of the Subject
Interests and (ii) all amounts due and payable in accordance with the
terms of each Production Sale Contract, other than such amounts which
Mortgagor is diligently contesting in good faith and by appropriate
proceedings;
(e) Cause, or in the event Mortgagor is not the operator of the
Subject Interests, use reasonable efforts to cause, the Operating
Equipment to be kept in good and effective operating condition, and all
repairs, renewals, replacements, additions and improvements thereof or
thereto, necessary to the production of Hydrocarbons from the Subject
Interests to be promptly made;
(f) Cause the Mortgaged Property or any part thereof or the rents,
issues, revenues, profits and other income therefrom to be kept free and
clear of all liens, charges, security interests and encumbrances of every
character, other than Permitted Encumbrances; and
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(g) Deliver, or cause to be delivered, to Mortgagees a copy of any
notice, demand or other material communication from any other party to the
Leases, the operating agreements governing any of the Leases described in
Exhibit A attached hereto or any Production Sale Contract relating to any
alleged, potential or actual material breach thereunder or material breach
of any of the covenants, agreements, terms, or limitations thereof which
would have a Material Adverse Effect on the rights of Mortgagor
thereunder.
4.2 RECORDING, ETC. Upon the request of Mortgagees, Mortgagor, at
its expense, will promptly record, register, deposit and file this and every
other instrument in addition or supplemental hereto in such offices and places
and at such times and as often as may be necessary to preserve, protect and
renew the Lien hereof as a first priority perfected Lien on real or personal
property as the case may be and the rights and remedies of Mortgagees, and
otherwise will do and perform all matters or things necessary or expedient to be
done or observed by reason of any law or regulation of any state or of the
United States of America or of any other competent authority, for the purpose of
effectively creating, maintaining and preserving the Lien of this Mortgage and
the perfection and priority thereof.
4.3 SALE OR MORTGAGE OF MORTGAGED Mortgagor will not sell, convey,
mortgage, pledge, or otherwise dispose of or encumber the Mortgaged Property or
any portion thereof, or any of Mortgagor's rights, titles, interests or estates
therein other than as permitted in the Note Agreement; and Mortgagor will not
enter into any arrangement with any gas pipeline company or other purchaser of
Hydrocarbons regarding the Mortgaged Property outside the ordinary course of
business whereby said gas pipeline company or purchaser may set off any claim
against Mortgagor by withholding payment for any Hydrocarbons actually
delivered.
4.4 FURTHER ASSURANCES. Mortgagor will execute and deliver such
other and further instruments and will use its reasonable best efforts to do
such other and further acts as in the reasonable opinion of Mortgagees may be
necessary or desirable to carry out more effectually the purposes of this
instrument, including, without limiting the generality of the foregoing, (a)
prompt correction of any defect which may hereafter be discovered in the title
to or description of the Mortgaged Property or any part thereof or in the
execution and acknowledgment of this instrument, any Note, or other document
executed in connection herewith, (b) prompt execution and delivery of all
division or transfer orders which in the opinion of Mortgagees are needed to
transfer effectively to Mortgagees the assigned proceeds of production from the
Subject Interests, and (c) obtain any necessary governmental approvals,
including, without limitation, those of the United States or the State of
Louisiana.
4.5 ADVERSE CLAIMS. Mortgagor will warrant and forever defend the
title to the Mortgaged Property unto Mortgagees against every Person whomsoever
lawfully claiming the same or any part thereof, and Mortgagor will maintain and
preserve the Lien created hereby so long
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as any of the Indebtedness remains unpaid. Should a material adverse claim be
made against or a cloud develop upon the title to any part of the Mortgaged
Property, Mortgagor agrees it will immediately defend against such adverse claim
or take appropriate action to remove such cloud at Mortgagor's expense if such
claim would, in the reasonable judgment of Mortgagees, materially and adversely
affect the Mortgaged Property, or any material part thereof, and Mortgagor
further agrees that Mortgagees may take such other action they deem advisable to
protect and preserve their interests in the Mortgaged Property, and in such
event Mortgagor will indemnify Mortgagees against any and all costs, reasonable
attorneys' fees and other expenses which they may incur in defending against any
such adverse claim or taking action to remove any such cloud.
4.6 RELOCATION OF OFFICES. Mortgagor shall not change its taxpayer
identification number, name or identity or its corporate structure, or relocate
its principal place of business or chief executive office to a county or state
other than that specified in SECTION 3.7 of this Mortgage or otherwise relocate
any portion of the personal property comprising part of the Mortgaged Property
to a county or state other than that where it is presently located unless prior
to such relocation Mortgagor (a) gives 30 days' prior written notice to
Mortgagees, which notice shall include, without limitation, the nature of the
change and/or the name of the county and state into which such relocation is to
be made and (b) executes and delivers all such additional documents and performs
all additional acts as Mortgagees or their counsel shall reasonably feel is
necessary or advisable in order to continue and maintain the existence and
priority of Mortgagees' security interest in the personal property comprising
part of the Mortgaged Property so relocated.
ARTICLE V
ASSIGNMENT OF PRODUCTION
5.1 ASSIGNMENT OF RENTS. Mortgagor hereby absolutely and
unconditionally assigns and transfers to Mortgagees all the income, rents,
royalties, revenue, issues, profits, and proceeds of the Subject Interests,
whether now due, past due or to become due, and hereby gives to and confers upon
Mortgagees the right, power and authority to collect such income, rents,
royalties, revenue, issues, profits and proceeds. Mortgagor irrevocably appoints
Mortgagees its true and lawful attorney at the option of Mortgagees at any time
to demand, receive, and enforce payment, to give receipts, releases, and
satisfactions and to sue, either in the name of Mortgagor or in the name of
Mortgagees, for all such income, rents, royalties, revenue, issues, profits and
proceeds. Neither the foregoing assignment nor the exercise by Mortgagees of any
of their rights or remedies under this Mortgage shall be deemed to make
Mortgagees a "mortgagee-in-possession" or otherwise responsible or liable in any
manner with respect to the Mortgaged Property or the use, occupancy, enjoyment
or operation of all or any portion thereof, unless Mortgagees, in person or by
agent, assumes actual possession thereof, nor shall appointment of a receiver
for the Subject Interests by any court at the request of Mortgagees or by
agreement with Mortgagor or the entering into possession of the Subject
Interests or any part thereof by such receiver be deemed to make Mortgagees a
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"mortgagee-in-possession" or otherwise responsible or liable in any manner with
respect to the Subject Interests or the use, occupancy, enjoyment or operation
of all or any portion thereof. Notwithstanding anything to the contrary
contained herein, until such time as Mortgagees or Mortgagor shall have
instructed such parties to deliver such rents, income, royalties, revenues,
issues, profits or proceeds directly to Mortgagees (which such instructions may
be given only after the occurrence and during the continuance of an Event of
Default but the giving of such instructions shall as to such parties be
conclusive as to the occurrence and continuance of an Event of Default), such
parties shall be entitled to deliver such rents, income, royalties, revenues,
issues, profits and proceeds to Mortgagor, to be applied in accordance with the
Note Agreement.
5.2 ASSIGNMENT OF PRODUCTION. As further security for the payment of
the Indebtedness, Mortgagor has transferred, assigned, warranted and conveyed
and does hereby transfer, assign, warrant and convey to Mortgagees, their
successors and assigns, and grants to Mortgagees a security interest in,
effective as of the date hereof, at 7:00 o'clock a.m., local time, all
Hydrocarbons which are thereafter produced and which accrue to the Subject
Interests, all products obtained or processed therefrom and all revenues and
proceeds now or hereafter attributable to said Hydrocarbons and said products as
well as any Liens and security interests securing any sales of said
Hydrocarbons. All parties producing, purchasing or receiving any such
Hydrocarbons or products, or having such Hydrocarbons, products, or proceeds
therefrom in their possession for which they or others are accountable to
Mortgagees by virtue of the provisions of this Article, are authorized and
directed to treat and regard Mortgagees as the assignees and transferees of
Mortgagor and entitled in such Mortgagor's place and stead to receive such
Hydrocarbons and all proceeds therefrom; and said parties and each of them shall
be fully protected in so treating and regarding Mortgagees and shall be under no
obligation to see to the application by Mortgagees of any such proceeds or
payments received by them; provided, however, that, until Mortgagees or
Mortgagor shall have instructed such parties to deliver such Hydrocarbons and
all proceeds therefrom directly to Mortgagees (which such instructions may be
given only after the occurrence and during the continuance of an Event of
Default but the giving of such instructions shall as to such parties be
conclusive as to the occurrence and continuance of an Event of Default),, such
parties shall be entitled to deliver such Hydrocarbons and all proceeds
therefrom to Mortgagor to be applied in accordance with the Note Agreement.
Mortgagor agrees to perform all such acts, and to execute all such further
assignments, transfers and division orders, and other instruments as may be
required or desired by Mortgagees or any party in order to have said revenues
and proceeds so paid to Mortgagees. Mortgagees are fully authorized to receive
and receipt for said revenues and proceeds, to endorse and cash any and all
checks and drafts payable to the order of such Mortgagor or Mortgagees for the
account of Mortgagor received from or in connection with said revenues or
proceeds and apply the proceeds thereof in accordance with SECTION 5.3 hereof,
and to execute transfer and division orders in the name of Mortgagor, or
otherwise, with warranties binding Mortgagor. Mortgagor will execute and deliver
to Mortgagees any instruments Mortgagees may from time to time request for the
purpose of effectuating this assignment and the payment to Mortgagees of the
proceeds assigned. Neither the foregoing assignment nor the exercise by
Mortgagees of any of its rights under this Mortgage shall
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be deemed to make Mortgagees a "mortgagee-in-possession" or otherwise
responsible or liable in any manner with respect to the Subject Interests or the
use, occupancy, enjoyment or operation of all or any portion thereof, unless and
until Mortgagees, in person or by agent, assumes actual possession thereof, nor
shall appointment of a receiver for the Mortgaged Property by any court at the
request of Mortgagees or by agreement with either Mortgagor or the entering into
possession of the Mortgaged Property or any part thereof by such receiver be
deemed to make Mortgagees a "mortgagee-in-possession" or otherwise responsible
or liable in any manner with respect to the Mortgaged Property or the use,
occupancy, enjoyment or operation of all or any portion thereof.
5.3 APPLICATION OF PROCEEDS. All payments received by Mortgagees
pursuant to SECTION 5.1 or 5.2 hereof shall be promptly applied to the
Indebtedness as follows:
First: To the payment and satisfaction of all reasonable costs and
expenses incurred in connection with the collection of such proceeds and
the payment and reimbursement of all amounts of Indebtedness (except that
included in "Second" and "Third" below);
Second: To the payment and satisfaction of the accrued interest
and/or any principal amount then due and owing on the Notes, pro rata in
proportion to the outstanding amount owing on each Note, such application
to be as set forth in the Note Agreement; and
Third: The balance, if any, shall be applied on the then unmatured
principal amounts of the Notes and all other amounts owed under the Note
Agreement, such application to be as set forth in the Note Agreement.
5.4 NO LIABILITY OF MORTGAGEES IN COLLECTING. Mortgagees are hereby
absolved from all liability for failure to enforce collection of any proceeds so
assigned and from all other responsibility in connection therewith, except the
responsibility to account to Mortgagor for funds actually received. Mortgagees
shall have the right, at their election, to prosecute and defend any and all
actions or legal proceedings deemed advisable by Mortgagees in order to collect
such funds and to protect the interests of Mortgagees and/or Mortgagor, with all
reasonable costs, expenses and attorneys' fees incurred in connection therewith
being paid by Mortgagor.
5.5 ASSIGNMENT NOT A RESTRICTION ON MORTGAGEES' RIGHTS. Nothing
herein contained shall detract from or limit the absolute obligation of
Mortgagor to make payment in full of the Indebtedness regardless of whether the
proceeds assigned by this Article are sufficient to pay the same, and the rights
under this Article shall be in addition to all other security now or hereafter
existing to secure the payment of the Indebtedness.
5.6 STATUS OF ASSIGNMENT. Notwithstanding the other provisions of
this ARTICLE V, Mortgagees or any receiver appointed in judicial proceedings for
the enforcement of this
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instrument shall have the right to receive all of the Hydrocarbons herein
assigned and the proceeds therefrom after the Notes have been declared due and
payable in accordance with this Mortgage and the Note Agreement and to apply all
of said proceeds as set forth in SECTION 5.3 hereof. Upon any sale of the
Subject Interests or any part thereof pursuant to ARTICLE VII hereof, the
Hydrocarbons thereafter produced from the Subject Interests so sold, and the
proceeds therefrom, shall be included in such sale and shall pass to the
purchaser free and clear of the assignment contained in this Article.
5.7 INDEMNITY. MORTGAGOR SHALL INDEMNIFY MORTGAGEES, THEIR PARTNERS, AND
THEIR RESPECTIVE DIRECTORS, OFFICERS, AGENTS, REPRESENTATIVES AND EMPLOYEES (THE
"INDEMNITEES") AGAINST ALL CLAIMS, LOSSES, ACTIONS, LIABILITIES, JUDGMENTS,
COSTS, ATTORNEYS' FEES AND OTHER CHARGES OF WHATSOEVER KIND OR NATURE,
(COLLECTIVELY, "CLAIMS") MADE AGAINST OR INCURRED BY THEM OR ANY OF THEM AS A
CONSEQUENCE OF THE ASSERTION, EITHER BEFORE OR AFTER THE PAYMENT IN FULL OF THE
INDEBTEDNESS, THAT THEY OR ANY OF THEM RECEIVED HYDROCARBONS HEREIN ASSIGNED OR
THE PROCEEDS THEREOF CLAIMED BY THIRD PERSONS. IT IS THE EXPRESS INTENTION OF
MORTGAGOR THAT MORTGAGOR'S INDEMNIFICATION OBLIGATIONS WITH RESPECT TO THE
FOREGOING MATTERS SHALL INCLUDE ANY CLAIMS RESULTING FROM THE SOLE, JOINT OR
CONCURRENT NEGLIGENCE OF ANY INDEMNITEE; PROVIDED, THAT NO INDEMNITEE SHALL BE
ENTITLED TO INDEMNIFICATION FOR ANY CLAIM RESULTING FROM ITS OWN GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. The terms and provisions of this SECTION 5.7
shall specifically survive payment in full of the Indebtedness, release of
liens, assignments and security interests of this Mortgage, the exercise by
Mortgagees of any and all remedies hereunder and/or acceptance of a deed or
other conveyance in lieu of foreclosure with respect to the Mortgaged Property
or any part thereof.
5.8 RIGHTS TO TIMELY PAYMENT. For purposes of more fully effecting the
assignment made under this ARTICLE V and continuing the rights of Mortgagees
hereunder, Mortgagor hereby appoints Mortgagees as its attorney-in-fact to
pursue any and all rights, remedies and payments in respect of the Hydrocarbons
and proceeds therefrom, including, but not limited to, proceeds accruing prior
to the effective date of the assignment contained in this ARTICLE V. The power
of attorney granted to Mortgagees under this SECTION 5.8, being coupled with an
interest, shall be irrevocable so long as the Indebtedness or any part thereof
remains unpaid.
ARTICLE VI
EVENTS OF DEFAULT
6.1 EVENTS OF DEFAULT. The occurrence of any "Event of Default" as
defined under the Credit Agreement shall be and constitute an event of default
under this Mortgage (herein referred to as an "Event of Default").
6.2 EFFECT OF EVENT OF DEFAULT. If any Event of Default of the type
described in Section 11.01(f) or (g) of the Note Agreement shall occur and be
continuing, the Notes and all other
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outstanding Indebtedness secured hereby shall automatically become and be
immediately due and payable in each instance without grace, demand, presentment
for payment, protest or notice (including, but not limited to, notice of intent
to accelerate and notice of acceleration) of any kind to Mortgagor or any other
Person, all of which are hereby expressly waived, and Mortgagees may proceed to
enforce its rights hereunder. If an Event of Default (other than an Event of
Default of the type described in Section 11.01(f) or (g) of the Note Agreement)
shall occur and be continuing:
(a) the Required Holders may by notice in writing to Mortgagor
declare the principal of and accrued interest on the Notes and all other
outstanding Indebtedness secured hereby to be immediately due and payable
whereupon the outstanding balance on the Notes and all other outstanding
Indebtedness shall become and be immediately due and payable, in each
instance without grace, demand, presentment for payment, protest or notice
(including, but not limited to, notice of intent to accelerate and notice
of acceleration) of any kind to Mortgagor or any other person, all of
which are hereby expressly waived; and
(b) the Required Holders may proceed to enforce the rights of
Mortgagees hereunder.
ARTICLE VII
ENFORCEMENT OF REMEDIES
7.1 RIGHTS OF MORTGAGEES WITH RESPECT TO PERSONAL PROPERTY
CONSTITUTING A PART OF THE MORTGAGED PROPERTY. Upon the occurrence and during
the continuance of an Event of Default, Mortgagees will have all rights and
remedies granted by law, and particularly by the Uniform Commercial Code,
including, but not limited to, the right to take possession of all personal
property constituting a part of the Mortgaged Property, and for this purpose
Mortgagees may enter upon any premises on which any or all of such personal
property is situated and take possession of and operate such personal property
(or any portion thereof) or remove it therefrom. Mortgagees may require
Mortgagor to assemble such personal property and make it available to Mortgagees
at a place to be designated by Mortgagees which is reasonably convenient to all
parties. Unless such personal property is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market,
Mortgagees will give Mortgagor reasonable notice of the time and place of any
public sale or of the time after which any private sale or other disposition of
such personal property is to be made. This requirement of sending reasonable
notice will be met if the notice is mailed by first class mail, postage prepaid,
to Mortgagor at the address shown below the signatures at the end of this
instrument at least ten (10) days before the time of the sale or disposition.
7.2 RIGHTS OF MORTGAGEES WITH RESPECT TO FIXTURES CONSTITUTING A
PART OF THE MORTGAGED PROPERTY. Upon the occurrence and during the continuance
of an Event of
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Default, Mortgagees may elect to treat the fixtures constituting a part of the
Mortgaged Property as either real property collateral or personal property
collateral and proceed to exercise such rights as apply to such type of
collateral.
7.3 JUDICIAL PROCEEDINGS. Upon occurrence and during the continuance
of an Event of Default, the Required Holders may proceed by a suit or suits in
equity or at law, whether for a foreclosure hereunder, or for the sale of the
Mortgaged Property, or for the specific performance of any covenant or agreement
herein contained or in aid of the execution of any power herein granted, or for
the appointment of a receiver or keeper pending any foreclosure hereunder or the
sale of the Mortgaged Property, or for the enforcement of any other appropriate
legal or equitable remedy. Upon occurrence and during the continuance of an
Event of Default, Mortgagor agrees that, to the extent permitted by law, the
appointment of a receiver or keeper shall be as a matter of right and without
proof of insolvency, fraud, insecurity or mismanagement on the part of
Mortgagor. Mortgagor agrees that such receiver or keeper may be appointed to
take possession of, hold, maintain, operate and preserve the Mortgaged Property,
including the production and sale of all Hydrocarbons therefrom, and to apply
the proceeds of the sale thereof in the manner the Mortgagees shall elect; and
said receiver may be authorized to sell and dispose of the Mortgaged Property
under orders of the Court appointing such receiver.
Upon the occurrence and during the continuance of an Event of
Default, the Required Holders may at their option, without notice, demand,
presentment or putting Mortgagor in default, all of which are hereby waived
expressly by Mortgagor, declare the Indebtedness to be due and payable, without
notice to Mortgagor, and may cause the Mortgaged Property to be seized and sold
by executory process or other legal process, or, at the Required Holders'
option, the Required Holders may file suit in any court of competent
jurisdiction and obtain judgment immediately by virtue of the confession of
judgment herein contained or, at the Required Holders' option, the Required
Holders may proceed with enforcement of this Mortgage in any other manner
provided by law. Mortgagor waives allotment, citation, and all legal notices and
delays and consents that said judgment may be rendered, signed and executed
immediately; in addition, Mortgagor waives the benefit of any and all laws or
parts of laws relative to the advertisement and appraisement of property seized
and sold under executory process or other legal process and consents that in the
case of any sale under any method of foreclosure authorized by the terms of this
Mortgage, the Mortgaged Property or any part thereof, may be sold IN GLOBO or in
separate parcels, at the election of the Required Holders, at public auction or
at private sale, to the highest bidder for cash or in such other terms as the
Required Holders may elect. Mortgagor hereby waives (i) the benefit of
appraisement provided for in Articles 2332, 2336, 2723 and 2724 of the Louisiana
Code of Civil Procedure and all other laws conferring the same; (ii) the demand
and three (3) days' notice of demand as provided for in Articles 2639 and 2721
of the Louisiana Code of Civil Procedure; (iii) the notice of seizure provided
for in Articles 2393 and 2721 of the Louisiana Code of Civil Procedure; (iv) the
three (3) days' delay provided for in Articles 2331 and 2722 of the Louisiana
Code of Civil Procedure; and (v) all other laws providing for notice, demand,
appraisement or delay. Mortgagor expressly authorizes and agrees that the
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Required Holders shall have the right to appoint a keeper of such Mortgaged
Property pursuant to the terms and provisions of La. R.S. 9:5131 et seq., which
keeper may be the Required Holders, any agent or employee thereof, or any other
person, firm, or corporation appointed by the Required Holders. Mortgagor
acknowledges the Indebtedness secured hereby, whether now existing or to arise
hereafter, and confesses judgment thereon in favor of Mortgagees, if such
Indebtedness is not paid as and when due.
7.4 POSSESSION OF THE MORTGAGED PROPERTY. It shall not be necessary
for Mortgagees to have physically present or constructively in their possession
at any sale held by Mortgagees or by any court, receiver or public officer any
or all of the Mortgaged Property, and Mortgagor shall deliver to the purchaser
at such sale on the date of sale the Mortgaged Property owned by Mortgagor and
purchased by such purchasers at such sale, and if it should be impossible or
impracticable for any of such purchasers to take actual delivery of the
Mortgaged Property, then the title and right of possession to the Mortgaged
Property shall pass to the purchaser at such sale as completely as if the same
had been actually present and delivered.
7.5 CERTAIN ASPECTS OF A SALE. Mortgagees shall have the right to
become the purchaser at any sale held by any court, receiver or public officer,
and Mortgagees shall have the right to credit upon the amount of the bid made
therefor, the amount payable out of the net proceeds of such sale to it.
Recitals contained in any conveyance made to any purchaser at any sale made
hereunder shall conclusively establish the truth and accuracy of the matters
therein stated, including, without limiting the generality of the foregoing,
nonpayment of the unpaid principal sum of, and the interest accrued on, the
Notes after the same have become due and payable, advertisement and conduct of
such sale in the manner provided herein.
7.6 RECEIPT TO PURCHASER. Upon any sale, whether made under the
Uniform Commercial Code or by virtue of judicial proceedings, the receipt of
Mortgagees or the officer making sale under judicial proceedings, acknowledging
the payment of purchase money with respect thereto, shall be sufficient
discharge to the purchaser or purchasers at any sale for his or their purchase
money, and such purchaser or purchasers and his or their assigns or personal
represen tatives, shall not, after paying such purchase money and receiving such
receipt of Mortgagees or of such officer therefor, be obliged to see to the
application of such purchase money, or be in anywise answerable for any loss,
misapplication or non-application thereof.
7.7 EFFECT OF SALE. Any sale or sales of the Mortgaged Property or
any part thereof, whether under the Uniform Commercial Code or by virtue of
judicial proceedings, shall operate to divest all right, title, interest, claim
and demand whatsoever either at law or in equity, of Mortgagor of, in and to the
Mortgaged Property sold, and shall be a perpetual bar, both at law and in
equity, against Mortgagor, and Mortgagor's successors or assigns, and against
any and all persons claiming or who shall thereafter claim all or any of the
property sold from, through or under
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Mortgagor, or Mortgagor's successors or assigns. Nevertheless, Mortgagor, if
requested by Mortgagees so to do, shall join in the execution and delivery of
all proper conveyances, assignments and transfers of the properties so sold.
7.8 APPLICATION OF PROCEEDS. The proceeds of any sale of the
Mortgaged Property, or any part thereof, whether under the Uniform Commercial
Code or by virtue of judicial proceedings, whose application has not elsewhere
herein been specifically provided for, shall be applied to the Indebtedness as
follows:
First: To the payment of all reasonable expenses incurred by
Mortgagees incident to the enforcement of this Mortgage, the Notes or any
of the Indebtedness including, without limiting the generality of the
foregoing, all such expenses of any entry or taking of possession, of any
sale, of advertisement thereof, and of conveyances, and as well, court
costs, compensation of agents and employees and legal fees;
Second: To the payment of all other costs, charges, expenses,
liabilities and advances incurred or made by Mortgagees under this
Mortgage or in executing any power hereunder;
Third: To the payment of the Notes and any other Indebtedness, with
interest to the date of such payment, pro rata in proportion to the
outstanding amount owing on each Note in such order and manner as set
forth in the Note Agreement;
Fourth: Any surplus thereafter remaining shall be paid to Mortgagor
or Mortgagor's successors or assigns, as their interests shall appear or
as a court of competent jurisdiction may direct.
7.9 MORTGAGOR'S WAIVER OF APPRAISEMENT, MARSHALING, ETC. RIGHTS.
Mortgagor agrees, to the full extent that Mortgagor may lawfully so agree, that
Mortgagor will not at any time insist upon or plead or in any manner whatever
claim the benefit of any appraisement, valuation, stay, extension or redemption
of law now or hereafter in force, in order to prevent or hinder the enforcement
or foreclosure of this Mortgage or the absolute sale of the Mortgaged Property
or the possession thereof by any purchaser at any sale made pursuant to any
provision hereof, or pursuant to the decree of any court of competent
jurisdiction; but Mortgagor, for Mortgagor and all who may claim through or
under Mortgagor, so far as Mortgagor or those claiming through or under
Mortgagor now or hereafter lawfully may, hereby waives the benefit of all such
laws. Mortgagor, for Mortgagor and all who may claim through or under Mortgagor
(including, without limitation, a holder of a Lien subordinate to the Lien
created hereby, without implying that Mortgagor has, except as expressly
provided herein, a right to grant an interest in, or subordinate a Lien on, the
Mortgaged Property), hereby waives, to the fullest extent permitted by
applicable law, any and all right to have any of the Mortgaged Property
marshaled upon any foreclosure of the Lien
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hereof, or sold in inverse order of alienation, and agrees that any court having
jurisdiction to foreclose such Lien may sell the Mortgaged Property as an
entirety. If any law in this paragraph referred to and now in force, of which
Mortgagor or Mortgagor's successor or successors might take advantage despite
the provisions hereof, shall hereafter be repealed or cease to be in force, such
law shall not thereafter be deemed to constitute any part of the contract herein
contained or to preclude the operation or application of the provisions of this
paragraph.
7.10 COSTS AND EXPENSES. All reasonable costs and expenses
(including reasonable attorneys' fees) incurred by Mortgagees in protecting and
enforcing their rights hereunder, shall, to the extent permitted by applicable
law, constitute a demand obligation owing by Mortgagor to the party incurring
such costs and expenses and shall bear interest until paid at the Default Rate.
7.11 OPERATION OF PROPERTY BY MORTGAGEES. Upon the occurrence and
during the continuation of an Event of Default and in addition to all other
rights herein conferred on Mortgagees, the Required Holders (or any person, firm
or corporation designated by the Required Holders) shall have the right and
power, but shall not be obligated, to enter upon and take possession of any of
the Mortgaged Property, and to exclude Mortgagor, and Mortgagor's agents or
servants, wholly therefrom, and to hold, use, administer, manage and operate the
same to the extent that Mortgagor shall be at the time entitled and in his place
and stead. The Required Holders, or any person, firm or corporation designated
by the Required Holders, may operate the same without any liability to Mortgagor
in connection with such operations, except for gross negligence or willful
misconduct in the operation of such Mortgaged Property, and the Required Holders
or any person, firm or corporation designated by the Required Holders, shall
have the right and power, but shall not be obligated, to collect, receive and
receipt for all Hydrocarbons produced and sold from said Mortgaged Property, to
make repairs, purchase machinery and equipment, conduit and power, to enter
work-over operations, drill additional wells and to exercise every power, right
and privilege of Mortgagor with respect to the Mortgaged Property. When and if
the expenses of such operation and development (including costs of unsuccessful
work-over operations or additional wells) have been paid and the Indebtedness
paid, said Mortgaged Property shall, if there has been no sale or foreclosure,
be returned to Mortgagor.
ARTICLE VIII
SECURITY AGREEMENT
Without limiting any of the provisions of this instrument, in order
to secure the Indebtedness, Mortgagor, as Debtor (referred to in this ARTICLE
VIII as "Debtor"), hereby expressly GRANTS, ASSIGNS, TRANSFERS and SETS OVER
unto Mortgagees, as Secured Party (Mortgagees being referred to collectively in
this ARTICLE VIII as "Secured Party"), a first Lien upon and a security interest
in all the Mortgaged Property (including, without limitation, all Mortgaged
Property that constitutes equipment, accounts, contract rights, goods,
instruments, general
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intangibles, inventory, Hydrocarbons, fixtures and other personal property of
any kind or character (including both those now and those hereafter existing))
to the full extent that such Mortgaged Property may be subject to the Uniform
Commercial Code including all products and proceeds of such Mortgaged Property
(said Mortgaged Property, products and proceeds being hereinafter collectively
referred to as the "Collateral" for the purposes of this ARTICLE VIII). The Lien
and security interest created by this Mortgage attaches upon the delivery
hereof. Debtor covenants and agrees with Secured Party that:
(a) In addition to and cumulative of any other remedies granted in
this instrument to Secured Party, Secured Party may, upon the occurrence
and during the continuance of an Event of Default, proceed under said
Uniform Commercial Code as to all or any part of the Collateral and shall
have and may exercise with respect to the Collateral all the rights,
remedies and powers of a secured party after default under said Uniform
Commercial Code, including, without limitation, the right and power to
sell, at public or private sale or sales, or otherwise dispose of, lease
or utilize the Collateral and any part or parts thereof in any manner
authorized or permitted under said Uniform Commercial Code after default
by a debtor, and to apply the proceeds thereof toward payment of any costs
and expenses and attorneys' fees and legal expenses thereby incurred by
Secured Party, and toward payment of the Indebtedness in such order or
manner as set forth in this Mortgage.
(b) Upon the occurrence and during the continuance of an Event of
Default, Secured Party shall have the right (without limitation) to take
possession of the Collateral and to enter upon any premises where same may
be situated for such purpose without being deemed guilty of trespass and
without liability for damages thereby occasioned, and to take any action
deemed necessary or appropriate or desirable by Secured Party, at its
option and in its discretion, to repair, refurbish or otherwise prepare
the Collateral for sale, lease or other use or disposition as herein
authorized.
(c) To the extent permitted by law, Debtor expressly waives notice
of any right or remedies of a debtor (other than notice of sale or other
disposition of the Collateral) or formalities prescribed by law relative
to sale or disposition of the Collateral or exercise of any other right or
remedy of Secured Party existing after default hereunder; and with respect
to any required notice, Debtor agrees that if such notice is mailed,
postage prepaid, to Debtor at the address shown with Debtor's signature
hereinbelow at least ten (10) days before the time of the sale or
disposition, such notice shall be deemed reasonable and shall fully
satisfy any requirement for giving of said notice. Such notice, in case of
a public sale or disposition, shall state the time and place fixed for
such sale or disposition and, in case of a private sale or disposition,
shall state the date after which such sale or disposition is to be made.
(d) Any public sale of the Collateral shall be held at such time or
times within ordinary business hours and at such places as Secured Party
may fix in the notice of
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such sale. At any such sale the Collateral may be sold in one lot as an
entirety or in separate parcels, as Secured Party may determine.
(e) Secured Party shall not be obligated to make any sale pursuant
to any such notice. Secured Party may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from
time to time by announcement at the time and place fixed for the sale, and
such sale may be made at any time or place to which the same shall be so
adjourned.
(f) In case of any sale of all or any part of the Collateral on
credit or for future delivery, the Collateral so sold may be retained by
Secured Party until the selling price is paid by the purchaser thereof,
but Secured Party shall not incur any liability in case of the failure of
such purchaser to take up and pay for the Collateral so sold and, in case
of any such failure, such Collateral may again be sold upon like notice.
(g) Upon the occurrence and during the continuance of an Event of
Default, Secured Party is expressly granted the right, at its option, to
transfer at any time to itself or to its nominee the Collateral, or any
part thereof and to hold the same as security for the Indebtedness, and to
receive the monies, income, proceeds or benefits attributable or accruing
thereto and to apply the same toward payment of the Indebtedness, whether
or not then due, in such order or manner as Secured Party may elect. All
rights to marshaling of assets of Debtor, including any such right with
respect to the Collateral, are hereby waived.
(h) All recitals in any instrument of assignment or any other
instrument executed by Secured Party incident to sale, transfer,
assignment, lease or other disposition or utilization of the Collateral or
any part thereof hereunder shall be full proof of the matter stated
therein, no other proof shall be required to establish full legal
propriety of the sale or other action or of any fact, condition or thing
incident thereto, and all prerequisites of such sale or other action and
of any fact, condition or thing incident thereto shall be presumed
conclusively to have been performed or to have occurred.
(i) Upon the occurrence and during the continuance of an Event of
Default, Secured Party may require Debtor to assemble the Collateral and
make it available to Secured Party at a place to be designated by Secured
Party that is reasonably convenient to both parties. All expenses of
retaking, holding, preparing for sale, lease or other use or disposition,
selling, leasing or otherwise using or disposing of the Collateral and the
like which are incurred or paid by Secured Party as authorized or
permitted hereunder, including also all attorneys' fees, legal expenses
and costs, shall be added to the Indebtedness.
(j) Should Secured Party elect to exercise its rights under said
Uniform Commercial Code as to part of the personal property and fixtures
described herein, this
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election shall not preclude Secured Party from exercising the rights and
remedies granted by the preceding paragraphs of this instrument as to the
remaining personal property and fixtures.
(k) Secured Party may, at its election, at any time after delivery
of this instrument, sign one or more photocopies hereof in order that such
photocopies may be used as a financing statement under said Uniform
Commercial Code. Such signature by Secured Party may be placed between the
last sentence of this instrument and Debtor's acknowledgment or may follow
Debtor's acknowledgment. Secured Party's signature need not be
acknowledged and is not necessary to the effectiveness hereof as a ,
mortgage, assignment, pledge or security agreement.
(l) So long as any amount remains unpaid on the Indebtedness, Debtor
will not execute or file in any public office any financing statement(s)
affecting the Collateral (other than Liens arising in respect of Permitted
Encumbrances) other than financing statements in favor of Secured Party
hereunder, unless the prior written specific consent and approval of
Secured Party shall have first been obtained.
(m) Secured Party is authorized to file, in any jurisdiction where
Secured Party deems it necessary, a financing statement or statements, and
at the request of Secured Party, Debtor will join Secured Party in
executing one or more financing statements pursuant to said Uniform
Commercial Code in form satisfactory to Secured Party, and will pay the
cost of filing or recording this or any other instrument, as a financing
statement, in all public offices at any time and from time to time
whenever filing or recording of any financing statement or of this
instrument is deemed by Secured Party to be necessary or desirable.
(n) Without in any manner limiting the generality of any of the
other provisions of this Mortgage: (i) some portions of the goods
described or to which reference is made herein are or are to become
fixtures on the Lands; (ii) the security interests created hereby under
applicable provisions of the Uniform Commercial Code of one or more of the
jurisdictions in which the Mortgaged Property is situated will attach to
Hydrocarbons or the accounts resulting from the sale thereof at the
wellhead or minehead located on the Lands; (iii) this instrument may be
filed or filed of record in the real estate records as a financing
statement; (iv) Debtor is the record owner of the real estate or interests
in the real estate comprised of the Leases and the Lands described in
Exhibit A and (v) the name and address of each of the Secured Party and
Debtor is set forth on the signature page hereof.
(o) Debtor hereby irrevocably designates and appoints Secured Party
as its attorney-in-fact, with full power of substitution, for the purposes
of carrying out the provisions of this Mortgage and taking any action and
executing any instrument that Secured Party may deem necessary or
advisable to accomplish the purposes hereof, which appointment
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as attorney-in-fact effective upon the occurrence and during the
continuance of an Event of Default (but the determination of an Event of
Default by Secured Party shall as to all parties for the purposes hereof
be conclusive as to the occurrence of an Event of Default) and is
irrevocable and coupled with an interest.
(p) Without limiting the generality of the foregoing, Debtor hereby
irrevocably authorizes and empowers Secured Party, upon the occurrence and
during the continuance of an Event of Default, at the expense of Debtor,
either in Secured Party's own name or in the name of Debtor, at any time
and from time to time (a) to ask, demand, receive, receipt, give
acquittance for, settle and compromise any and all monies which may be or
become due or payable or remain unpaid at any time or times to Debtor
under or with respect to the Collateral; (b) to endorse any drafts,
checks, orders or other instruments for the payment of money payable to
Debtor on account of the Collateral (including any such draft, check,
order or instrument issued by an insurance company payable jointly to
Debtor and Secured Party); and (c) in the discretion of Secured Party, to
settle, compromise, prosecute or defend any action, claim or proceeding,
or take any other action, all either in its own name or in the name of
Debtor or otherwise, which Secured Party may deem to be necessary or
advisable for the purpose of exercising and enforcing its powers and
rights under this Mortgage or in furtherance of the purposes hereof,
including any action which by the terms of this Mortgage is to be taken by
Debtor. Nothing in this Mortgage shall be construed as requiring or
obligating Secured Party to make any demand or to make any inquiry as to
the nature or sufficiency of any payment received by it or to present or
file any claim or notice, or to take any other action with respect to any
of the Collateral or the amounts due or to become due under any thereof,
or to collect or enforce the payment of any amounts assigned to it or to
which it may otherwise be entitled hereunder at any time or times.
(q) Secured Party shall incur no liability as a result of the sale
of Collateral, or any part thereof, at any private sale. Debtor hereby
waives, to the extent permitted by applicable law, any claims against
Secured Party arising by reason of the fact that the price at which the
Collateral may have been sold at such a private sale was less than the
price which might have been obtained at a public sale or was less than the
aggregate amount of the Indebtedness, even if Secured Party accepts the
first offer received and does not offer such Collateral to more than one
offeree if such sale is otherwise commercially reasonable.
(r) Debtor acknowledges the Indebtedness secured hereby, whether now
existing or to arise hereafter, and confesses judgment thereon in favor of
Secured Party, if the Indebtedness is not paid as and when due.
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ARTICLE IX
MISCELLANEOUS
9.1 POOLING AND UNITIZATION. Mortgagor shall have the right, and is
hereby authorized, to pool or unitize all or any part of the Leases insofar as
related to the Mortgaged Property, with adjacent lands, leaseholds and other
interests, when, in the reasonable judgment of Mortgagor, it is necessary or
advisable to do so in order to form a drilling unit to facilitate the orderly
development of that part of the Mortgaged Property affected thereby, or to
comply with the requirements of any law or governmental order or regulation
relating to the spacing of wells or proration of the production therefrom; and
further provided that the Hydrocarbons produced from any unit so formed shall be
allocated among the separately owned tracts or interests comprising the unit in
proportion to the respective surface areas or reservoir volumes thereof or in
such proportion as is prescribed by applicable law. Any unit so formed may
relate to one or more zones or horizons, and a unit formed for a particular zone
or horizon need not conform in area to any other unit relating to a different
zone or horizon, and a unit formed for the production of oil need not conform in
area with any unit formed for the production of gas. Upon the written request of
Mortgagees, as to all such units theretofore formed, and thereafter immediately
after formation of any such unit, Mortgagor shall furnish to Mortgagees a true
copy of the pooling agreements, declarations of pooling or other instruments
creating such units, in such number of counterparts as Mortgagees may reasonably
request. The interest in any such unit attributable to the Mortgaged Property
(or any part thereof) included therein shall become a part of the Mortgaged
Property and shall be subject to the lien hereof in the same manner and with the
same effect as though such unit and the interest of Mortgagor therein were
specifically described in Exhibit A. Mortgagor may enter into pooling or
unitization agreements not hereinabove authorized only with the prior written
consent of Mortgagees.
9.2 ADVANCES BY MORTGAGEES. Each and every covenant herein contained
shall be performed and kept by Mortgagor solely at Mortgagor's expense. If
Mortgagor shall fail to perform or keep any of the covenants of whatsoever kind
or nature contained in this instrument and any applicable cure period has
expired, Mortgagees or any receiver or keeper appointed hereunder, may, but
shall not be obligated to, make advances to perform the same in Mortgagor's
behalf. Mortgagees shall notify Mortgagor as soon as practicable of any such
action taken by Mortgagees, PROVIDED that the failure of Mortgagees to so notify
Mortgagor shall not relieve Mortgagor of any of its obligations hereunder.
Mortgagor hereby agree to repay such sums within ten (10) days of demand plus
interest until paid at the Default Rate; provided, however, that in no event
shall such interest rate ever exceed the Highest Lawful Rate. No such advance
shall be deemed to relieve Mortgagor from any default hereunder.
9.3 DEFENSE OF CLAIMS. Mortgagor will notify Mortgagees, in writing,
promptly of the commencement of any legal proceedings affecting the Lien hereof
or the Mortgaged Property, or any part thereof, and will take such action,
employing attorneys agreeable to
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Mortgagees, as may be necessary to preserve Mortgagor's and Mortgagees's rights
affected thereby; and should the Mortgagor fail or refuse to take any such
action, Mortgagees may, upon giving prior written notice thereof to Mortgagor,
take such action on behalf and in the name of Mortgagor and at Mortgagor's
expense. Moreover, Mortgagees, may take such independent action in connection
therewith as they may in their discretion deem proper, Mortgagor hereby agreeing
that all sums advanced or all expenses incurred in such actions plus interest at
the Default Rate will, on demand, be reimbursed to Mortgagees or any receiver or
keeper appointed hereunder; provided, however, that in no event shall such
interest rate ever exceed the Highest Lawful Rate.
9.4 RELEASES. If the Indebtedness shall be fully paid and the
covenants herein contained shall be well and truly performed, then Mortgagees in
such case shall, upon the request of Mortgagor and at Mortgagor's cost and
expense, deliver to Mortgagor, proper instruments acknowledging release and
satisfaction of this Mortgage.
9.5 RENEWALS AND OTHER SECURITY. Renewals and extensions of the
Indebtedness may be given at any time and Mortgagees may take or may now hold
other security for the Indebtedness without notice to or consent of Mortgagor.
Mortgagees may resort first to such other security or any part thereof or first
to the security herein given or any part thereof, or from time to time to either
or both, even to the partial or complete abandonment of any security, and such
action shall not be a waiver of any rights conferred by this instrument, which
shall continue as a perfected Lien upon the Mortgaged Property not expressly
released until the Indebtedness is fully paid.
9.6 MORTGAGE AN ASSIGNMENT, ETC. This Mortgage shall be deemed to be
and may be enforced from time to time as an assignment, chattel mortgage,
hypothecation, contract, deed of trust, conveyance, financing statement, real
estate mortgage, pledge or security agreement, and from time to time as any one
or more thereof in order fully to effectuate the lien and security interest
granted hereby and the purposes and agreements herein set forth.
9.7 SUBROGATION. To the extent that any of the Indebtedness
represents funds utilized to satisfy any outstanding indebtedness or obligations
secured by liens, rights or claims against the Mortgaged Property or any part
thereof, Mortgagees shall be subrogated to any and all liens, rights, superior
titles and equities owned or claimed by the holder of any such outstanding
indebtedness or obligation so satisfied, however remote, regardless of whether
said liens, rights, superior titles and equities are by the holder(s) thereof
assigned to Mortgagees or released.
9.8 SEPARABILITY. If any provision hereof or of the other
Transaction Documents is invalid or unenforceable in any jurisdiction, the other
provisions hereof or of the other Transaction Documents shall remain in full
force and effect in such jurisdiction, and the remaining provisions hereof shall
be liberally construed in favor of Mortgagees in order to effectuate the
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provisions hereof, and the invalidity of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of any such
provision in any other jurisdiction. Any reference herein contained to a statute
or law of a state in which no part of the Mortgaged Property is situated shall
be deemed inapplicable to, and not used in, the interpretation hereof.
9.9 RIGHTS CUMULATIVE. Each and every right, power and remedy herein
given to Mortgagees shall be cumulative and not exclusive; and every right,
power and remedy whether specifically herein given or otherwise existing may be
exercised from time to time, and so often and in such order as may be deemed
expedient by Mortgagees, and the exercise, or the beginning of the exercise, of
any such right, power or remedy shall not be deemed a waiver of the right to
exercise, at the same time or thereafter, any other right, power or remedy. No
delay or omission by Mortgagees in the exercise of any right, power or remedy
shall impair any such right, power or remedy or operate as a waiver thereof or
of any other right, power or remedy then or thereafter existing.
9.10 BINDING EFFECT. This Mortgage is binding upon Mortgagor and
Mortgagor's successors and assigns and shall inure to the benefit of Mortgagees,
their respective successors and assigns, and the provisions hereof shall
likewise constitute covenants running with the land.
9.11 ARTICLE AND SECTION HEADINGS. The article and section headings
in this instrument are inserted for convenience and shall not be considered a
part of this instrument or used in its interpretation.
9.12 NOTICES. Any notice, request, demand or other instrument which
may be required or permitted to be given or served upon Mortgagor or Mortgagees
shall be given in the manner provided for in the Note Agreement. The taxpayer
identification number of each Mortgagee is as follows: RIMCO PARTNERS, L.P. --
061208375, RIMCO PARTNERS, L.P. II -- 061264592, RIMCO PARTNERS, L.P. III --
061291935, RIMCO PARTNERS, L.P. IV -- 061327489.
9.13 AMENDMENTS, MODIFICATIONS AND WAIVERS, ETC. This Mortgage may
be amended, modified, revised, discharged, released or terminated only by a
written instrument or instruments executed by Mortgagor and Mortgagees. Any
alleged amendment, revision, discharge, release or termination which is not so
documented shall not be effective as to any party. No waiver of any provision of
this Mortgage nor consent to any departure by Mortgagor therefrom shall in any
event be effective unless the same shall be in writing, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.
9.14 SURVIVAL OF AGREEMENTS. All representations and warranties of
Mortgagor herein and all covenants and agreements herein not fully and finally
performed before the
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.12 - Page 28
<PAGE>
effective date or dates of this Mortgage shall survive such date or dates. All
covenants and obligations in this Mortgage are intended by the parties to be,
and shall be construed as, covenants running with the Lands.
9.15 GOVERNING LAW. THIS MORTGAGE, INCLUDING IN PARTICULAR ANY
PROVISION OF THIS MORTGAGE RELATING TO THE CREATION, EXISTENCE OR VALIDITY OF
THE INDEBTEDNESS AND THE OBLIGATIONS CONTAINED HEREIN, SHALL BE DEEMED CONTRACTS
AND INSTRUMENTS MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE SUBSTANTIVE LAWS
OF THE STATE OF NEW YORK AND THE LAWS OF THE UNITED STATES OF AMERICA, EXCEPT
THAT THE CREATION OF THE LIEN ON AND THE PERFECTION, PRIORITY AND ENFORCEABILITY
OF THE LIEN ON ANY MORTGAGED PROPERTY SHALL BE GOVERNED BY THE SUBSTANTIVE LAWS
OF THE STATE OF LOUISIANA.
9.16 NOTE AGREEMENT. To the fullest extent possible, the terms and
provisions of the Note Agreement shall be read together with the terms and
provisions of this Mortgage so that the terms and provisions of this Mortgage do
not conflict with the terms and provisions of the Note Agreement; provided,
however, if any of the terms and provisions of this Mortgage conflict with any
terms or provisions of the Note Agreement, the terms or provisions of the Note
Agreement shall govern and control for all purposes, provided that (i) the
provisions of ARTICLE II, ARTICLE V, ARTICLE VIII and SECTION 9.17 hereof shall
govern and control for all purposes in the event of a conflict with the Note
Agreement, (ii) the provisions of this Mortgage shall govern and control for all
purposes in the event of a conflict with the Note Agreement to the extent that
any provision contained in the Note Agreement would negate or adversely affect
the enforceability, validity, perfection or priority of the Lien and security
interest created by this Mortgage, and (iii) the inclusion of additional terms,
provisions, covenants and warranties, supplemental rights or remedies in favor
of Mortgagees in this Mortgage shall not be deemed to be in conflict with the
Note Agreement.
9.17 LIMIT TO INDEBTEDNESS. The maximum amount of the Indebtedness
that may be outstanding at any time and from time to time that this Mortgage
(including the assignment of rents under Section 5.1 and the assignment of
production under Section 5.2 hereof) secures is fixed at sixteen million
dollars, and the maximum amount which Mortgagees may claim for damages that
Mortgagees may suffer from a breach of any covenant, obligation, agreement, term
or condition secured by this Mortgage (other than for the payment of money) is
fixed at sixteen million dollars.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.12 - Page 29
<PAGE>
9.18 NO PARAPH. The Notes and all other evidences of the
Indebtedness have not been paraphed for identification with this Mortgage.
9.19 ACCEPTANCE. The acceptance of this Mortgage by Mortgagees is
presumed, and therefore this Mortgage has not been executed and need not be
executed by Mortgagees.
Thus Done and Passed, on the date first written above, in the presence of
the undersigned competent witnesses, who here unto sign their names with
Mortgagor and me, Notary, after due reading of the whole.
WITNESSES: MORTGAGOR:
TEXOIL COMPANY
/S/ GARY MILAVEC
By: /S/ RUBEN MEDRANO
Name: Ruben Medrano
/S/ NICK H. SORENSEN Title:President
The address of the The address of the
Mortgagees/Secured Party is: Mortgagor/Debtor is:
600 Travis Street, Suite 6875 1600 Smith, Suite 4000
Houston, Texas 77002 Houston, Texas 77002
/S/ PAT WAGNER
Notary Public in and for the State of Texas
My Commission Expires: (MARCH 22, 2000)
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.12 - Page 30
<PAGE>
MORTGAGE, ASSIGNMENT OF PRODUCTION,
SECURITY AGREEMENT AND FINANCING STATEMENT
DATED SEPTEMBER 6, 1996
FROM
TEXOIL COMPANY
(MORTGAGOR AND DEBTOR)
TO
RIMCO PARTNERS, L.P., RIMCO PARTNERS, L.P. II,
RIMCO PARTNERS, L.P. III AND RIMCO PARTNERS, L.P. IV
(MORTGAGEES AND SECURED PARTY)
The mailing address of the above-named Mortgagees and Secured Party is 600
Travis, Suite 6875, Houston, Texas 77002, the mailing address of Mortgagor and
Debtor is 1600 Smith Street, Suite 4000, Houston, Texas 77002.
This instrument contains after-acquired property provisions.
This instrument secures payment of future advances.
The oil and gas interests included in the Mortgaged Property will be financed at
the wellheads of the wells located on the properties described in Exhibit A
hereto.
Mortgagor has an interest of record in the real estate concerned, which is
described in Exhibit A hereto.
ATTENTION OF RECORDING OFFICERS: This instrument is a mortgage affecting both
real and personal property and is, among other things, a security agreement and
financing statement under the Uniform Commercial Code. Some of the personal
property constituting a portion of the Mortgaged Property is or is to be affixed
to the Lands described in Exhibit A hereto. This instrument creates a lien on
rights in, or relating to, Lands of the Mortgagor which are described in Exhibit
A hereto.
Recorded counterparts should be returned to:
William P. Swenson
Andrews & Kurth L.L.P.
4200 Texas Commerce Tower
Houston, Texas 77002
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.12 - Page 31
<PAGE>
PREAMBLE TO EXHIBIT A
To Mortgage, Assignment of Production, Security Agreement and Financing
Statement from Texoil Company, Mortgagor, to RIMCO Partners, L.P. et al.,
Mortgagees
1. Depth limitations, land descriptions and descriptions of undivided
working interests and net revenue interests contained in Exhibit A and the
listing of any percentages, decimal or fractional interest in this Exhibit A
shall not be deemed to limit or otherwise diminish the interests being subjected
to the lien, security interest and assignment of this Mortgage. It is intended
that this Mortgage shall cover and affect Mortgagor's entire present and future
interest in the Subject Interests and other Mortgaged Property. The listings of
depth limitations, land descriptions, working interests and net revenue
interests in Exhibit A are made for the sole purpose of giving effect to the
title warranties of Mortgagor contained in this Mortgage.
2. Any statement contained in this Mortgage or Exhibit A that any interest
described herein is subject to any Permitted Encumbrance or any other agreement,
instrument, or other matter shall not operate to subject such interest to any
such Permitted Encumbrance or such agreement, instrument or other matter, except
to the extent (i) that such interest described herein is in fact subject to such
Permitted Encumbrance or other agreement, instrument or matter, (ii) that such
Permitted Encumbrance or other agreement, instrument or matter is valid and
presently subsisting, and (iii) that such Permitted Encumbrance or other
agreement, instrument or matter is effective and binding upon third parties.
Nothing contained in this Mortgage or Exhibit A shall be deemed to constitute a
recognition by Mortgagor or Mortgagees that any such Permitted Encumbrance or
other agreement, instrument or other matter is valid and presently subsisting.
3. The term "BPO" in Exhibit A specify the warranted working interest and
net revenue interest of Mortgagor in a particular well or unit before the
occurrence of a particular event such as payout of costs with respect to such
well or unit. The term "APO" in Exhibit A specify the warranted working interest
and net revenue interest of Mortgagor in a particular well or unit after the
occurrence of a particular event such as payout of costs with respect to such
well or unit.
4. References in Exhibit A to instruments on file in the public records
are made for all purposes. Unless provided otherwise, all references to file
numbers, entry numbers and COB/Folio numbers in Exhibit A are references to the
official real property records of the applicable parish in which the Mortgaged
Property is located and in which records such documents are or in the past have
been customarily recorded, whether Official Records, Deed Records, Conveyance
Records, Oil and Gas Records, Oil and Gas Lease Records or other similar
records.
5. Capitalized terms used in Exhibit A shall have the meaning assigned to
them in this Mortgage.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.12 - Page 32
EXHIBIT 10.13
PROMISSORY NOTE
$1,000,000.00 Houston, Texas As of September 1, 1996
FOR VALUE RECEIVED, the undersigned, TEXOIL, INC., a Nevada corporation (
the "BORROWER"), promises to pay to the order of the T. W. HOEHN, JR. AND BETTY
JOE HOEHN REVOCABLE TRUST (the "LENDER") in lawful money of the United States of
America, the maximum principal amount of ONE MILLION AND NO/100 DOLLARS
($1,000,000.00), or so much thereof as may be outstanding, upon the terms
provided in this Note, plus interest and such other additional amounts as may be
added to principal pursuant to the terms of this Note.
1. DEFINITIONS. As used in this Note,
HIGHEST LAWFUL RATE means the maximum rate (or, if the context so
requires, an amount calculated at such rate) of interest which the holder
of this Note is allowed to contract for, charge, take, reserve, or receive
under applicable law after taking into account, to the extent required by
applicable law, any and all relevant payments or charges.
MATURITY DATE means the earlier to occur of (a) October 1, 2002, and
(b) the date occurring 30 days after all of the notes issued under the
RIMCO Note Purchase Agreement have been paid in full or exchanged for
common stock of the Borrower and all commitments of the RIMCO Purchasers
to fund under RIMCO Finance Documents have terminated.
PRIME RATE means the annual interest rate most recently announced by
Wells Fargo - Texas, N.A. (f\k\a First Interstate Bank of Texas, N.A.) as
its prime rate in effect at its principal office, automatically
fluctuating upward and downward with and as specified in each announcement
without special notice to Borrower or any other person (which prime rate
may not necessarily represent the lowest or best rate actually charged to
a customer).
PRINCIPAL DEBT means, when determined, the outstanding principal
balance of this Note.
RIMCO FINANCE DOCUMENTS means the RIMCO Note Purchase Agreement, the
RIMCO Guaranty, the RIMCO Tranche A Notes, any other notes issued under
the RIMCO Note Purchase Agreement, and any pledge agreements, mortgages or
other documents executed in connection therewith.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.13 - Page 1
<PAGE>
RIMCO GUARANTY means the Guaranty and Exchange Agreement dated the
same date as this Note, and executed by the Company (as a guarantor),
Texoil Company, and the RIMCO Purchasers.
RIMCO NOTE PURCHASE AGREEMENT means that Note Purchase Agreement
dated the same date as this Note, among the Borrower, Texoil Company, and
the RIMCO Purchasers, under which the RIMCO Tranche A Notes, and certain
other notes, were issued.
RIMCO PURCHASERS means RIMCO Partners, L.P., RIMCO Partners, L.P.
II, RIMCO Partners, L.P. III, and RIMCO Partners, L.P. IV, each a Delaware
limited partnership, and their respective successors and assigns.
RIMCO TRANCHE A NOTES means the 10% Senior Secured Exchangeable
General Obligation Notes in the aggregate principal amount of $3,000,000
issued by Texoil Company to the RIMCO Purchasers.
SUBORDINATION AGREEMENT means that certain Subordination Agreement
dated as of September 6, 1996, and executed by Borrower, Lender, Texoil
Company and the RIMCO Purchasers.
TEXOIL COMPANY means Texoil Company, a Tennessee corporation and a
wholly-owned subsidiary of the Borrower.
2. PAYMENT TERMS. The entire unpaid Principal Debt, plus all accrued and
unpaid interest on this Note and all fees, expenses, and costs due from Borrower
to Lender under the terms of this Note, shall be due and payable on the Maturity
Date. Subject to the terms of Section 11, interest on the outstanding Principal
Debt is due and payable monthly as it accrues commencing on October 10, 1996,
and continuing on the 10th day of each month thereafter through and including
the Maturity Date. Subject to the terms of Section 11, installments of Principal
Debt in an amount equal to the lesser of (a) the sum of (i) $142,800 plus (ii)
all unpaid cumulative Deficits, and (b) 95.24% of the amount by which the
unencumbered cash or cash equivalents owned by Texoil Company at such date
exceed $150,000, are due and payable quarterly on the 10th day of each January,
April, July, and October beginning on the later of (i) April 10, 1997 and (ii)
the 10th day of the first January, April, July or October occurring after the
total amounts advanced under the RIMCO Tranche A Notes equals or exceeds
$2,800,000. Subject to the terms of Section 11, if any installment of Principal
Debt paid under this Section 2 is less than $142,800, then an amount equal to
the difference of $142,800 and the amount of the installment actually paid (the
"DEFICIT") shall be due and payable on the next quarterly installment date and
all such Deficits shall cumulate and shall continue to be due on each subsequent
quarterly installment date until fully paid. No Deficit shall be deemed to be
past due for purposes of Section 4 or Section 5(a).
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.13 - Page 2
<PAGE>
All payments are to be made to the following address:
c/o T. W. Hoehn, Jr., Trustee
2302 Rue Adriane
La Jolla, California 92037
Lender may change the address to which payments are to be sent by giving the
Borrower fifteen (15) days notice by regular mail addressed to the Borrower last
known address as shown on the Lender's records.
3. INTEREST RATE. Except as provided in Section 11, interest shall accrue
on the Principal Debt from the date of this Note until due at a variable rate
equal to the Prime Rate plus 2% per annum. Interest shall be calculated on a
365-day (or 366-day, as the case may be) basis.
4. PAST DUE INTEREST. Except as provided in Section 11, all past due
installments of principal and interest shall accrue interest from the date due
until paid at a default rate (the "DEFAULT RATE") which shall be equal to 14%
per annum.
5. DEFAULT. The term "DEFAULT," as used in this Note, shall mean the
occurrence or happening, at any time and from time to time, of any one or more
of the following:
5.1. PAYMENT. Borrower fails to pay all or any portion of the
amounts due under this Note when due (except for payments which become due
during a No Payment Period as provided in Section 11) and such failure
remains uncured for a period of 10 days.
5.2. PERFORMANCE OF OBLIGATIONS. Borrower fails to fully and timely
perform, discharge or observe any terms, covenants, or conditions
contained in this Note as and when required and such failure remains
uncured for a period of 30 days.
5.3. CROSS-DEFAULT. The occurrence of any Event of Default under,
and as defined in, the RIMCO Note Purchase Agreement or the other RIMCO
Finance Documents.
6. COLLECTION COSTS. If this Note is placed in the hands of an attorney
for collection, or if it is collected through any legal proceedings, the
Borrower shall be liable for and agrees to pay the court costs, reasonable
attorneys' fees, and other costs of collection incurred by or on behalf of the
holder of this Note.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.13 - Page 3
<PAGE>
7. WAIVER. Except as provided in this Note, the Borrower and any party
which may be or become liable for the payment of any sums of money payable on
this Note (including any surety, endorser, or guarantor) jointly and severally
waive (to the extent permitted by law), presentment and demand for payment,
protest, notice of protest and nonpayment, notice of the intention to
accelerate, and notice of acceleration.
8. APPLICABLE LAW. This Note shall be construed in accordance with and
governed by the laws of the State of Texas and all applicable laws of the United
States of America.
9. REMEDIES OF LENDER. Subject to the terms of the Subordination
Agreement, if a Default exists, Lender may, at its option, declare the Principal
Debt and all accrued and unpaid interest thereon immediately due and payable,
whereupon the entire indebtedness under this Note shall become immediately due
and payable. In addition, if a Default exists, Lender shall have (subject to the
terms of the Subordination Agreement) all rights and remedies granted in this
Note and those available at law or equity and the same (a) shall be cumulative
and concurrent, (b) may be pursued separately, successively, or concurrently
against Borrower or any other liable party or against any one or more of them in
such order as Lender, in its sole discretion, shall determine, (c) may be
exercised as often as occasion therefor shall arise, it being agreed by Borrower
and any other liable party that the exercise or failure to exercise any of the
same shall in no event be construed as a waiver or release thereof or of any
other right, remedy, or recourse, and (d) are intended to be, and shall be,
nonexclusive. Notwithstanding the foregoing to the contrary, but subject to the
terms of the Subordination Agreement, if a Default is in respect of a bankruptcy
or insolvency proceeding, the entire Principal Debt and all accrued and unpaid
interest under this Note shall automatically become due and payable without
action of any kind.
10. INTEREST LIMITATION. Regardless of any provision contained in this
Note, the holder shall never be entitled to receive, collect, or apply, as
interest on this Note, any amount in excess of the Highest Lawful Rate. In the
event the holder ever receives, collects, or applies as interest, any excess
amount which would be excessive interest, that amount shall be treated as a
principal prepayment and applied to reduce the Principal Debt of this Note;
PROVIDED THAT, if the principal hereof is paid in full, any remaining excess
shall be paid to Borrower. In determining whether or not the interest paid or
payable, under any specific contingency, exceeds the Highest Lawful Rate,
Borrower and the holder hereof shall, to the maximum extent permitted under
applicable law, (a) characterize any nonprincipal payment as an expense, fee, or
premium rather than as interest, (b) exclude voluntary prepayments and the
effects thereof, and (c) spread the total amount of interest throughout the
entire contemplated term of this Note; PROVIDED THAT, if this Note is paid and
performed in full prior to the end of the full contemplated term hereof, and if
the interest received by the holder hereof for the actual period of existence
hereof exceeds the Highest Lawful Rate, then the holder hereof shall refund to
Borrower the amount of such excess, and, in such event, the holder hereof shall
not be subject to any penalties provided by any laws for contracting for,
charging, taking,
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.13 - Page 4
<PAGE>
reserving, or receiving interest in excess of the Highest Lawful Rate. To the
extent that the holder hereof is relying on Article 5069-1.04, as amended, of
the REVISED CIVIL STATUTES OF TEXAS to determine the Highest Lawful Rate, the
holder hereof will use the indicated weekly rate ceiling from time to time in
effect as provided in Article 5069-1.04, as amended. To the extent United States
federal law permits the holder hereof to contract for, charge, or receive a
greater amount of interest, the holder hereof will rely on United States federal
law instead of Article 5069-1.04, as amended, for the purpose of determining the
Highest Lawful Rate.
11. SUBORDINATION AGREEMENT OR RIMCO FINANCE DOCUMENTS. This Note is
subject to the terms of the Subordination Agreement. If, under the terms of the
Subordination Agreement or the RIMCO Finance Documents, Borrower is precluded
from paying, and Lender is precluded from receiving, any payments under the
terms of this Note ("NO PAYMENT PERIOD"), each payment which becomes due during
such period shall not thereafter accrue interest, shall not be deemed to be past
due for purposes of Section 4 above, and shall be deemed to be due on the
Maturity Date. If Borrower again is permitted to make scheduled payments under
the terms of this Note, Borrower is not obligated to pay the installments which
became due during the No Payment Period. Instead, Borrower shall begin paying
installments with the next installment due after the No Payment Period ends and
the scheduled payments that were not paid during the No Payment Period shall be
due and payable at the Maturity Date. Installments which become due during a No
Payment Period shall not thereafter accrue interest. All amounts which, under
the terms of this Section 11, are deemed to be due at the Maturity Date may be
paid under Section 2 after all other Principal Debt and accrued interest has
been paid in full.
12. REPLACEMENT NOTE. This Note is issued in replacement of, but not as a
novation of, that certain promissory note dated as of July 31, 1996, in the
original principal amount of $1,000,000, executed by Borrower and made payable
to the order of Lender.
NOTICE: THE RIGHTS AND OBLIGATIONS OF THE BORROWER AND LENDER SHALL BE
DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS AND INSTRUMENTS, AND ANY
PRIOR ORAL AGREEMENTS BETWEEN THE BORROWER AND LENDER ARE SUPERSEDED BY AND
MERGED INTO SUCH WRITINGS. THIS NOTE (AS AMENDED IN WRITING FROM TIME TO TIME)
AND THE OTHER WRITTEN DOCUMENTS EXECUTED BY BORROWER AND LENDER (OR BY BORROWER
FOR THE BENEFIT OF LENDER) REPRESENT THE FINAL AGREEMENT BETWEEN BORROWER AND
LENDER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS BY THE BORROWER AND LENDER. THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE BORROWER AND LENDER. THIS PARAGRAPH IS INCLUDED
HEREIN PURSUANT TO SECTION 26.02
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.13 - Page 5
<PAGE>
OF THE TEXAS BUSINESS AND COMMERCE CODE, AS AMENDED FROM TIME TO
TIME.
TEXOIL, INC.
By: /S/ RUBEN MEDRANO
Ruben Medrano, President
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.13 - Page 6
EXHIBIT 10.14
PROMISSORY NOTE
$50,000.00 Houston, Texas As of September 1, 1996
FOR VALUE RECEIVED, the undersigned, TEXOIL, INC., a Nevada corporation (
the "BORROWER"), promises to pay to the order of OPAL AIR, INC. (the "LENDER")
in lawful money of the United States of America, the maximum principal amount of
FIFTY THOUSAND AND NO/100 DOLLARS ($50,000.00), or so much thereof as may be
outstanding, upon the terms provided in this Note, plus interest and such other
additional amounts as may be added to principal pursuant to the terms of this
Note.
1. DEFINITIONS. As used in this Note,
HIGHEST LAWFUL RATE means the maximum rate (or, if the context so
requires, an amount calculated at such rate) of interest which the holder
of this Note is allowed to contract for, charge, take, reserve, or receive
under applicable law after taking into account, to the extent required by
applicable law, any and all relevant payments or charges.
MATURITY DATE means the earlier to occur of (a) October 1, 2002, and
(b) the date occurring 30 days after all of the notes issued under the
RIMCO Note Purchase Agreement have been paid in full or exchanged for
common stock of the Borrower and all commitments of the RIMCO Purchasers
to fund under RIMCO Finance Documents have terminated.
PRIME RATE means the annual interest rate most recently announced by
Wells Fargo - Texas, N.A. (f\k\a First Interstate Bank of Texas, N.A.) as
its prime rate in effect at its principal office, automatically
fluctuating upward and downward with and as specified in each announcement
without special notice to Borrower or any other person (which prime rate
may not necessarily represent the lowest or best rate actually charged to
a customer).
PRINCIPAL DEBT means, when determined, the outstanding principal
balance of this Note.
RIMCO FINANCE DOCUMENTS means the RIMCO Note Purchase Agreement, the
RIMCO Guaranty, the RIMCO Tranche A Notes, any other notes issued under
the RIMCO Note Purchase Agreement, and any pledge agreements, mortgages or
other documents executed in connection therewith.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.14 - Page 1
RIMCO GUARANTY means the Guaranty and Exchange Agreement dated the
same date as this Note, and executed by the Company (as a guarantor),
Texoil Company, and the RIMCO Purchasers.
RIMCO NOTE PURCHASE AGREEMENT means that Note Purchase Agreement
dated the same date as this Note, among the Borrower, Texoil Company, and
the RIMCO Purchasers, under which the RIMCO Tranche A Notes, and certain
other notes, were issued.
RIMCO PURCHASERS means RIMCO Partners, L.P., RIMCO Partners, L.P.
II, RIMCO Partners, L.P. III, and RIMCO Partners, L.P. IV, each a Delaware
limited partnership, and their respective successors and assigns.
RIMCO TRANCHE A NOTES means the 10% Senior Secured Exchangeable
General Obligation Notes in the aggregate principal amount of $3,000,000
issued by Texoil Company to the RIMCO Purchasers.
SUBORDINATION AGREEMENT means that certain Subordination Agreement
dated as of September 6, 1996, and executed by Borrower, Lender, Texoil
Company and the RIMCO Purchasers.
TEXOIL COMPANY means Texoil Company, a Tennessee corporation and a
wholly-owned subsidiary of the Borrower.
2. PAYMENT TERMS. The entire unpaid Principal Debt, plus all accrued and
unpaid interest on this Note and all fees, expenses, and costs due from Borrower
to Lender under the terms of this Note, shall be due and payable on the Maturity
Date. Subject to the terms of Section 11, interest on the outstanding Principal
Debt is due and payable monthly as it accrues commencing on October 10, 1996,
and continuing on the 10th day of each month thereafter through and including
the Maturity Date. Subject to the terms of Section 11, installments of Principal
Debt in an amount equal to the lesser of (a) the sum of (i) $7,200 plus (ii) all
unpaid cumulative Deficits, and (b) 4.76% of the amount by which the
unencumbered cash or cash equivalents owned by Texoil Company at such date
exceed $150,000, are due a payable quarterly on the 10th day of each January,
April, July, and October beginning on the later of (i) April 10, 1997 and (ii)
the 10th day of the first January, April, July or October occurring after the
total amounts advanced under the RIMCO Tranche A Notes equals or exceeds
$2,800,000. Subject to the terms of Section 11, if any installment of Principal
Debt paid under this Section 2 is less than $7,200, then an amount equal to the
difference of $7,200 and the amount of the installment actually paid (the
"DEFICIT") shall be due and payable on the next quarterly installment date and
all such Deficits shall cumulate and shall continue to be due on each subsequent
quarterly installment date until fully paid. No Deficit shall be deemed to be
past due for purposes of Section 4 or Section 5(a).
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.14 - Page 2
All payments are to be made to the following address:
Opal Air, Inc.
P. O. Box 789
Carlsbad, California 92008
Lender may change the address to which payments are to be sent by giving the
Borrower fifteen (15) days notice by regular mail addressed to the Borrower last
known address as shown on the Lender's records.
3. INTEREST RATE. Except as provided in Section 11, interest shall accrue
on the Principal Debt from the date of this Note until due at a variable rate
equal to the Prime Rate plus 2% per annum. Interest shall be calculated on a
365-day (or 366-day, as the case may be) basis.
4. PAST DUE INTEREST. Except as provided in Section 11, all past due
installments of principal and interest shall accrue interest from the date due
until paid at a default rate (the "DEFAULT RATE") which shall be equal to 14%
per annum.
5. DEFAULT. The term "DEFAULT," as used in this Note, shall mean the
occurrence or happening, at any time and from time to time, of any one or more
of the following:
5.1. PAYMENT. Borrower fails to pay all or any portion of the
amounts due under this Note when due (except for payments which become due
during a No Payment Period as provided in Section 11) and such failure
remains uncured for a period of 10 days.
5.2. PERFORMANCE OF OBLIGATIONS. Borrower fails to fully and timely
perform, discharge or observe any terms, covenants, or conditions
contained in this Note as and when required and such failure remains
uncured for a period of 30 days.
5.3. CROSS-DEFAULT. The occurrence of any Event of Default under,
and as defined in, the RIMCO Note Purchase Agreement or the other RIMCO
Finance Documents.
6. COLLECTION COSTS. If this Note is placed in the hands of an attorney
for collection, or if it is collected through any legal proceedings, the
Borrower shall be liable for and agrees to pay the court costs, reasonable
attorneys' fees, and other costs of collection incurred by or on behalf of the
holder of this Note.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.14 - Page 3
7. WAIVER. Except as provided in this Note, the Borrower and any party
which may be or become liable for the payment of any sums of money payable on
this Note (including any surety, endorser, or guarantor) jointly and severally
waive (to the extent permitted by law), presentment and demand for payment,
protest, notice of protest and nonpayment, notice of the intention to
accelerate, and notice of acceleration.
8. APPLICABLE LAW. This Note shall be construed in accordance with and
governed by the laws of the State of Texas and all applicable laws of the United
States of America.
9. REMEDIES OF LENDER. Subject to the terms of the Subordination
Agreement, if a Default exists, Lender may, at its option, declare the Principal
Debt and all accrued and unpaid interest thereon immediately due and payable,
whereupon the entire indebtedness under this Note shall become immediately due
and payable. In addition, if a Default exists, Lender shall have (subject to the
terms of the Subordination Agreement) all rights and remedies granted in this
Note and those available at law or equity and the same (a) shall be cumulative
and concurrent, (b) may be pursued separately, successively, or concurrently
against Borrower or any other liable party or against any one or more of them in
such order as Lender, in its sole discretion, shall determine, (c) may be
exercised as often as occasion therefor shall arise, it being agreed by Borrower
and any other liable party that the exercise or failure to exercise any of the
same shall in no event be construed as a waiver or release thereof or of any
other right, remedy, or recourse, and (d) are intended to be, and shall be,
nonexclusive. Notwithstanding the foregoing to the contrary, but subject to the
terms of the Subordination Agreement, if a Default is in respect of a bankruptcy
or insolvency proceeding, the entire Principal Debt and all accrued and unpaid
interest under this Note shall automatically become due and payable without
action of any kind.
10. INTEREST LIMITATION. Regardless of any provision contained in this
Note, the holder shall never be entitled to receive, collect, or apply, as
interest on this Note, any amount in excess of the Highest Lawful Rate. In the
event the holder ever receives, collects, or applies as interest, any excess
amount which would be excessive interest, that amount shall be treated as a
principal prepayment and applied to reduce the Principal Debt of this Note;
PROVIDED THAT, if the principal hereof is paid in full, any remaining excess
shall be paid to Borrower. In determining whether or not the interest paid or
payable, under any specific contingency, exceeds the Highest Lawful Rate,
Borrower and the holder hereof shall, to the maximum extent permitted under
applicable law, (a) characterize any nonprincipal payment as an expense, fee, or
premium rather than as interest, (b) exclude voluntary prepayments and the
effects thereof, and (c) spread the total amount of interest throughout the
entire contemplated term of this Note; PROVIDED THAT, if this Note is paid and
performed in full prior to the end of the full contemplated term hereof, and if
the interest received by the holder hereof for the actual period of existence
hereof exceeds the Highest Lawful Rate, then the holder hereof shall refund to
Borrower the amount of such excess, and, in such event, the holder hereof shall
not be subject to any penalties provided by any laws for contracting for,
charging, taking,
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.14 - Page 4
reserving, or receiving interest in excess of the Highest Lawful Rate. To the
extent that the holder hereof is relying on Article 5069-1.04, as amended, of
the REVISED CIVIL STATUTES OF TEXAS to determine the Highest Lawful Rate, the
holder hereof will use the indicated weekly rate ceiling from time to time in
effect as provided in Article 5069-1.04, as amended. To the extent United States
federal law permits the holder hereof to contract for, charge, or receive a
greater amount of interest, the holder hereof will rely on United States federal
law instead of Article 5069-1.04, as amended, for the purpose of determining the
Highest Lawful Rate.
11. SUBORDINATION AGREEMENT OR RIMCO FINANCE DOCUMENTS. This Note is
subject to the terms of the Subordination Agreement. If, under the terms of the
Subordination Agreement or the RIMCO Finance Documents, Borrower is precluded
from paying, and Lender is precluded from receiving, any payments under the
terms of this Note ("NO PAYMENT PERIOD"), each payment which becomes due during
such period shall not thereafter accrue interest, shall not be deemed to be past
due for purposes of Section 4 above, and shall be deemed to be due on the
Maturity Date. If Borrower again is permitted to make scheduled payments under
the terms of this Note, Borrower is not obligated to pay the installments which
became due during the No Payment Period. Instead, Borrower shall begin paying
installments with the next installment due after the No Payment Period ends and
the scheduled payments that were not paid during the No Payment Period shall be
due and payable at the Maturity Date. Installments which become due during a No
Payment Period shall not thereafter accrue interest. All amounts which, under
the terms of this Section 11, are deemed to be due at the Maturity Date may be
paid under Section 2 after all other Principal Debt and accrued interest has
been paid in full.
12. REPLACEMENT NOTE. This Note is issued in replacement of, but not as a
novation of, that certain promissory note dated as of July 31, 1996, in the
original principal amount of $50,000, executed by Borrower and made payable to
the order of Lender.
NOTICE: THE RIGHTS AND OBLIGATIONS OF THE BORROWER AND LENDER SHALL BE
DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS AND INSTRUMENTS, AND ANY
PRIOR ORAL AGREEMENTS BETWEEN THE BORROWER AND LENDER ARE SUPERSEDED BY AND
MERGED INTO SUCH WRITINGS. THIS NOTE (AS AMENDED IN WRITING FROM TIME TO TIME)
AND THE OTHER WRITTEN DOCUMENTS EXECUTED BY BORROWER AND LENDER (OR BY BORROWER
FOR THE BENEFIT OF LENDER) REPRESENT THE FINAL AGREEMENT BETWEEN BORROWER AND
LENDER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS BY THE BORROWER AND LENDER. THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE BORROWER AND LENDER. THIS PARAGRAPH IS INCLUDED
HEREIN PURSUANT TO SECTION 26.02
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.14 - Page 5
OF THE TEXAS BUSINESS AND COMMERCE CODE, AS AMENDED FROM TIME TO
TIME.
TEXOIL, INC.
By: /S/ RUBEN MEDRANO
Ruben Medrano, President
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.14 - Page 6
EXHIBIT 10.15
CANCELLATION OF GUARANTY, WARRANTS
AND REGISTRATION RIGHTS AGREEMENT
THIS CANCELLATION OF GUARANTY, WARRANTS AND REGISTRATION RIGHTS AGREEMENT
(this "CANCELLATION") is entered into as of September 6, 1996, among TEXOIL
COMPANY, a Tennessee corporation ("COMPANY"), TEXOIL, INC., a Nevada corporation
("PARENT"), and T. W. HOEHN, JR., T. W. HOEHN, III, JOE C. RICHARDSON, JR.,
TRUSTEE, U/D/T 5-17-91, as Amended, and WILLIAM F. SEAGLE (collectively, the
"PURCHASERS").
RECITALS
A. Parent entered into the following documents with Purchasers, each
dated as of May 6, 1996 (the "FINANCING DOCUMENTS"):
1. Agreements of Purchase and Sale between Parent and,
respectively, each of the Purchasers;
2. 12% Convertible Promissory Notes in the aggregate
original principal amount of $1,100,000 issued by
Parent, respectively, to each of the Purchasers in
various amounts and which were convertible into shares
of Parent's common stock at a conversion price of $0.80
per share (collectively, the "NOTES");
3. Warrants to Purchase Common Stock of Parent issued to
the Purchasers under which Parent authorized the sale of
warrants to purchase 1,100,000 shares of common stock of
Parent at an initial exercise price of $1.3125, with
such Warrants expiring five years after their date (the
"WARRANTS"); and
4. Registration Rights Agreement between Parent and the
Purchasers under which Parent granted the Purchasers,
collectively and not individually, certain registration rights
in respect of the shares of common stock purchasable under the
Warrants or upon conversion of the amounts due under the Notes
(the "REGISTRATION RIGHTS AGREEMENT").
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.15 - Page 1
<PAGE>
B. The Company, a wholly-owned subsidiary of Parent, executed a Guaranty
dated as of May 6, 1996, for the benefit of the Purchasers, guaranteeing the
obligations of the Parent under the Finance Documents (the "GUARANTY").
C. The Company has received a new financing commitment under which it will
issue notes to RIMCO Partners, L.P., RIMCO Partners, L.P. II, RIMCO Partners,
L.P. III, and RIMCO Partners, L.P. IV, each a Delaware limited partnership (the
"RIMCO FINANCING").
D. The Company, Parent and Purchasers agree that the RIMCO Financing is in
the best interest of the Company and the Parent, and the Purchasers have agreed
to restructure the financial commitments of the Parent and the Company to the
Purchasers under the Finance Documents to facilitate the RIMCO Financing.
Company, Parent, and Purchasers have agreed to cancel the Guaranty, Warrants and
Registration Rights Agreement.
E. Such cancellation is part of the restructure of the Financing Documents
and is a condition of the RIMCO Financing.
AGREEMENTS
NOW THEREFORE, in consideration of the premises, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Company, Parent and Purchasers agree as follows:
1. No rights have been exercised by any party under the Guaranty, Warrants
or Registration Rights Agreement as of the date of this Cancellation.
2. The Purchasers hereby cancel the Guaranty and Company shall have no
obligations or liability thereunder.
3. The Purchasers hereby cancel the Warrants and Parent shall have no
obligations or liability thereunder.
4. The Parent and the Purchasers hereby cancel the Registration Rights
Agreement and neither the Parent nor the Purchaser shall have any right,
obligation or liability thereunder.
5. Concurrent with the execution of this Cancellation, Purchasers shall
deliver the Guaranty to Company and the Warrants and Registration Rights
Agreement to Parent.
6. Purchasers hereby release any and all liens and security interests in
and to the property and assets of Parent and Company (the "COLLATERAL").
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.15 - Page 2
<PAGE>
7. Purchasers consent to the release of all liens and security interests
in the Collateral by First Interstate Bank of Texas or Wells Fargo.
[SIGNATURES ON FOLLOWING PAGE.]
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.15 - Page 3
<PAGE>
EXECUTED as of the date set forth above.
PURCHASERS:
/S/ T. W. HOEHN, JR.
T. W. HOEHN, JR.
/S/ T. W. HOEHN, III
T. W. HOEHN, III
/S/ JOE C. RICHARDSON, JR., TRUSTEE
JOE C. RICHARDSON, JR., TRUSTEE
U/D/T 5-17-91, AS AMENDED
/S/ WILLIAM F. SEAGLE
WILLIAM F. SEAGLE
AGREED AND ACCEPTED:
TEXOIL, INC., A NEVADA CORPORATION
TEXOIL COMPANY, A TENNESSEE CORPORATION
By: /S/ RUBEN MEDRANO
Ruben Medrano
President of each of the foregoing corporations
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.15 - Page 4
EXHIBIT 10.16
EXHIBIT 10.16
AMENDED AND RESTATED
AGREEMENT OF PURCHASE AND SALE
This Amended and Restated Agreement of Purchase and Sale (the
"AGREEMENT"), is made and entered into effective as of September 6, 1996, by and
between TEXOIL, INC., a Nevada corporation (the "SELLER"), and ________________,
an individual (the "PURCHASER"), and sets forth the terms and conditions of the
sale and purchase of a $_______ Replacement 12% Convertible Promissory Note,
substantially in the form attached hereto as EXHIBIT A (the "NOTE").
RECITALS
A. The Seller and Purchaser entered into that Agreement of Purchase and
Sale dated as of May 6, 1996 (the "ORIGINAL PURCHASE AGREEMENT"), under which
Seller issued to Purchaser a 12% Convertible Promissory Note in the original
principal amount of $_______ (the "ORIGINAL NOTE").
B. Seller has received a new financing commitment under which it will
issue notes to RIMCO PARTNERS, L.P., RIMCO PARTNERS, L.P. II, RIMCO PARTNERS,
L.P. III, and RIMCO PARTNERS, L.P. IV, each a Delaware limited partnership (the
"RIMCO FINANCING"). Seller and Purchaser agree that the RIMCO Financing is in
the best interest of the Seller and will benefit the Purchaser.
C. The Seller and Purchaser now desire to facilitate the RIMCO Financing
by restructuring the financing arrangement contemplated by the Original Purchase
Agreement. Among other things, the Purchaser and Seller will enter into this
Agreement and that certain Cancellation of Guaranty, Warrants and Registration
Rights Agreement dated the same date as this Agreement.
D. The Seller desires to issue and sell to the Purchaser, and the
Purchaser desires to purchase and accept from the Seller, the Note on the terms
and subject to the conditions set forth herein. The Note is issued in
replacement of, but not as a novation of, the Original Note.
E. This Agreement, the Note, and any documents executed in connection
therewith are collectively referred to as the "TRANSACTION DOCUMENTS".
NOW, THEREFORE, in consideration of the premises, the mutual promises and
covenants, and the representations and warranties contained herein, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Purchaser and Seller agree as follows:
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.16 - Page 1
<PAGE>
ARTICLE I
Purchase and Sale
1.1 PURCHASE AND SALE OF THE NOTE. Subject to the terms of this Agreement,
the Seller agrees to issue, sell and deliver the Note to the Purchaser at the
Closing (as defined herein), and Purchaser agrees to purchase and accept the
Note from the Seller at the Closing.
1.2 CONSIDERATION FOR PURCHASE OF THE NOTE. Subject to the terms of this
Agreement, the Purchaser hereby agrees to extend and continue the loan evidenced
by the Original Note under the terms of the Note and to deliver to the Seller
the Original Note at Closing, with such extension and continuation on the terms
of the Note being the consideration for the issuance of the Note (the
"CONSIDERATION").
ARTICLE II
Representations and Warranties of Seller
Seller represents and warrants to the Purchaser as follows:
2.1 ORGANIZATION, STANDING AND QUALIFICATION. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as it is now being
conducted. Seller is licensed and qualified to do business as a foreign
corporation in each jurisdiction in which the character of Seller's properties,
owned or leased, or the nature of its activities makes such qualification or
license necessary, except where failure to be so licensed and qualified would
not have a material adverse effect on Seller's business.
2.2 AUTHORITY; NO DEFAULTS. Seller has all requisite corporate power and
authority to enter into the Transaction Documents and to carry out its
obligations thereunder. The execution and delivery of the Transaction Documents
and the consummation of the transactions contemplated thereby have been duly
authorized by all necessary corporate action on the part of Seller. The
Transaction Documents have been executed and delivered by Seller and constitute
the valid and binding obligation of Seller, enforceable in accordance with their
terms, subject to bankruptcy, insolvency, moratorium and other similar laws
affecting creditors' rights generally and general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). The execution and delivery of the Transaction Documents do
not, and the consummation of the transactions contemplated hereby and thereby
will not, conflict with or result in a breach of or the acceleration of any
obligation under, or constitute a default or event of default (or event which,
with notice or lapse of time or both, would constitute a default) under, any
provision of any charter,
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.16 - Page 2
<PAGE>
bylaw, indenture, mortgage, lien, lease, agreement, contract, instrument, order,
judgment, decree, ordinance or regulation, or any restriction to which any
property of Seller is subject or by which Seller is bound, the effect of which
would be materially adverse to Seller. Seller is not, nor is it alleged to be,
in material violation or default of any applicable law, statute, order, rule or
regulation promulgated or judgment entered by any court, administrative agency
or commission or other governmental agency or instrumentality, domestic or
foreign (a "GOVERNMENTAL ENTITY"), relating to or affecting the operation,
conduct or ownership of the property or business of Seller.
2.3 APPROVALS. Except for compliance with the provisions of the Securities
Exchange Act of 1934 (the "EXCHANGE ACT"), the Securities Act of 1933 (the
"SECURITIES ACT") and the blue sky laws of various states, there is no legal
impediment to the execution and delivery of the Transaction Documents by Seller
or to the consummation of the transactions contemplated thereby, and no filing
or registration with, or authorization, consent or approval of, a Governmental
Entity, shareholders or any other third party is necessary for the consummation
by Seller of the transactions contemplated thereby.
2.4 SEC DOCUMENTS. Seller has provided to the Purchaser a true, complete
and correct copy of Seller's annual report on Form 10-KSB for the fiscal year
ended December 31, 1995, together with all amendments thereto, and any and all
filings with the Securities and Exchange Commission ("SEC") made by Seller
(including all requested exhibits to such filings) since the filing of said Form
10-KSB (all such documents that have been filed with the SEC, as amended, are
referred to as the "SELLER SEC DOCUMENTS"). As of their respective dates, and
except as amended, the Seller SEC Documents complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and none of the Seller SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of Seller
included in the Seller SEC Documents comply as to form in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles ("GAAP") applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto or, in the case of the unaudited statements, as permitted by Form
10-QSB) and fairly present (subject, in the case of the unaudited statements, to
normal recurring audit adjustments) the consolidated financial position of
Seller as of the dates thereof and the consolidated results of its operations
and cash flows for the periods then ended.
2.5 LITIGATION. Except as set forth in Seller SEC Documents, as of the
date of this Agreement, there is no suit, action, proceeding or investigation
pending or, to the best knowledge of Seller, threatened against or affecting
Seller (or any of its respective officers or directors in connection with the
business of Seller), nor is there any outstanding judgment, order, writ,
injunction or decree against Seller, which judgment would have a material
adverse effect on Seller. Seller is not
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.16 - Page 3
<PAGE>
subject to any court order, writ, injunction, decree, settlement agreement or
judgment that contains or orders any on-going obligations, whether prohibitory
or mandatory in nature, the performance of which would have a material adverse
effect on Seller.
2.6 CAPITALIZATION. Seller has authorized capital stock of (a) 50,000,000
shares of Common Stock, par value $.01, of which, as of July 31, 1996, 4,157,073
shares are issued and outstanding, and (b) 10,000,000 shares of preferred stock,
par value $.01 per share ("PREFERRED STOCK"), of which, as of March 31, 1996,
23,000 shares are issued and outstanding. All of the issued and outstanding
shares of Common Stock were duly and validly issued and are fully paid and
non-assessable. None of the outstanding shares of Common Stock have been issued
in violation of any preemptive rights of the current or past stockholders of
Seller. All of the Common Stock issued on the conversion of the Note will be
fully paid, non-assessable and free and clear of any preemptive rights and,
subject to compliance with the statutes and regulations referred to in Section
2.3, Encumbrances. As used in this Agreement, the term "ENCUMBRANCE" means and
includes (i) any security interest, mortgage, deed of trust, lien, charge,
pledge, proxy, adverse claim, equity, power of attorney, or restriction of any
kind, including but not limited to, any restriction or servitude on the use,
transfer, receipt of income, or other exercise of any attributes of ownership,
other than restrictions imposed by the Securities Act or any state blue sky
laws, and (ii) any Uniform Commercial Code financing statement or other public
filing, notice or record that by its terms purports to evidence or notify
interested parties of any of the matters referred to in clause (i) that has not
been terminated or released by another proper public filing, notice or record.
2.7 SUBSIDIARIES. Each subsidiary of Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, has all requisite corporate power and
authority to own, to lease or to operate its properties and to carry on its
business as it is now being conducted and is duly qualified or licensed to do
business in each jurisdiction in which the character of its properties, owned or
leased, or the nature of its activities makes such qualification or license
necessary, unless the failure to be so licensed or qualified would not have a
material, adverse effect on Seller. All outstanding shares of capital stock of
each subsidiary of Seller were duly and validly issued and are fully paid,
nonassessable and owned by Seller or a subsidiary of Seller, free and clear of
all Encumbrances. There are no options, warrants or other rights, agreements or
commitments (including preemptive rights) obligating Seller or any of its
subsidiaries to issue, to sell or to transfer any shares of capital stock or
other securities of any subsidiary of Seller.
2.8 LIABILITIES. Seller has no liabilities or obligations, either accrued,
absolute, contingent, or otherwise that have a material adverse effect on the
value or business of Seller, and Seller has no knowledge of any potential
liability that it reasonably believes would likely result in a material adverse
effect on the value or business of the Seller, other than those (a) reflected or
reserved against in the unaudited consolidated balance sheet of Seller at July
31, 1996, or disclosed in other Seller SEC
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.16 - Page 4
<PAGE>
Documents, (b) incurred in the ordinary course of business, (c) incurred in
connection with the RIMCO Financing, or (d) that are otherwise known to
Purchaser.
2.9 LICENSES, PERMITS, AUTHORIZATIONS, ETC. Seller holds all approvals,
authorizations, consents, licenses, orders, franchises, rights, registrations
and permits of any type required to operate its business as presently conducted,
except where failure to be so authorized would not have a material adverse
effect on Seller's business. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby will not result in any
revocation, cancellation, suspension or modification of any such approval,
authorization, consent, license, order, franchise, right, registration or
permit.
2.10 TAXES AND RETURNS. Seller has filed all required tax returns and
reports. Seller has paid all taxes, assessments and governmental charges and
penalties which it has incurred, except such as are being or may be contested in
good faith by appropriate proceedings. Seller is not delinquent in the payment
of any tax, assessment or governmental charge. No deficiencies for any taxes
have been proposed, asserted, or assessed against Seller, and no requests for
waivers of the time to assess any such tax are pending. For the purposes of this
Agreement, the term "TAX" (including, with correlative meaning, the terms
"taxes" and "taxable") shall include all federal, state, local and foreign
income, profits, franchise, gross receipts, payroll, sales, employment, use,
property, withholding, excise and other taxes, duties or assessments of any
nature whatsoever, together with all interest, penalties and additions imposed
with respect to such amounts.
2.11 INSURANCE. Each policy of property, fire and casualty, commercial
liability, product liability, worker's compensation, professional liability and
title insurance and other forms of insurance (except group, health and life
policies) and each bond issued or posted by any person with respect to any
operations or other activities of Seller is, to the knowledge of Seller, the
legal, valid and binding obligation of the insurer or bond issuer, enforceable
in accordance with its terms, and is in an amount and provides for coverage as
is customary in the ordinary business practices of Seller's industry.
ARTICLE III
Representations and Warranties of Purchaser
Purchaser represents and warrants to the Seller as follows:
3.1 PURCHASER. Purchaser is an individual, over the age of eighteen years,
a citizen of the United States of America and a resident of California.
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
3.2 AUTHORITY; NO DEFAULTS. Purchaser has all requisite legal capacity and
authority to enter into the Transaction Documents and to carry out its
obligations thereunder. The Transaction Documents have been executed and
delivered by Purchaser and constitute the valid and binding obligation of
Purchaser, enforceable in accordance with their terms, subject to bankruptcy,
insolvency, moratorium and other similar laws affecting creditors' rights
generally and general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). The execution
and delivery of the Transaction Documents do not, and the consummation of the
transactions contemplated hereby and thereby will not, conflict with or result
in a breach of or the acceleration of any obligation under, or constitute a
default or event of default (or event which, with notice or lapse of time or
both, would constitute a default) under, any provision of any charter, bylaw,
indenture, mortgage, lien, lease, agreement, contract, instrument, order,
judgment, decree, ordinance or regulation, or any restriction to which any
property of Purchaser is subject or by which Purchaser is bound, the effect of
which would be materially adverse to Purchaser. Purchaser is not, nor is it
alleged to be, in material violation or default of any applicable law, statute,
order, rule or regulation promulgated or judgment entered by any Governmental
Entity, relating to or affecting the operation, conduct or ownership of the
property or business of Purchaser.
3.3 APPROVALS. Purchaser is an accredited investor (as defined in Section
2(15) of the Securities Act, and in Rule 215 and Regulation D promulgated
thereunder), and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of an investment
in Common Stock, and make an informed investment decision. In addition,
Purchaser is a director of Seller. There is no legal impediment to the execution
and delivery of the Transaction Documents by Purchaser or to the consummation of
the transactions contemplated thereby, and no filing or registration with, or
authorization, consent or approval of, a Governmental Entity, shareholders or
any other third party is necessary for the consummation by Purchaser of the
transactions contemplated thereby.
3.4 NO AWARENESS OF BREACH. As of the date hereof and the Closing Date,
Purchaser is not aware of any breach of any representation, warranty, covenant
or other agreement by Seller contained in this Agreement or in any other
Transaction Document.
ARTICLE IV
The Closing
4.1 TIME AND PLACE. The closing of the purchase and sale of the Note (the
"CLOSING") will take place on September 6, 1996 (the "CLOSING DATE"), at the
offices of Seller, unless another place is agreed to by the parties.
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
4.2 CONDITIONS TO THE OBLIGATION OF SELLER. The obligation of Seller to
effect the Closing is subject to the consummation of the RIMCO Financing and to
Purchaser delivering, or causing to be delivered, to Seller the Original Note at
the Closing.
4.3 CONDITIONS TO THE OBLIGATION OF PURCHASER. The obligation of Purchaser
to effect the Closing is subject to the consummation of the RIMCO Financing and
to Seller delivering, or causing to be delivered, to Purchaser at the Closing
the following documents:
(a) the Note; and
(b) a certificate of an officer of the Seller, in a form acceptable
to the Purchaser in its sole discretion, that each of the representations
and warranties of Seller in the Transaction Documents are true as of the
Closing Date.
ARTICLE V
General Provisions
5.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations, warranties and agreements contained in this Agreement shall
survive the Closing until the earlier of the expiration of the statutory
limitation period or such time as the Purchaser is no longer the owner of any of
the capital stock of Seller.
5.2 NOTICES. All notices or other communications which are required or may
be given under this Agreement shall be in writing and shall be deemed to have
been duly given when delivered, transmitted by telecopier (with receipt
confirmed) or mailed by registered or certified first class mail, postage
prepaid, return receipt requested to the parties hereto at the address set forth
below (as the same may be changed from time to time by notice similarly given)
or the last known business or residence address of such other person as may be
designated by either party hereto in writing.
(a) If to Seller:
Texoil, Inc.
1600 Smith Street, Suite 4000
Houston, Texas 77002
Fax: (713) 652-9601
Attn: President
with a copy to:
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
Porter & Hedges, L.L.P.
700 Louisiana Street, 35th Floor
Houston, Texas 77002-2764
Fax: (713) 228-1331
Attn: Nick D. Nicholas
(b) If to Purchaser:
Fax:
with a copy to:
Pillsbury, Madison & Sutro, L.L.P.
101 West Broadway, Suite 1800
San Diego, California 92101-8219
Fax: (619) 236-1995
Attn: David R. Snyder
Shannon, Martin, Finkelstein & Sayre, P.C.
1200 Smith Street, Suite 1300
Houston, Texas 77002
Fax: (713) 752-0337
Attn: Nancy F. Martin
5.3 MISCELLANEOUS. This Agreement and the other Transaction Documents (i)
constitute the entire agreement and supersede all other prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof, (ii) shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns
and is not intended to confer upon any other person any rights or remedies
hereunder, (iii) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of Texas, and (iv) may be
executed in two or more counterparts which when read together shall constitute a
single agreement.
5.4 SCHEDULES. All statements contained in any exhibit, schedule,
appendix, certificate or other instrument delivered by or on behalf of the
parties hereto, or in connection with the transactions contemplated hereby, are
an integral part of this Agreement and shall be deemed representations and
warranties hereunder. Notwithstanding anything in this Agreement or any
Transaction Document to the contrary, Purchaser shall not be entitled to assert,
by action or defense, any breach or inaccuracy
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
in any representation, warranty, covenant, or agreement by Seller under this
Agreement or any other Transaction Document, if, and to the extent that,
Purchaser or any member of Seller's Board of Directors, who is also a purchaser
of a note and warrant from Seller, has knowledge of such breach or inaccuracy.
5.5 PUBLICITY. Seller and Purchaser promptly shall advise and cooperate
with the other prior to issuing, or permitting any of its directors, officers,
employees or agents to issue, any press release with respect to this Agreement
or the explicit transactions contemplated hereby. Notwithstanding the foregoing,
without the prior consent of the Purchaser, neither Seller nor any of its
directors, officers, employees or agents shall issue any press release which
includes the name of the Purchaser or any of the Purchaser' affiliates.
5.6 ASSIGNMENT. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by either of the parties hereto (other
than by operation of law) without the prior written consent of the other party,
which consent may not be unreasonably withheld.
[SIGNATURES ON FOLLOWING PAGES.]
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
SELLER'S SIGNATURE PAGE
IN WITNESS WHEREOF, Seller has signed this Agreement as of the date first
written above.
TEXOIL, INC.,
A NEVADA CORPORATION
By:
Ruben Medrano
President
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
PURCHASER'S SIGNATURE PAGE
IN WITNESS WHEREOF, Purchaser has signed this Agreement as of the date
first written above.
Name:
ATTACHMENTS:
Exhibit A - Form of Replacement 12% Convertible Promissory Note
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.16 - Page 11
EXHIBIT 10.17
EXHIBIT 10.17
THE SECURITIES REPRESENTED BY THIS NOTE AND THE COMMON STOCK ISSUABLE THEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW. THE SECURITIES
REPRESENTED BY THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANY OTHER APPLICABLE SECURITIES
LAWS.
TEXOIL, INC.
Replacement 12% Convertible Promissory Note
$_______ Houston, Texas As of September 6, 1996
Texoil, Inc., a Nevada corporation (the "COMPANY"), for value received,
hereby promises to pay to the order of ________________, an individual (together
with his registered assigns, the "PURCHASER"), the principal sum of
___________________________ AND NO\100 DOLLARS ($_______), together with accrued
interest on the amount of such principal sum, payable in accordance with the
terms set forth below.
ARTICLE I
Definitions
For all purposes of this Note, except as otherwise expressly provided or
unless the context otherwise requires: (i) The terms defined in this Article
have the meanings assigned to them in this Article and include the plural as
well as the singular; (ii) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with generally accepted
accounting principles as promulgated from time to time by the Association of
Independent Certified Public Accountants; and (iii) the words "herein" and
"hereof" and other words of similar import refer to this Note as a whole and not
to any particular Article, Section or other subdivision.
"APPLICABLE LAW" is defined in Section 7.10.
"AVERAGE PRICE" is defined in Section 4.2.
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
"BOARD OF DIRECTORS" means the board of directors of the Company as
elected from time to time or any duly authorized committee of that board.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in Houston, Texas are
authorized or required by law or executive order to be closed.
"COMMON STOCK" means shares of common stock, par value $.01 per share, of
the Company.
"COMPANY FINANCIAL STATEMENTS" shall mean those audited financial
statements of the Company included in the Company's most recent annual report as
filed with the United States Securities and Exchange Commission on Form 10-KSB,
and any amendments thereto.
"CONVERSION EVENT" is defined in Section 4.2.
"CONVERSION PRICE" means the price per share determined in accordance with
Articles IV and V (as adjusted in accordance with the terms of this Note) at
which shares of Common Stock shall be delivered to Purchaser upon conversion of
this Note into Common Stock.
"CONVERTIBLE SECURITIES" is defined in Section 5.2(c).
"DEFAULT" means any event which is, or after notice or passage of time
would be, an Event of Default.
"EVENT OF DEFAULT" has the meaning specified in Section 3.1.
"INDEBTEDNESS" of any Person means all indebtedness of such Person,
whether outstanding on the date of this Note or hereafter created, incurred,
assumed or guaranteed, (i) for the principal of, premium on and interest on all
debts of the Person whether outstanding on the date of this Note or thereafter
created for money borrowed by such Person (including capitalized lease
obligations), money borrowed by others (including capitalized lease obligations)
and guaranteed, directly or indirectly, by such Person, or Purchase Money
Indebtedness for which the Person is directly or contingently liable; (ii) for
all accrued obligations of the Person in respect of any contract, agreement or
instrument imposing an obligation upon the Person to pay funds; (iii) for all
trade debt of the Person; and (iv) for all deferrals, renewals, extensions and
refundings of, and amendments, modifications and supplements to, any of the
indebtedness referred to in (i), (ii) or (iii) above.
"INTEREST" is defined in Section 7.10.
"MAJORITY NOTEHOLDERS" means the holders of at least 66% of the aggregate
outstanding principal amount of the Replacement 12% Convertible Promissory Notes
issued by the Company as
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
of the date of this Note, which notes (including this Note) have an aggregate
original principal amount of $900,000.
"MATURITY DATE", when used with respect to this Note means, the earlier to
occur of (a) October 1, 2002, and (b) the date occurring 30 days after all of
the notes issued under the RIMCO Note Purchase Agreement have been paid in full
or exchanged for common stock of the Company and all commitments of the RIMCO
Noteholders to fund under the RIMCO Finance Documents have terminated.
"NO PAYMENT PERIOD" is defined in Section 7.11.
"NOTE" means this Replacement 12% Convertible Promissory Note.
"ORIGINAL PURCHASE AGREEMENT" means that Agreement of Purchase and Sale
dated as of May 6, 1996, and executed by Purchaser and Company, and which has
been amended and restated by the Purchase Agreement.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or other entity or any government or any agency or political
subdivision thereof.
"PURCHASE AGREEMENT" means that Amended and Restated Agreement of Purchase
and Sale by and between the Company and the Purchaser dated the same date as
this Note and pursuant to which this Note was issued.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness secured by property
acquired with the proceeds of such Indebtedness.
"RIMCO FINANCE DOCUMENTS" means the RIMCO Note Purchase Agreement, the
RIMCO Notes, the RIMCO Guaranty, and all pledge agreements, mortgages, or other
agreements or instruments executed in connection therewith.
"RIMCO FINANCING" means the financing arrangement evidenced by the RIMCO
Finance Documents.
"RIMCO GUARANTY" means the Guaranty and Exchange Agreement dated the same
date as this Note, and executed by the Company (as a guarantor), Texoil Company,
and the RIMCO Noteholders.
"RIMCO NOTE PURCHASE AGREEMENT" means that Note Purchase Agreement dated
the same date as this Note, and executed among Texoil Company, the Company, and
the RIMCO Noteholders.
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
"RIMCO NOTEHOLDERS" means RIMCO Partners, L.P., RIMCO Partners, L.P. II,
RIMCO Partners, L.P. III, and RIMCO Partners, L.P. IV, each, a Delaware limited
partnership, and their respective successors and assigns.
"RIMCO NOTES" means the RIMCO Tranche A Notes and the 10% Senior Secured
General Obligation Notes in the aggregate principal amount of $5,000,000 issued
by Texoil Company under the terms of the RIMCO Note Purchase Agreement.
"RIMCO TRANCHE A NOTES" means the 10% Senior Secured Exchangeable General
Obligation Notes in the aggregate principal amount of $3,000,000 issued by
Texoil Company under the terms of the RIMCO Note Purchase Agreement.
"SEC" means the United States Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act of 1933.
"SHARES" is defined in Section 4.1.
"SUBORDINATION AGREEMENT" means that certain Subordination Agreement dated
the same date as this Note, among Purchaser, Company, Texoil Company, and the
RIMCO Noteholders.
"SUBSIDIARY" means a Person in which more than 50% of the outstanding
voting stock or equity interests is owned or controlled, directly or indirectly,
by the Company or any combination of the Company and one or more other
Subsidiaries. For the purposes of this definition, "VOTING STOCK" means stock or
other interests which ordinarily has voting power for the election of directors,
and equity interests means the right to receive the profits of the Person, when
disbursed, or the assets of the Person upon liquidation or dissolution.
"TEXOIL COMPANY" means Texoil Company, a Tennessee corporation.
ARTICLE II
Payments
2.1 INTEREST. Except as provided in Section 7.11, interest shall accrue on
the outstanding principal amount of this Note at a fixed rate equal to 12% per
annum calculated on the basis of a 365- day year (or 366-day year, as the case
may be). Except as provided in Section 7.11, all past due amounts of principal
and interest shall bear interest at a rate equal to 14% per annum calculated on
the basis of a 365-day year (or 366-day year, as the case may be) until paid.
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
2.2 PAYMENT OF PRINCIPAL AND INTEREST. The principal of this Note shall be
due and payable in full on the Maturity Date. Except as provided in Section
7.11, interest on the outstanding principal balance of this Note shall be due
and payable monthly as it accrues commencing October 10, 1996, and continuing on
the tenth day of each month thereafter until the Maturity Date. Payment shall be
made by delivery of checks to Purchaser at its address set out in this Note or
wire transfers pursuant to instructions from Purchaser.
2.3 MANNER OF PAYMENT UPON MATURITY. On the Maturity Date, payment of
principal and accrued and unpaid interest on this Note will be made by delivery
of checks to Purchaser at its address set out in this Note or wire transfers
pursuant to instructions from Purchaser. If the date upon which the payment of
principal and interest is required to be made pursuant to this Note occurs other
than on a Business Day, then such payment of principal and interest shall be
made on the next occurring Business Day following said payment date and shall
include interest through said next occurring Business Day.
ARTICLE III
Remedies
3.1 EVENTS OF DEFAULT. An "EVENT OF DEFAULT" occurs if:
(a) the Company fails to pay any amount under this Note when due
(except for payments which become due during a No Payment Period as provided in
Section 7.11) and such failure remains uncured for 10 days; or
(b) the Company fails to timely perform any covenant made by the
Company, and such failure remains uncured for a period of 30 days regardless
whether such covenant arises under the Purchase Agreement or this Note; or
(c) there occurs an Event of Default under, and as defined in, the
RIMCO Note Purchase Agreement or the other RIMCO Finance Documents.
3.2 ACCELERATION OF MATURITY. Subject to the terms of the Subordination
Agreement, upon the occurrence of an Event of Default, the principal of, and the
accrued and unpaid interest on, this Note may be declared due and payable only
by the prior written notice of the Majority Noteholders to the Company.
Notwithstanding the immediately preceding sentence, but subject to the terms of
the Subordination Agreement, if an Event of Default is in respect of a
bankruptcy or insolvency proceeding, the principal of this Note and all accrued
and unpaid interest shall automatically become immediately due and payable.
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
ARTICLE IV
Conversion of Note
4.1 CONVERSION PRIVILEGE AND CONVERSION PRICE. Subject to and upon
compliance with the provisions of this Article, at the option of Purchaser, all
or any part of this Note may be converted at any time, at the amount of
principal and accrued interest hereof, into fully paid and nonassessable shares
of Common Stock (the "SHARES"), calculated as to each conversion to the nearest
1/100 of a share at the Conversion Price, determined as hereinafter provided, in
effect at the time of conversion. The Conversion Price shall be initially $.80
per share of Common Stock. The principal amount of this Note shall be reduced by
the amount so converted as if payment or prepayment in such amount has occurred.
4.2 REQUIRED CONVERSION. If at any time after the amounts advanced under
the RIMCO Tranche A Notes equals or exceeds $2,800,000, the average closing
price per share of Common Stock (as reported by the principal securities
exchange or trading market, as the case may be, on which the Common Stock is
then traded) during a period of 20 consecutive trading days (such 20-day average
being referred to herein as the "AVERAGE PRICE") equals or exceeds $3.00 per
share (a "CONVERSION EVENT"), the Company may, at its option exercisable in its
sole discretion at any time during the 30-day period following such Conversion
Event, convert all (but not less than all) of this Note into Shares at the
Conversion Price then in effect. Such conversion shall be deemed to have been
effected immediately upon the mailing of notice by the Company to Purchaser by
first class mail, postage pre-paid, which notice to be effective must be
deposited in the mail on or prior to the close of business on the 30th day
following the Conversion Event, whereupon the person or persons entitled to
receive the Shares shall be treated for all purposes as the record holder of
such Shares and the Note shall be deemed to represent only the right to receive
certificates representing the number of Shares. If the Company does not exchange
the Note in accordance with this Section within the 30-day period following any
Conversion Event, then a new period of trading days shall begin for purposes of
determining whether the Company may exchange the Notes pursuant to this Section.
ARTICLE V
Adjustment of Conversion Price
5.1 ANTI-DILUTION PROVISIONS. The Conversion Price shall be subject to
adjustment from time to time as provided herein. Upon each adjustment of the
Conversion Price, the Purchaser shall thereafter be entitled to purchase, at the
adjusted Conversion Price, the number of shares of Common Stock which equal the
product of (i) the Conversion Price in effect immediately prior to such
adjustment multiplied by (ii) the maximum number of shares the Purchaser could
have purchased by
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
converting the entire Outstanding Balance at the Conversion Price immediately
prior to such adjustment, AND dividing that product by the adjusted Conversion
Price.
5.2 ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF COMMON STOCK.
(a) If the Company issues or sells any Common Stock for no
consideration or for a consideration per share less than the Conversion Price,
the Conversion Price shall be reduced (but not increased, except as otherwise
specifically provided herein) to the price (calculated to the nearest one-tenth
of a cent) determined by dividing (i) an amount equal to the sum of (1) the
product of the total number of shares of Common Stock outstanding immediately
prior to such issue or sale multiplied by the then existing Conversion Price
PLUS (2) the consideration received by the Company upon such issue or sale by
(ii) the total number of shares of Common Stock outstanding immediately after
such issue or sale.
(b) No adjustment shall be made in the Conversion Price in the event
that the Company issues, in one or more transactions, (i) Common Stock upon
exercise of any options issued to officers, directors or employees of the
Company pursuant to a stock option plan or an employment, severance or
consulting agreement as now or hereafter in effect, in each case approved by the
Board of Directors; (ii) Common Stock upon conversion of this Note or any other
note issued under the Purchase Agreement; (iii) Common Stock upon exercise of
any stock purchase warrant or option (other than the options referred to in
clause (i) above) or other convertible security, note or other instrument
outstanding or issued on the date hereof; (iv) Common Stock issued as
consideration in acquisitions; or (v) without duplication, Common Stock issued
upon the exercise of any warrant, option or other right set out on SCHEDULE
5.2(B). In addition, for purposes of calculating any adjustment of the
Conversion Price, all of the shares of Common Stock issuable pursuant to any of
the foregoing shall be assumed to be outstanding prior to the event causing such
adjustment to be made.
(c) In case at any time after the date hereof the Company shall in
any manner grant (whether directly or by assumption in a merger or otherwise)
any rights to subscribe for or to purchase Common Stock or any options (except
for options issued to or reserved for issuance to, officers, directors or
employees of the Company pursuant to a stock option plan or an employment,
severance or consulting agreement in effect as of the date hereof) for the
purchase of Common Stock or any stock or securities convertible into or
exchangeable for Common Stock (such convertible or exchangeable stock or
securities being herein called "CONVERTIBLE SECURITIES"), whether or not such
rights or options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for which shares
of Common Stock are issuable upon the exercise of such rights or options or upon
conversion or exchange of such Convertible Securities (determined by dividing
(i) the total amount, if any, received or receivable by the Company as
consideration for the granting of such rights or options, PLUS the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the exercise of such rights or options,
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
OR PLUS, in the case of such rights or options that relate to Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable upon the issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (ii) the maximum number of shares of Common
Stock issuable upon the exercise of such rights or options or upon the
conversion or exchange of all such Convertible Securities issuable upon the
exercise of such rights or options) SHALL BE LESS THAN the Conversion Price in
effect as of the date of granting such rights or options, then the maximum
number of shares of Common Stock issuable upon the exercise of such rights or
options or upon conversion or exchange of all such Convertible Securities
issuable upon the exercise of such rights or options shall be deemed to be
outstanding as of the date of the granting of such rights or options and to have
been issued for such price per share, with the effect on the Conversion Price
specified herein. Except as provided herein, no further adjustment of the
Conversion Price shall be made upon the actual issuance of such Common Stock or
of such Convertible Securities upon exercise of such rights or options or upon
the actual issuance of such Common Stock upon conversion or exchange of such
Convertible Securities.
(d) If: (i) the purchase price provided for in any right or option,
(ii) the additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities, or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock
shall be decreased (other than by reason of provisions designed to protect
against dilution), the Conversion Price then in effect shall be decreased to the
Conversion Price that would have been in effect had such rights, options or
Convertible Securities provided for such changed purchase price, additional
consideration or conversion rate at the time initially issued.
(e) In case at any time Common Stock or Convertible Securities or
any rights or options to purchase Common Stock or Convertible Securities shall
be issued or sold for cash, the total amount of cash consideration shall be
deemed to be the amount received by the Company. If at any time any Common
Stock, Convertible Securities or any rights or options to purchase any such
Common Stock or Convertible Securities shall be issued or sold for consideration
other than cash, the amount of the consideration other than cash received by the
Company shall be deemed to be the fair value of such consideration, as
determined reasonably and in good faith by the Board of Directors of the
Company. If at any time any Common Stock, Convertible Securities or any rights
or options to purchase any Common Stock or Convertible Securities shall be
issued in connection with any merger or consolidation in which the Company is
the surviving corporation, the amount of consideration received therefor shall
be deemed to be the fair value, as determined reasonably and in good faith by
the Board of Directors of the Company, of such portion of the assets and
business of the nonsurviving corporation as such Board of Directors may
determine to be attributable to such Common Stock, Convertible Securities,
rights or options as the case may be. In case at any time any rights or options
to purchase any shares of Common Stock or Convertible Securities shall be issued
in connection with the issuance and sale of other securities of the Company,
together consisting of one integral transaction in which no consideration is
allocated to such rights
::ODMA\PCDOCS\DOCS\88117\1
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or options by the parties, such rights or options shall be deemed to have been
issued without consideration.
(f) In the case the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them (i) to receive a dividend or
other distribution payable in Common Stock or Convertible Securities, or (ii) to
subscribe for or purchase Common Stock or Convertible Securities, then such
record date shall be deemed to be the date of the issuance or sale of the Common
Stock or Convertible Securities deemed to have been issued or sold as a result
of the declaration of such dividend or the making of such other distribution or
the date of the granting of such right of subscription or purchase, as the case
may be.
(g) The number of shares of Common Stock outstanding at any given
time shall not include shares owned directly by the Company in treasury, and the
disposition of any such shares shall be considered an issuance or sale of Common
Stock.
5.3 STOCK DIVIDENDS. In case the Company shall declare a dividend or make
any other distribution upon any shares of the Company, payable in Common Stock
or Convertible Securities, any Common Stock or Convertible Securities, as the
case may be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
5.4 STOCK SPLITS AND REVERSE SPLITS. In the event that the Company shall
at any time subdivide its outstanding shares of Common Stock into a greater
number of shares, the Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of Shares into which
this Note may be converted immediately prior to such subdivision shall be
proportionately increased, and conversely, in the event that the outstanding
shares of Common Stock shall at any time be combined into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
shall be proportionately increased and the number of Shares into which this Note
may be converted immediately prior to such combination shall be proportionately
reduced.
5.5 REORGANIZATIONS AND ASSET SALES. If any capital reorganization or
reclassification of the capital stock of the Company, or any consolidation,
merger or share exchange of the Company with another Person, or the sale,
transfer or other disposition of all or substantially all of its assets to
another Person shall be effected in such a way that holders of Common Stock
shall be entitled to receive capital stock, securities or assets with respect to
or in exchange for their shares, then the following provisions shall apply:
(a) As a condition of such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer or other disposition,
lawful and adequate provisions shall be made whereby the Purchaser shall
thereafter have the right to purchase and receive upon the terms and conditions
specified in this Note, such shares of capital stock, securities or assets as
may be
::ODMA\PCDOCS\DOCS\88117\1
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issued or payable with respect to or in exchange for a number of outstanding
shares of such Common Stock equal to the number of Shares immediately
theretofore so receivable had such reorganization, reclassification,
consolidation, merger, share exchange or sale not taken place, and in any such
case appropriate provision reasonably satisfactory to Purchaser shall be made
with respect to the rights and interests of Purchaser to the end that the
provisions hereof (including, without limitation, provisions for adjustments of
the Conversion Price and of the number of Shares receivable upon the exercise)
shall thereafter be applicable, as nearly as possible, in relation to any shares
of capital stock, securities or assets thereafter deliverable upon the exercise
of Note.
(b) In the event of a merger, share exchange or consolidation of the
Company with or into another Person as a result of which a number of shares of
common stock or its equivalent of the successor Person greater or lesser than
the number of shares of Common Stock outstanding immediately prior to such
merger, share exchange or consolidation are issuable to holders of Common Stock,
then the Conversion Price in effect immediately prior to such merger, share
exchange or consolidation shall be adjusted in the same manner as though there
were a subdivision or combination of the outstanding shares of Common Stock.
(c) The Company shall not effect any such consolidation, merger,
share exchange, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the successor Person (if other than
the Company) resulting from such consolidation, share exchange or merger or the
Person purchasing or otherwise acquiring such assets shall have assumed by
written instrument executed and mailed or delivered to the Purchaser at the last
address of Purchaser appearing on the books of the Company the obligation to
deliver to Purchaser such shares of capital stock, securities or assets as, in
accordance with the foregoing provisions, Purchaser may be entitled to receive,
and all other liabilities and obligations of the Company hereunder. Upon written
request by the Purchaser, such successor Person will issue a new Note revised to
reflect the modifications in this Note effected pursuant to this Section 5.5.
(d) If a purchase, tender or exchange offer is made to and accepted
by the holders of 50% or more of the outstanding shares of Common Stock, the
Company shall not effect any consolidation, merger, share exchange or sale,
transfer or other disposition of all or substantially all of the Company's
assets with the Person having made such offer or with any affiliate of such
Person, unless prior to the consummation of such consolidation, merger, share
exchange, sale, transfer or other disposition the Purchaser shall have been
given a reasonable opportunity to then elect to receive upon the conversion of
the Note either the capital stock, securities or assets then issuable with
respect to the Common Stock or the capital stock, securities or assets, or the
equivalent, issued to previous holders of the Common Stock in accordance with
such offer.
5.6 ADJUSTMENT FOR ASSET DISTRIBUTION. If the Company declares a dividend
or other distribution payable to all holders of shares of Common Stock in
evidences of indebtedness of the Company or other assets of the Company
(including, cash (other than regular cash dividends declared
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
by the Board of Directors), capital stock (other than Common Stock, Convertible
Securities or options or rights thereto) or other property), the Conversion
Price in effect immediately prior to such declaration of such dividend or other
distribution shall be reduced by an amount equal to the amount of such dividend
or distribution payable per share of Common Stock, in the case of a cash
dividend or distribution, or by the fair value of such dividend or distribution
per share of Common Stock (as reasonably determined in good faith by the Board
of Directors of the Company), in the case of any other dividend or distribution.
Such reduction shall be made whenever any such dividend or distribution is made
and shall be effective as of the date as of which a record is taken for purpose
of such dividend or distribution or, if a record is not taken, the date as of
which holders of record of Common Stock entitled to such dividend or
distribution are determined.
5.7 DE MINIMIS ADJUSTMENTS. No adjustment in the number of shares of
Common Stock purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one share of Common Stock
purchasable upon conversion of the Note and no adjustment in the Conversion
Price shall be required unless such adjustment would require an increase or
decrease of at least $.01 in the Conversion Price; provided, however, that any
adjustments which are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations shall be made to the
nearest full share or nearest one hundredth of a dollar, as applicable.
5.8 NOTICE OF ADJUSTMENT. Whenever the Conversion Price or the number of
Shares issuable upon the conversion of the Note shall be adjusted as herein
provided, or the rights of the Purchaser shall change by reason of other events
specified herein, the Company shall compute the adjusted Conversion Price and
the adjusted number of Shares in accordance with the provisions hereof and shall
prepare an Officer's Certificate setting forth the adjusted Conversion Price and
the adjusted number of Shares issuable upon the conversion of the Note or
specifying the other shares of stock, securities or assets receivable as a
result of such change in rights, and showing in reasonable detail the facts and
calculations upon which such adjustments or other changes are based. The Company
shall cause to be mailed to the Purchaser copies of such Officer's Certificate
together with a notice stating that the Conversion Price and the number of
Shares purchasable upon conversion of the Note have been adjusted and setting
forth the adjusted Conversion Price and the adjusted number of Shares
purchasable upon conversion of the Note.
5.9 NOTIFICATIONS TO PURCHASER. In case at any time the Company proposes:
(a) to declare any dividend upon its Common Stock payable in capital
stock or make any special dividend or other distribution (other than cash
dividends) to the holders of its Common Stock;
(b) to offer for subscription pro rata to all of the holders of its
Common Stock any additional shares of capital stock of any class or other
rights;
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
(c) to effect any capital reorganization, or reclassification of the
capital stock of the Company, or consolidation, merger or share exchange of the
Company with another Person, or sale, transfer or other disposition of all or
substantially all of its assets; or
(d) to effect a voluntary or involuntary dissolution, liquidation or
winding up of the Company,
then, in any one or more of such cases, the Company shall give the Purchaser (i)
at least 10 days (but not more than 90 days) prior written notice of the date on
which the books of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights or for determining rights to vote
in respect of any such issuance, reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer, disposition, dissolution,
liquidation or winding up, and (ii) in the case of any such issuance,
reorganization, reclassification, consolidation, merger, share exchange, sale,
transfer, disposition, dissolution, liquidation or winding up, at least 10 days
(but not more than 90 days) prior written notice of the date when the same shall
take place. Such notice in accordance with the foregoing clause (i) shall also
specify, in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled thereto, and
such notice in accordance with the foregoing clause (ii) shall also specify the
date on which the holders of Common Stock shall be entitled to exchange their
Common Stock, as the case may be, for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, share
exchange, sale, transfer, disposition, dissolution, liquidation or winding up,
as the case may be.
5.10 COMPANY TO PREVENT DILUTION. If any event or condition occurs as to
which other provisions of this Article are not strictly applicable or if
strictly applicable would not fairly protect the exercise or purchase rights of
the Note evidenced hereby in accordance with the essential intent and principles
of such provisions, or that might materially and adversely affect the exercise
or purchase rights of the Purchaser under any provisions of this Note, then the
Company shall make such adjustments in the application of such provisions, in
accordance with such essential intent and principles, so as to protect such
exercise and purchase rights as aforesaid, and any adjustments necessary with
respect to the Conversion Price and the number of Shares purchasable hereunder
so as to preserve the rights of the Purchaser hereunder. In no event shall any
such adjustment have the effect of increasing the Conversion Price as otherwise
determined pursuant to this Article except in the event of a combination of
shares.
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
ARTICLE VI
Covenants
The Company covenants and agrees that, so long as this Note is
outstanding:
6.1 USE OF PROCEEDS. The Company will use the proceeds of this Note to pay
the Company's working interest share of certain costs of conducting seismic and
other operations for the Raceland, Greens Lake and Laurel Grove prospects, the
payment of preferred dividends, general corporate purposes, and the reduction of
Indebtedness of the Company and its Subsidiaries.
6.2 PAYMENT OF PRINCIPAL AND ACCRUED INTEREST. The Company will duly and
punctually pay or cause to be paid the principal sum of this Note, together with
interest accrued thereon from the date hereof to the date of payment, in
accordance with the terms hereof.
6.3 CORPORATE EXISTENCE. The Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, rights (charter and statutory) and franchises; provided, however,
that the Company shall not be required to preserve any such right or franchise
if it shall reasonably determine that the preservation thereof is no longer
desirable in the conduct of its business.
6.4 TAXES; CLAIMS; ETC. The Company will promptly pay and discharge all
lawful taxes, assessments, and governmental charges or levies imposed upon it or
upon its income or profits, or upon any of its properties, real, Personal, or
mixed, before the same shall become in default, as well as all lawful claims for
labor, materials, and supplies or otherwise which, if unpaid, might become a
lien or charge upon such properties or any part thereof, and which lien or
charges will have a material adverse effect on the business of the Company;
PROVIDED, however, that the Company shall not be required to pay or cause to be
paid any such tax, assessment, charge, levy, or claim prior to institution of
foreclosure proceedings if the validity thereof shall concurrently be contested
in good faith by appropriate proceedings and if the Company shall have
established reserves deemed by the Company adequate with respect to such tax,
assessment, charge, levy, or claim.
6.5 MAINTENANCE OF EXISTENCE AND PROPERTIES. The Company will, and will
cause each Subsidiary to, keep its material properties in good repair, working
order, and condition, ordinary wear and tear excepted, so that the business
carried on may be properly conducted at all times in accordance with prudent
business management.
6.6 SEC REPORTS. The Company will deliver to the Purchaser within 20 days
after it files them with the SEC, copies of its annual and quarterly reports and
of the information, documents, and other reports (or copies of such portions of
any of the foregoing as the SEC may by rules and regulations prescribe) which
the Company is required to file with the SEC pursuant to Section 13 or
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
15(d) of the Securities Exchange Act of 1934. The Company will timely comply
with its reporting and filing obligations under the applicable federal
securities laws.
6.7 NOTICE OF DEFAULTS. The Company will promptly notify the Purchaser in
writing of the occurrence of (i) any Event of Default under this Note, and (ii)
any event of default (or if any event of default would result upon any payment
with respect to this Note) with respect to any Indebtedness as such event of
default is defined therein or in the instrument under which it is outstanding,
permitting the holder to accelerate the maturity of such Indebtedness.
6.8 MERGERS AND ACQUISITIONS. Without the consent of the Majority
Noteholders, the Company or any Subsidiary will not dissolve, liquidate,
consolidate or merge with or sell or transfer all or a substantial portion of
its assets to any Person.
6.9 COMPLIANCE WITH LAWS. The Company will promptly comply with all laws,
ordinances and governmental rules and regulations to which it is subject.
ARTICLE VII
Miscellaneous
7.1 COLLECTION FEES. If this Note is placed in the hands of an attorney
for collection, and if it is collected through any legal proceedings at law or
in equity or in bankruptcy, receivership or other court proceedings, the Company
hereby undertakes to pay all costs and expenses of collection including, but not
limited to, court costs and the reasonable attorney's fees of Purchaser.
7.2 CONSENT TO AMENDMENTS. This Note may be amended, and the Company may
take any action herein prohibited, or omit to perform any act herein required to
be performed by it, if and only if the Company shall obtain the written consent
to such amendment, action or omission to act from the Majority Noteholders.
7.3 BENEFITS OF NOTE. Nothing in this Note, express or implied, shall give
to any Person, other than the Company, Purchaser, and their successors any
benefit or any legal or equitable right, remedy or claim under or in respect of
this Note.
7.4 SUCCESSORS AND ASSIGNS. All covenants and agreements in this Note
contained by or on behalf of the Company and the Purchaser shall bind and inure
to the benefit of the respective successors and assigns of the Company and the
Purchaser.
7.5 RESTRICTIONS ON TRANSFER. Subject to the provisions of this Section,
this Note is transferable in the same manner and with the same effect as in the
case of a negotiable instrument payable to a specified Person.
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
7.6 NOTICE; ADDRESS OF PARTIES. All notices or other communications which
are required or may be given under this Note shall be in writing and shall be
deemed to have been duly given when delivered, transmitted by telecopier (with
receipt confirmed) or mailed by registered or certified first class mail,
postage prepaid, return receipt requested to the parties hereto at the address
set forth below (as the same may be changed from time to time by notice
similarly given) or the last known business or residence address of such other
person as may be designated by either party hereto in writing.
(a) If to Company:
Texoil, Inc.
1600 Smith Street, Suite 4000
Houston, Texas 77002
Fax: (713) 652-9601
Attn.: President
with a copy to:
Porter & Hedges, L.L.P.
700 Louisiana Street, 35th Floor
Houston, Texas 77002-2764
Fax: (713) 228-1331
Attn.: Nick D. Nicholas
(b) If to Purchaser:
Fax:
with a copy to:
Pillsbury, Madison & Sutro, L.L.P.
101 West Broadway, Suite 1800
San Diego, California 92101-8219
Fax: (619) 236-1995
Attn.: David R. Snyder
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
Shannon, Martin, Finkelstein & Sayre, P.C.
1200 Smith Street, Suite 1300
Houston, Texas 77002
Fax: (713) 752-0337
Attn.: Nancy F. Martin
7.7 SEVERABILITY CLAUSE. In case any provision in this Note shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions in such jurisdiction shall not in
any way be affected or impaired thereby; provided, however, such construction
does not destroy the essence of the bargain provided for hereunder.
7.8 GOVERNING LAW. This Note shall be governed by, and construed in
accordance with, the internal laws of the State of Texas (without regard to
principles of choice of law).
7.9 WAIVERS. The Company waives any right to notice of default or demand,
notice of intent to accelerate, notice of acceleration, and any other notice not
specifically required under this Note. Failure to exercise any remedy under this
Note does not constitute a waiver of such remedy.
7.10 USURY. It is the intention of the parties hereto to conform strictly
to the applicable laws of the State of Texas and the United States of America,
and judicial or administrative interpretations or determinations thereof
regarding the contracting for, charging and receiving of interest for the use,
forbearance, and detention of money (referred to as "APPLICABLE LAW"). The
Purchaser shall have no right to claim, to charge or to receive any interest in
excess of the maximum rate of interest, if any, permitted to be charged on that
portion of the amount representing principal which is outstanding and unpaid
from time to time by Applicable Law. Determination of the rate of interest for
the purpose of determining whether this Note is usurious under Applicable Law
shall be made by amortizing, prorating, allocating and spreading in equal parts
during the period of the actual time of this Note, all interest or other sums
deemed to be interest (referred to in this Section as "INTEREST") at any time
contracted for, charged or received from the Company in connection with this
Note. Any Interest contracted for, charged or received in excess of the maximum
rate allowed by Applicable Law shall be deemed a result of a mathematical error
and a mistake. If this Note is paid in part prior to the end of the full stated
term of this Note and the Interest received for the actual period of existence
of this Note exceeds the maximum rate allowed by Applicable Law, Purchaser shall
credit the amount of the excess against any amount owing under this Note or, if
this Note has been paid in full, or in the event that it has been accelerated
prior to maturity, Purchaser shall refund to the Company the amount of such
excess, and shall not be subject to any of the penalties provided by Applicable
Law for contracting for, charging or receiving Interest in excess of the maximum
rate allowed by Applicable Law. Any such excess which is unpaid shall be
canceled.
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
7.11 SUBORDINATION AND RIMCO FINANCING. This Note is subject to the terms
of the Subordination Agreement and to the RIMCO Finance Documents. If at any
time, under the terms of the Subordination Agreement or the RIMCO Finance
Documents, Company is precluded from paying (and Purchaser is precluded from
receiving) any payments under the terms of this Note ("NO PAYMENT PERIOD"), each
payment which becomes due during such period shall not thereafter accrue
interest, shall not be deemed to be past due under Section 2.1, and shall be
deemed to be due on the Maturity Date. If Company again is permitted to make
scheduled payments under the terms of this Note, Company is not obligated to pay
the installments which became due during the No Payment Period. Instead, Company
shall begin paying installments with the next installment due after the No
Payment Period ends and the scheduled payments that were not paid during the No
Payment Period shall be due and payable at the Maturity Date. Installments which
become due during a No Payment Period shall not thereafter accrue interest.
7.12 REPLACEMENT NOTE. This Note is issued in replacement of, but not as a
novation of, that certain 12% Convertible Promissory Note dated as of May 6,
1996, in the original principal amount of $_______, and issued by the Company to
Purchaser under the terms of the Original Purchase Agreement.
THE RIGHTS AND OBLIGATIONS OF THE COMPANY AND THE PURCHASER SHALL BE
DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS AND INSTRUMENTS AND ANY
PRIOR ORAL AGREEMENTS BETWEEN THE PURCHASER AND THE COMPANY ARE SUPERSEDED BY
AND MERGED INTO SUCH WRITINGS. THIS NOTE (AS AMENDED IN WRITING FROM TIME TO
TIME) AND THE OTHER WRITTEN AGREEMENTS EXECUTED BY THE COMPANY AND PURCHASER (OR
BY THE COMPANY FOR THE BENEFIT OF PURCHASER) REPRESENT THE FINAL AGREEMENT
BETWEEN THE COMPANY AND THE PURCHASER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed on the date first above written.
TEXOIL, INC.
By:
Ruben Medrano
President
Attachments:
Schedule 5.2(b) - Capitalization
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<PAGE>
SCHEDULE 5.2(B)
CAPITALIZATION SCHEDULE
AS OF JULY 31, 1996
<TABLE>
<CAPTION>
Common
Shares PROCEEDS
Expiration After TO
NUMBER CLASS DATE CONVERSION TEXOIL
- ------ ----- ---- ---------- ------
<S> <C> <C> <C> <C>
4,058,648(4) Common 4,058,648 -0-
98,423(5) Employee Salary Compensation-- 98,423 -0-
'95 Plan
29,463(6) Employee Salary Compensation-- 29,463 -0-
'96 Plan
23,000 Class "A" Preferred 766,667 -0-
750,000 Class "A" Warrants ($3.50) 05-26-99 750,000 $2,625,000
750,000 Class "B" Warrants ($4.50) 05-26-99 750,000 3,375,000
300,000 Underwriter Warrants ($3.88) 05-26-99 300,000 1,162,500
281,384 Options to J. Graves ($.45) 12-31-99 281,384 126,623
281,384 Options to J. Richardson ($.45) 12-31-99 281,384 126,623
20,000 Employee Options ($3.00) RM 20,000 60,000
5,000 Option to Marc Countiss ($3.50) 09-15-00 5,000 17,500
1,100,000 Convertible May 96 Notes ($.80) 1,375,000 -0-
1,100,000 Convertible May 96 Note 5 years 1,100,000 1,441,000
Warrants ($1.31) - to be
eliminated at Closing.
50,000 Option to Bill Seagle ($1.56) 50,000 78,000
30,000 Option to Ruben Medrano ($1.31) 30,000 39,300
20,000 Option to J. D. Hughes ($1.25) - 20,000 25,000
to be issued upon Closing.
TOTAL FULLY DILUTED 9,915,969 $9,076,546
========= ==========
</TABLE>
- --------
4. Number accurate as of March 31, 1995 (see first quarter 1995 10-QSB)
5. Includes shares issued from April 1995 through February 1996
6. Includes shares to be issued from March 1996 through July 1996
EXHIBIT 10.18
STOCK OWNERSHIP AND
REGISTRATION RIGHTS AGREEMENT
AMONG
TEXOIL, INC.,
AND
T. W. HOEHN, JR.
T. W. HOEHN, III
AND
WILLIAM F. SEAGLE
SEPTEMBER 6, 1996
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
STOCK OWNERSHIP AND REGISTRATION RIGHTS AGREEMENT
AMONG
TEXOIL, INC.
AND
T. W. HOEHN, JR., T. W. HOEHN, III, AND WILLIAM F. SEAGLE
THIS STOCK OWNERSHIP AND REGISTRATION RIGHTS AGREEMENT dated as of
September 6, 1996, (this "Agreement") among TEXOIL, INC., a Nevada corporation
(the "Company"), and T. W. HOEHN, JR., T. W. HOEHN III, AND WILLIAM F. SEAGLE
(collectively, the "Shareholder Holders," and together with their distributees,
successors and assigns, the "Holders"), is effective for all purposes as of the
date specified in Article III hereof.
W I T N E S S E T H:
WHEREAS, pursuant to the terms and subject to the conditions of those
three certain Amended and Restated Agreements of Purchase and Sale (the "Note
Purchase Agreements") dated as of even date herewith between the Company and,
respectively, the Shareholder Holders, the Company will issue and sell to each
Shareholder Holder, in various amounts, a Replacement 12% Convertible Promissory
Note (collectively, the "Notes", and each individually, a "Note") and the Notes
are in the aggregate principal amount of $900,000; and
WHEREAS, the Notes are convertible or exchangeable according to their
terms for shares of common stock of Company, par value $.01 per share (the
"Company Common Stock"); and
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to the closing of the transactions contemplated by the Note Purchase
Agreements;
NOW, THEREFORE, to induce the parties hereto to close the transactions
contemplated by the Note Purchase Agreements (such closing referred to herein as
the "Closing") and in consideration of the aforesaid and of the mutual
representations, warranties and covenants contained herein and in the Note
Purchase Agreements, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto, intending
to be legally bound, agree as follows:
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.18 - Page 2
<PAGE>
ARTICLE I
DEFINITIONS; COMPANY REPRESENTATIONS,
WARRANTIES AND COVENANTS
SECTION 1.01 CERTAIN DEFINED TERMS. Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings set forth in the
Note Purchase Agreements. For purposes of this Agreement,
"1933 ACT" means the Securities Act of 1933, as amended.
"1934 ACT" means the Securities and Exchange Act of 1934, as amended.
"AGREEMENT" has the meaning specified in the preamble.
"BLUE SKY FILING" has the meaning specified in SECTION 2.09(A).
"CLOSING" has the meaning specified in the recitals.
"COMMISSION" means the Securities and Exchange Commission.
"COMPANY" has the meaning specified in the preamble.
"COMPANY COMMON STOCK" has the meaning specified in the recitals.
"DEMAND REGISTRATIONS" has the meaning specified in SECTION 2.01(A).
"HOLDERS" has the meaning specified in the preamble.
"NOTE PURCHASE AGREEMENTS" has the meaning specified in the recitals.
"NOTES" has the meaning specified in the recitals.
"PERMITTED INTERRUPTION" has the meaning specified in SECTION 2.01(G).
"PIGGYBACK REGISTRATION" has the meaning specified in SECTION 2.02(A).
"REGISTRABLE SECURITIES" means the Shares and the Related Securities. As
to any particular Registrable Securities, once issued such securities shall
cease to be Registrable Securities when (a) a registration statement with
respect to the sale of such securities shall have become effective under the
1933 Act and such securities shall have been disposed of in accordance with the
plan of
::ODMA\PCDOCS\DOCS\88117\1
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distribution set forth in such registration statement, (b) such securities shall
have been distributed in accordance with Rule 144 under the 1933 Act or (c) such
securities shall have been otherwise transferred, new certificates therefor not
bearing a legend restricting further transfer shall have been delivered in
exchange therefor by Company and subsequent disposition of such securities shall
not require registration or qualification under the 1933 Act or any similar
state law then in force.
"REGISTRATION EXPENSES" has the meaning specified in SECTION 2.07.
"RELATED SECURITIES" means, collectively, other than the Shares, (i) any
and all securities issued or issuable as a result of adjustments made under the
Notes, and in each case any and all securities otherwise exchanged therefor or
distributed, issued or issuable with respect thereto and (ii) any and all
securities of Company or any successor thereto or assignee thereof that are
hereafter transferred, distributed, issued or issuable to the Holders.
"RIMCO NOTE PURCHASE AGREEMENT" means that certain Note Purchase Agreement
dated the same date as this Agreement among the Company, the RIMCO Noteholders,
and Texoil Company, a Tennessee corporation.
"RIMCO NOTEHOLDERS" means the holders of RIMCO Tranche A Notes, as defined
in the RIMCO Note Purchase Agreement.
"SHAREHOLDER HOLDERS" has the meaning specified in the preamble.
"SHARES" means, collectively, shares of Company Common Stock issued or
issuable upon exchange or conversion of the Notes and all shares of Company
Common Stock exchanged therefor or distributed, issued or issuable with respect
thereto.
SECTION A. UNDERTAKING TO FILE REPORTS AND COOPERATE IN RULE 144
TRANSACTIONS. For as long as any Holder shall continue to hold any Registrable
Securities, Company shall file, on a timely basis, all annual, quarterly and
other reports required to be filed by it under Sections 13 and 15(d) of the 1934
Act and the rules and regulations promulgated by the Commission thereunder, as
amended from time to time during the term of this Agreement. In the event of any
proposed transfer of Registrable Securities other than pursuant to a sale or
transfer registered under the 1933 Act, Company shall cooperate with each Holder
so as to enable such sales to be made in accordance with applicable laws, rules
and regulations, the requirements of Company's transfer agents, and the
reasonable requirements of the broker through which the sales are proposed to be
executed, and shall, upon request and subject to applicable law, furnish
unlegended certificates representing Shares and Related Securities in such
numbers and denominations as any Holder shall reasonably require for delivery
pursuant to such sales. The Holders will have all of the rights set forth
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
in this Agreement to register the offering of the Registrable Securities
notwithstanding any availability of Rule 144 under the 1933 Act with respect to
the sale of all or part of the Registrable Securities.
SECTION 1.02 SECTIONS 411 THROUGH 444 OF THE NEVADA GENERAL CORPORATION
LAW. If at any time Company shall be governed by Sections 411 through 444 of
the Nevada General
Corporation Law, Company hereby covenants that it will use its reasonable best
efforts, subject to compliance with applicable law, to take all actions
necessary under Nevada law, including, without limitation, the approval by the
Board of Directors of Company of the Transaction Documents and the consummation
of the transactions contemplated thereby, to render the provisions of Sections
411 through 444 of the Nevada General Corporation Law inapplicable to the
Shareholder Holders and their affiliates and to the transactions contemplated in
the Transaction Documents, including, without limitation, the acquisition of
shares of Company Common Stock by the Shareholder Holders pursuant to the
transactions contemplated by the Transaction Documents, as may be amended from
time to time.
SECTION 1.03 BOSTON STOCK EXCHANGE. Company shall as promptly as
practicable prepare and file an application to list the Registrable Securities
on each exchange or automated market on which comparable securities of the
Company are then traded, including, without limitation, the Boston Stock
Exchange (if applicable), effective as soon as practicable after the issuance of
such Registrable Securities and shall use its reasonable best efforts to cause
such application to be approved as promptly as practicable.
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.01 DEMAND REGISTRATIONS. (a) GENERAL. Upon the written request
to Company of Holders of not less than a majority (in then market value) of the
then outstanding Registrable Securities, including not less than a majority (in
then market value) of the then outstanding Registrable Securities held by the
Shareholder Holders, to Company that Company effect the registration under the
1933 Act, such registration to occur at any time, of all or part of the
Registrable Securities and specifying the intended method of disposition
thereof, Company will give prompt written notice of such request to all other
Persons, if any, who have contractual rights to request that any of their shares
be piggybacked onto any registration form proposed to be used to register the
Registrable Securities requested by such Holders, and thereupon Company will,
subject to the provisions of this Agreement, use its reasonable best efforts to
include in the registration under the 1933 Act all shares of Company Common
Stock that persons having contractual registration rights with respect to such
shares have requested in writing that Company register, PROVIDED such request is
given to Company within 20 days after the receipt of the aforesaid written
notice by Company (specifying the intended method of disposition of such Company
Common Stock), all to
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
the extent requisite to permit the intended disposition of the Registrable
Securities and shares of Company Common Stock to be so registered. All
registrations requested pursuant to this SECTION 2.01(A) are referred to herein
as "Demand Registrations."
(b) NUMBER OF DEMAND REGISTRATIONS. Subject to the provisions of SECTION
2.01(A), the Holders shall, collectively, be entitled to request one Demand
Registration.
(c) REGISTRATION OF OTHER SECURITIES. Whenever Company shall effect a
Demand Registration of Company Common Stock pursuant to SECTION 2.01(A) in
connection with an underwritten offering by the Holders, no securities other
than shares of Company Common Stock shall be included among the securities
covered by such registration unless (i) the managing underwriter of such
offering shall have advised Company in writing that the inclusion of such other
securities would not adversely affect such offering or (ii) the Holders of
Registrable Securities participating in such Demand Registration shall have
consented in writing to the inclusion of such other securities.
(d) REGISTRATION STATEMENT FORM. Demand Registrations shall be on such
appropriate registration form of the Commission (excluding Form S-8 or Form S-4
(or any successor form)) (i) as shall be selected by Company and shall be
reasonably acceptable to the Holders and (ii) as shall permit the disposition of
such Registrable Securities in accordance with the intended method or methods of
disposition specified in the Holders' request for such registration, including,
without limitation, a "shelf offering" or disposition pursuant to Rule 415 under
the 1933 Act. Company and the Holders agree to include in any such registration
statement all information and exhibits that, in the opinion of counsel to the
Holders or counsel to Company, is required to be included therein.
(e) EFFECTIVE REGISTRATION STATEMENT. A registration requested pursuant to
SECTION 2.01(A) shall not be deemed to have been effected and will NOT be
considered one of the Demand Registrations which may be requested pursuant to
this Agreement if (i) a registration statement with respect thereto has not
become effective or if the request for the Demand Registration is withdrawn
prior to effectiveness or such registration is interfered with by any stop
order, injunction or other order or requirement of the Commission or other
governmental agency or court for any reason and has not thereafter become
effective, (ii) after it has become effective, it does not remain effective for
a period of at least 120 days or, in the case of a "shelf" registration or
registration pursuant to Rule 415 under the 1933 Act, for a period of at least
two years (unless the Registrable Securities registered thereunder have been
sold or disposed of prior to the expiration of such 120-day period or such
two-year period, as the case may be), (iii) the conditions to closing specified
in any underwriting agreement entered into in connection with such registration
are not satisfied or waived other than by reason of the failure or refusal of
the Holders to satisfy or perform a condition to such closing or (iv) the
Holders are not able to register and sell all of the Registrable Securities
requested to be included in such Demand Registration, but only if such
registration statement is for a "firm
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.18 - Page 6
<PAGE>
commitment underwriting" rather than for an "at the market sale" by the Holders.
In any event, Company shall pay all Registration Expenses in connection with any
such registration initiated but not so effected.
(f) PRIORITY ON DEMAND REGISTRATIONS. In the event that the managing
underwriters of a requested Demand Registration advise Company in writing that
in their opinion the number of shares of Registrable Securities proposed to be
included in any such registration exceeds the number of securities that can be
sold in such offering, Company shall include in such registration only the
number of shares of Registrable Securities that in the opinion of such
underwriters can be sold. If the number of Registrable Securities requested to
be sold in a Demand Registration exceeds the number of shares of Registrable
Securities that can be sold, Company shall include in such Demand Registration
(i) FIRST, the Registrable Securities requested to be included therein by the
Holders, and (ii) SECOND, other securities requested to be included in such
registration.
(g) RESTRICTIONS ON DEMAND REGISTRATIONS. Company shall not be obligated
to effect any Demand Registration within 180 days after the effective date of a
previous Demand Registration or a previous registration under which any Holder
exercised piggyback rights pursuant to SECTION 2.02 hereof. Company may postpone
(such postponement referred to herein as a "Permitted Interruption") for a
reasonable period of time (not to exceed 90 days, which may not thereafter be
extended without approval by the Holders participating in such Demand
Registration, which approval will not be unreasonably withheld) the filing or
the effectiveness of a registration statement for a Demand Registration if, at
the time it receives a request for such registration (i) Company is engaged in
any active program for repurchase of Company Common Stock and furnishes to the
Holders an Officer's Certificate to that effect, (ii) Company is conducting or
about to conduct an offering of Company Common Stock or other securities and
Company is advised by the investment banker engaged by Company to conduct the
offering that such offering would be affected adversely by the registration so
demanded and Company furnishes to the Holders an Officer's Certificate to that
effect, or (iii) the board of directors of Company shall determine in good faith
that such offering will interfere with a pending or contemplated financing,
merger, acquisition, business combination, sale of assets, recapitalization or
other similar corporate action of Company and Company furnishes to the Holders
an Officer's Certificate to that effect. After such Permitted Interruption,
Company shall effect such registration as promptly as practicable without
further request from the Holders unless such request has been withdrawn.
(h) SELECTION OF UNDERWRITERS. The Holders shall have the right to select
such investment bankers and managers as shall be reasonably acceptable to
Company to administer the offering of Registrable Securities for which a Demand
Registration is requested. The Holders shall, in their sole discretion,
negotiate the terms of the underwriters' fees and expenses, the underwriting
discount and commission and the transfer taxes.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.18 - Page 7
<PAGE>
(i) PREEMPTION OF DEMAND REGISTRATION. Notwithstanding anything to the
contrary contained herein, if at any time a Demand Registration has been
requested pursuant to SECTION 2.01(A), Company may elect to effect an
underwritten primary registration on behalf of Company if Company's board of
directors believes that such primary registration would be in the best interests
of Company or if the managing underwriter for the requested Demand Registration
advises Company in writing that in their opinion in order to sell the
Registrable Securities subject to such Demand Registration Company should
include its own securities. Promptly after receiving a request for a Demand
Registration, Company shall notify the members of its board of directors (and
the board of directors shall consider the issue within 30 days after receiving
such request), and Company shall meet with the managing underwriter and shall
decide whether or not to effect an underwritten primary registration on behalf
of Company, and failure to convene such a meeting and make such determination
within such 30-day period shall constitute a waiver by Company of its right to
preempt a Demand Registration under this SECTION 2.01(I). If Company elects to
effect a primary registration after receiving a request to effect a Demand
Registration, Company shall give prompt written notice (and in any event within
60 days after receiving a request for a Demand Registration) to each Holder
requesting such Demand Registration of Company's intention to effect such a
primary registration and shall afford such Holder or Holders rights to Piggyback
Registrations contained in SECTION 2.02 hereof. If Company elects to effect a
primary registration after receiving a request to effect a Demand Registration,
such registration shall not count as one of the Demand Registrations of the
Holders permitted under SECTION 2.01(B) hereof, unless all Registrable
Securities requested to be included in the Demand Registration are included in
such primary registration.
SECTION 2.02 PIGGYBACK REGISTRATIONS. (a) GENERAL. Whenever Company
proposes to register any shares of Company Common Stock or other equity
securities under the 1933 Act (other than registrations solely for shares to be
issued in connection with any employee benefit plan or a merger, consolidation
or other business combination registered on Form S-4 (or any successor form
thereto)) and the registration form to be used may be used for the registration
of Shares or Related Securities, as the case may be (a "Piggyback
Registration"), Company shall give prompt written notice (in any event within 10
business days after its receipt of notice of any exercise of other registration
rights) to each Holder of its intention to effect such a registration and shall
use its reasonable best efforts to include in such registration all of the
Registrable Securities with respect to which Company receives from any Holder a
written request for inclusion therein within 20 days after the receipt by the
Holders of Company's notice (five business days if Company gives telephonic
notice to the Holders, with written confirmation to follow immediately
thereafter, stating that (i) such registration will be on Form S-3 (or any
comparable or successor form or comparable form then applicable to small
business issuers) and (ii) such shorter period of time is required because of a
planned filing date), which request shall specify the number of Registrable
Securities requested to be included in such registration by such Holder. If
Company elects, prior to effectiveness, not to proceed with a primary
registration of Company Common Stock or other equity securities, it shall not be
obligated to register any Registrable Securities pursuant to such registration
unless such
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.18 - Page 8
<PAGE>
primary registration was initiated as provided in SECTION 2.01(I) after Company
received a request for Demand Registration.
(b) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback Registration is an
underwritten primary registration on behalf of Company and the managing
underwriter of such offering advises Company in writing that in their opinion
the number of securities requested to be included in such registration exceeds
the number that can reasonably be sold in such offering, then Company shall
include in such registration (i) FIRST, the securities that Company proposes to
sell, (ii) SECOND, the Registrable Securities and other securities requested to
be included therein by one or more Holders or RIMCO Noteholders, on a PRO RATA
basis according to the number of securities originally requested to be included
by each Holder and RIMCO Noteholder and (iii) THIRD, securities requested to be
included therein by any other persons having registration rights with respect to
securities of Company. If the managing underwriter of such offering subsequently
advises Company in writing that the number of securities that can be sold
exceeds the number of securities included in the offering, Company shall include
in the registration (i) FIRST, the securities that Company proposes to sell,
(ii) SECOND, such additional securities that one or more Holders or RIMCO
Noteholders had originally requested be included in the registration, on a PRO
RATA basis according to the number of securities originally requested to be
included by each Holder and RIMCO Noteholder and (iii) THIRD, securities
requested to be included therein by any other persons having registration rights
with respect to securities of Company.
(c) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback Registration is an
underwritten secondary registration on behalf of holders of Company's securities
other than the Holders and the managing underwriter of such offering advises
Company in writing that in their opinion the number of securities requested to
be included in such registration exceeds the number that can reasonably be sold
in such offering, then Company shall include in such registration (i) FIRST, if
such registration is being made on behalf of other stockholders of Company
exercising demand registration rights, then the securities so requested to be
included therein in accordance with such demand registration rights, (ii)
SECOND, the Registrable Securities and other securities requested to be included
in such registration by one or more Holders or RIMCO Noteholders on a PRO RATA
basis according to the number of securities originally requested to be included
by each Holder and RIMCO Noteholder, and (iii) THIRD, securities requested to be
included therein by any other persons having registration rights with respect to
securities of Company. If the managing underwriter of such offering subsequently
advises Company in writing that the number of securities that can be sold
exceeds the number of securities included in the offering, Company shall include
in the registration (i) FIRST, the securities proposed to be sold on behalf of
the other stockholders of Company exercising demand registration rights, (ii)
SECOND, such additional securities that one or more Holders or RIMCO Noteholders
had originally requested be included in the registration, on a PRO RATA basis
according to the number of securities originally requested to be included by
each Holder and RIMCO Noteholder and (iii) THIRD, securities requested to be
included therein by any other persons having registration rights with respect to
securities of Company.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.18 - Page 9
<PAGE>
(d) OTHER REGISTRATIONS. If (i) Company has previously filed a
registration statement with respect to any of the Registrable Securities
pursuant to SECTION 2.01(A) OR 2.02(A) and (ii) such previous registration has
not been withdrawn or abandoned, Company shall not file or cause to be effective
any other registration of any of its equity securities or securities convertible
or exchangeable into or exercisable for its equity securities under the 1933 Act
(except on Form S-8 or Form S-4 or any successor form), whether on its own
behalf or at the request of any holder or holders of such securities, until a
period of at least 180 days has elapsed from the effective date of such previous
registration (and, during the period of any "shelf offering" or offering
pursuant to Rule 415 under the 1933 Act, during such time as any Holder is
engaged in selling efforts pursuant thereto, except with the prior written
consent of the Holders named in the prospectus for such "shelf offering").
(e) PIGGYBACK NOT A DEMAND REGISTRATION. Should any Holder's participation
in a registration be pursuant to a Piggyback Registration in connection with (i)
an underwritten primary registration on behalf of Company as described in
SECTION 2.01(I) OR 2.02(B), or (ii) an underwritten secondary registration on
behalf of holders of Company's securities other than the Holders as described in
SECTION 2.02(C), then such participation by any Holder shall not constitute a
Demand Registration for purposes of determining the number of Demand
Registrations the Holders are entitled to pursuant to SECTION 2.01(B).
SECTION 2.03 HOLDBACK AGREEMENTS. (a) GENERAL. Each Holder hereby agrees
not to effect any public sale or distribution of equity securities of Company,
or any securities convertible into or exchangeable or exercisable for such
securities, including, without limitation, sales pursuant to Rule 144 under the
1933 Act (or any similar rule then in effect), during the 10 days prior to and
the 90 days beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration in which Registrable
Securities are included (except as part of such underwritten registration)
unless the underwriters managing the registered public offering otherwise agree.
(b) AGREEMENT BY COMPANY. Company agrees not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the 10 days prior to and
during the 90 days beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration in which Registrable
Securities are included (except as part of such underwritten registration in
accordance with the provisions of this Agreement) unless the underwriters
managing the registered public offering otherwise agree.
(c) REGISTRATION PROCEDURES. Whenever any Holder requests registration
pursuant to this Agreement, Company shall use its reasonable best efforts to
effect the registration of Registrable Securities for which registration is
requested in accordance with the intended method of disposition thereof, and
pursuant thereto Company shall as expeditiously as possible:
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.18 - Page 10
<PAGE>
(i) prepare and file with the Commission a registration statement with
respect to such 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, Company will furnish to the counsel selected by the
Holders copies of all documents proposed to be filed, which documents will
be subject to the review of such counsel);
(ii) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection
therewith and prepare and file any related registration statement pursuant
to Rule 462 under the 1933 Act, in each case as necessary to keep such
registration statement or registration statements effective for a period
of not less than 90 days after such registration statement is declared
effective, provided that Company shall have no obligation pursuant to this
Agreement to maintain the effectiveness of such registration statement
after the sale of the securities registered thereunder, and shall comply
with the provisions of the 1933 Act with respect to the disposition of all
securities owned by each Holder that are covered by such registration
statement during such period in accordance with the intended methods of
disposition by such Holder;
(iii) furnish to the Holders such number of copies of such registration
statement, each amendment and supplement thereto, the prospectus included
in such registration statement (including each preliminary prospectus) and
such other documents as any Holder may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such
Holder;
(iv) use its reasonable best efforts to register or qualify such
Registrable Securities under such other securities or Blue Sky Laws of
such jurisdictions as any Holder requests and do any and all other acts
and things that may be necessary or advisable to enable each Holder to
consummate the disposition in such jurisdictions of the Registrable
Securities (provided that Company will not be required to (A) qualify
generally to do business in any jurisdiction where it would not otherwise
be required to qualify but for this sub-clause (iv), (B) subject itself to
taxation in any such jurisdiction or (C) consent to general service of
process in such jurisdiction);
(v) cause all such shares of Registrable Securities to be listed on each
securities exchange or qualified for trading on each market on which
securities issued by Company that are of the same class as the Registrable
Securities are then listed or traded;
(vi) provide a transfer agent and registrar for all such Registrable
Securities no later than the effective date of such registration
statement;
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.18 - Page 11
<PAGE>
(vii) obtain a "cold comfort" letter from Company's independent public
accountants in customary form, covering such matters of the type
customarily covered by "cold comfort" letters delivered to underwriters,
and covering such other matters as any Holder may reasonably request; and
obtain an opinion of counsel for Company in customary form, covering such
matters of the type customarily covered in opinions of legal counsel
delivered to underwriters, and covering such other matters as any Holder
may reasonably request;
(viii)if underwriters are engaged in connection with any registration
referred to in this Agreement, Company shall provide customary
indemnification, representations, covenants, opinions, and other
assurances to the underwriters, in each case in form and substance
reasonably satisfactory to such underwriter;
(ix) notify each Holder and the managing underwriters, if any, promptly,
and (if requested by any such Person) confirm such advice in writing, (A)
when a prospectus or any prospectus supplement or post-effective amendment
(or related registration statement filed pursuant to Rule 462 under the
1933 Act) has been filed, and, with respect to a registration statement or
any post-effective amendment, when the same has become effective, (B) of
any request by the Commission for amendments or supplements to a
registration statement or related prospectus or for additional
information, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of a registration statement or the initiation
of any proceedings for that purpose, (D) of the receipt by Company of any
notification with respect to the suspension of the qualification of any of
the registrable securities for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose, (E) of the happening of
any event that requires the making of any changes in a registration
statement or related prospectus so that such documents will not contain
any 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 (F) of Company's reasonable determination that a
post-effective amendment to a registration statement would be required;
(x) notify each Holder at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act, of the occurrence of any
event as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any
fact necessary to make the statements therein not misleading, and, at the
request of any Holder, Company shall prepare a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of such
shares such amended or supplemented prospectus shall not contain an untrue
statement of a material fact or omit to state any fact necessary to make
the statements therein not misleading;
(xi) use its reasonable best efforts to obtain as soon as reasonably
practicable the withdrawal of any order suspending the effectiveness of a
registration statement, or the lifting
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.18 - Page 12
<PAGE>
of any suspension of the qualification of any of the Registrable
Securities for sale in any jurisdiction;
(xii) if requested by the managing underwriters or any Holder, incorporate
in a prospectus supplement or post-effective amendment such information as
the managing underwriter and the Holders agree should be included therein
relating to the sale and distribution of Registrable Securities,
including, without limitation, information with respect to the number of
Registrable Securities being sold to such underwriters, the purchase price
being paid therefor by such underwriters and with respect to any other
terms of the underwritten (or best efforts underwritten) offering of the
Registrable Securities to be sold in such offering; make all required
filings of such prospectus supplement or post-effective amendment as soon
as notified of the matters to be incorporated in such prospectus
supplement or post-effective amendment; and supplement or make amendments
to any registration statement if requested by any Holder or any
underwriter of such securities;
(xiii)furnish to each Holder and each managing underwriter, without
charge, such signed copies of the registration statement or statements and
any post-effective amendment thereto, including financial statements and
schedules, all documents incorporated therein by reference and all
exhibits (including those incorporated by reference) as any Holder or
managing underwriter may reasonably request;
(xiv) cooperate with reasonable requests of the Holders and the managing
underwriter, if any, to facilitate the timely preparation and delivery of
certificates representing Shares or Related Securities to be sold and not
bearing any restrictive legends unless required by applicable law; and
enable such certificates to be in such denominations and registered in
such names as the managing underwriter may request at least two business
days prior to any sale of Registrable Securities to the underwriters;
(xv) in the case of an underwritten offering, enter into such customary
agreements (including underwriting agreements in customary form) and take
all such other actions as any Holder or underwriter reasonably requests in
order to expedite or facilitate the disposition of such Registrable
Securities; and
(xvi) make available for inspection by any Holder, any underwriter
participating in any disposition pursuant to such registration statement,
and any attorney, accountant or other agent retained by any such Holder or
underwriter, all financial and other records, pertinent corporate
documents and properties of Company, and cause Company's officers,
directors, employees and independent accountants to supply all information
reasonably requested by any such Holder, underwriter, attorney, accountant
or agent in connection with such registration statement.
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
SECTION 2.04 COMPANY REPORTS. Company shall file all reports required to
be filed by it under the 1933 Act and the 1934 Act and the rules and regulations
promulgated by the Commission thereunder, and take such further reasonable
action as may be necessary or appropriate for Company to use Form S-2 or S-3 (or
any similar registration form then applicable to small business issuers or
hereafter adopted by the Commission) to register the Registrable Securities for
sale thereon. Upon request, Company shall deliver to the Holders a written
statement as to whether it has complied with such requirements.
SECTION 2.05 INFORMATION TO BE FURNISHED BY THE HOLDERS. In connection
with any registration of shares of Registrable Securities hereunder, Company may
require the Holders to furnish Company with such information regarding the
Holders and the distribution of such shares as Company may from time to time
reasonably request in writing in order to comply with the 1933 Act. Each Holder
agrees to notify Company as promptly as practicable of any inaccuracy or change
in information previously furnished to Company or of the occurrence of any event
in either case as a result of which any prospectus relating to such registration
contains untrue statements of a material fact regarding the Holders or the
distribution of such shares or omits to state any material fact regarding the
Holders or the distribution of such shares required to be stated therein or
necessary to make the statement therein not misleading in light of the
circumstances under which such statements were made, and to promptly furnish to
Company any additional information required to correct and update any previously
furnished information or required such that such prospectus shall not contain,
with respect to the Holders or the distribution of such shares, an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which such statements are made.
SECTION 2.06 SUSPENSION OF OFFERING PENDING PROSPECTUS SUPPLEMENT OR
AMENDMENT. Each Holder agrees that, upon receipt of any notice from Company of
the occurrence of any event of the kind described in SECTION 2.03(C)(IX)(B),
(C), (D), (E) OR (F) hereof, such Holder will forthwith discontinue disposition
of the Registrable Securities covered by such registration statement or
prospectus until such holder's receipt of the copies of the supplemented or
amended prospectus relating to such registration statement or prospectus, or
until it is advised in writing by Company that the use of the applicable
prospectus may be resumed, and has received copies of any additional or
supplemental filings which are incorporated by reference in such prospectus,
and, if so directed by Company, such Holder will deliver to Company all copies,
other than permanent file copies then in such Holder's possession, of the
prospectus covering the Registrable Securities current at the time of receipt of
such notice.
SECTION 2.07 REGISTRATION EXPENSES. (a) GENERAL. All expenses incident to
Company's performance and execution of Demand Registrations or Piggyback
Registrations, and Company's performance of or compliance with this Agreement,
including, without limitation, all registration and filing fees, fees and
expenses of compliance with securities or Blue Sky Laws,
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.18 - Page 14
<PAGE>
expenses and fees for listing the securities on the appropriate securities
exchanges or qualifying such securities for trading in the appropriate
securities markets, costs of liability insurance, all internal expenses, the
expense of any annual audit or quarterly review, printing expenses, messenger
and delivery expenses, fees and disbursements of counsel for Company and all
independent certified public accountants (including the expenses of any special
audit and "cold comfort" letters required by or incident to such performance),
and fees and costs of underwriters (excluding discounts and commissions and fees
of underwriters, selling brokers, dealer managers or similar securities industry
professionals relating to the distribution of the Registrable Securities) and
other Persons (all such expenses being herein called "Registration Expenses"),
shall be borne by Company.
(b) REIMBURSEMENT FOR COUNSEL FEES. In connection with each Demand
Registration and Piggyback Registration, Company shall reimburse the Holders for
the reasonable fees and disbursements of one law firm chosen by Holders of a
majority (in then market value) of the then outstanding Registrable Securities.
(c) PAYMENT OF EXPENSES BY THE HOLDERS. The Holders shall pay the
underwriters' discount and commissions and the commissions and fees, if any,
payable in respect of selling brokers, dealer managers or similar securities
industry professionals, and transfer taxes allocable to the registration of the
Holders' securities so included in any Demand Registration or Piggyback
Registration pursuant to this Agreement.
SECTION 2.08 UNDERWRITTEN OFFERINGS. (a) UNDERWRITING AGREEMENT. In any
underwritten offering by one or more Holders pursuant to a registration
requested under SECTION 2.01(A) OR 2.02(A), Company shall enter into an
underwriting agreement which shall be reasonably satisfactory in form and
substance to Company, such Holder or Holders and the underwriters and which
shall contain representations, warranties and agreements (including
indemnification agreements to the effect and consistent with that provided in
SECTION 2.09 hereof) as are customarily included by an issuer in underwriting
agreements with respect to primary distributions.
(b) CONDITION TO PARTICIPATION AND QUALIFICATIONS TO OBLIGATIONS UNDER
REGISTRATION COVENANTS. The obligations of Company to use its reasonable best
efforts to cause the Registrable Securities to be registered under the 1933 Act
are subject to each of the conditions that no Holder may participate in any
underwritten offering hereunder unless such Holder (a) agrees to sell such
Registrable Securities on the basis provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably and customarily required
under the terms of such underwriting arrangements.
::ODMA\PCDOCS\DOCS\88117\1
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<PAGE>
SECTION 2.09 INDEMNIFICATION. (a) BY THE COMPANY. In the event of any
registration of any Registrable Securities under the 1933 Act, the Company will,
and hereby does, indemnify and hold harmless, to the fullest extent permitted by
law, each Holder, its directors and officers, each other Person who participates
as an underwriter in the offering or sale of such securities and each other
Person, if any, who controls such Holder or any such underwriter within the
meaning of the 1933 Act, against any and all losses, claims, damages,
liabilities and expenses (or actions or proceedings, whether commenced or
threatened, in respect thereof), to which they or any of them may become subject
under the 1933 Act or any other statute or common law, including any amount paid
in settlement of any litigation, commenced or threatened, and to reimburse them
for any legal or other expenses incurred by them in connection with
investigating any claims and defending any actions, insofar as any such losses,
claims, damages, liabilities, expenses or actions arise out of or are based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained in the registration statement relating to the sale of such securities
or any post-effective amendment thereto or any related registration statement
filed pursuant to Rule 462 or similar rule under the 1933 Act or in any filing
made in connection with the qualification of the offering under Blue Sky or
other securities laws or jurisdictions in which the Registrable Securities are
offered ("Blue Sky Filing"), or the omission or alleged omission to state
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading or (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, if used prior to the effective date of such registration
statement (unless such statement is corrected in the final prospectus and
Company has previously furnished copies thereof to each Holder and the
underwriters), or contained in the final prospectus (as amended or supplemented
if Company shall have filed with the Commission, and furnished to each Holder
and the underwriters of such offering copies thereof, prior to the written
confirmation of any sale to the person asserting liability, any amendment
thereof or supplement thereto) if used within the period during which Company is
required to keep the registration statement to which such prospectus relates
current, or the omission or alleged omission to state therein (if so used) a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; PROVIDED, HOWEVER,
that the indemnification agreement contained herein shall not (i) apply to such
losses, claims, damages, liabilities, expenses or actions arising out of, or
based upon, any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in reliance
upon and in conformity with written information furnished to Company by a Holder
or such underwriter expressly for use in connection with preparation of the
registration statement, any preliminary prospectus or final prospectus contained
in the registration statement, any such amendment or supplement thereto or any
Blue Sky Filing or (ii) inure to the benefit of any underwriter or any person
controlling such underwriter, to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
such person's failure to send or give a copy of the final prospectus, as the
same may be then supplemented or amended, to the person asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
person if such statement or omission was corrected in such final prospectus.
Such indemnity shall
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remain in full force and effect regardless of any investigation made by or on
behalf of such Holder or any such director, officer or controlling person and
shall survive the transfer of such securities by such Holder.
(b) BY THE HOLDERS. Company may require, as a condition to including any
Registrable Securities in any registration statement filed pursuant to SECTION
2.01 OR 2.02, that Company shall have received an undertaking satisfactory to it
from the Holders to indemnify and hold harmless (in the same manner and to the
same extent as set forth in SECTION 2.09(A)) Company, each director of Company,
each officer of Company and each other person, if any, who controls Company
within the meaning of the 1933 Act, with respect to any untrue statement or
alleged untrue statement in, or omission or alleged omission from, such
registration statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, if such statement or omission
was made in reliance upon and in conformity with written information furnished
to Company by a Holder expressly for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, amendment or supplement.
Such indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of Company or any such director, officer or
controlling person and shall survive the transfer of such securities by such
Holder. In no event shall any indemnity paid by any Holder to Company pursuant
to this SECTION 2.09(B), or otherwise, exceed the proceeds received by such
Holder in such offering.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in SECTION 2.09(A) OR 2.09(B), such indemnified party will, if a
claim in respect thereof is to be made against indemnifying party, give written
notice to the indemnifying party of the commencement of such action, PROVIDED
that the failure of any indemnified party to give notice as provided herein
shall not relieve the indemnifying party of its obligations under SECTION
2.09(A) OR 2.09(B), as the case may be. In case any such action is brought
against an indemnified party, the indemnifying party shall be entitled to
participate in and, unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified party and the indemnifying party
may exist in respect of such claim, to assume the defense thereof, jointly with
any other indemnifying party similarly notified to the extent that it may wish,
with counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. In the event that the indemnifying party advises an indemnified
party that it will contest a claim for indemnification hereunder, or fails,
within 30 days of receipt of any indemnification notice to notify, in writing,
such person of its election to defend, settle or compromise, at its sole cost
and expense, any action, proceeding or claim (or discontinues its defense at any
time after it commences such defense), then the indemnified party may, at its
option, defend, settle or otherwise compromise or pay such action or claim. In
any event, unless and until the indemnifying party elects
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in writing to assume and does so assume the defense of any such claim,
proceeding or action, the indemnified party's costs and expenses arising out of
the defense, settlement or compromise of any such action, claim or proceeding
shall be losses subject to indemnification hereunder. The indemnified party
shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the indemnified party which relates to such action or claim. The indemnifying
party shall keep the indemnified party fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. If
the indemnifying party elects to defend any such action or claim, then the
indemnified party shall be entitled to participate in such defense with counsel
of its choice at its sole cost and expense. If the indemnifying party does not
assume such defense, the indemnified party shall keep the indemnifying party
apprised at all times as to the status of the defense; PROVIDED, HOWEVER, that
the failure to keep the indemnifying party so informed shall not affect the
obligations of the indemnifying party hereunder. Indemnifying party shall not be
liable for any settlement of any action, claim or proceeding effected without
its written consent; PROVIDED, HOWEVER, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. Indemnifying party shall
not, without the consent of the indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation.
(d) CONTRIBUTION. If the indemnification provided for in or pursuant to
SECTION 2.09(A) OR 2.09(B) is due in accordance with the terms thereof, but is
held by a court to be unavailable or unenforceable in respect of any losses,
claims, damages, liabilities or expenses referred to therein, then indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified person as a result of such losses,
claims, damages, liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses as well
as any other relevant equitable considerations. The relative fault of the
indemnifying party on the one hand and of the indemnified person on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the indemnifying
party or by the indemnified party, by such party's relative intent, knowledge,
access to information and opportunity to correct or prevent such statement, or
omission. In no event shall the liability of any Holder be greater in amount
than the amount of proceeds received by such Holder upon such sale.
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<PAGE>
ARTICLE III
EFFECTIVE TIME AND TERM OF THIS AGREEMENT
SECTION 3.01 EFFECTIVE TIME AND TERM OF THIS AGREEMENT. This Agreement
will be effective for all purposes as of the Closing and will continue in full
force and effect until the date that no Holder owns any of the Registrable
Securities.
ARTICLE IV
MISCELLANEOUS
SECTION 4.01 SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 4.02 AMENDMENTS. This Agreement contains the entire understanding
of the parties with respect to the Registrable Securities, and may be amended
only by an agreement in writing signed by (i) the Company and (ii) the Holders
of not less than a majority (in then market value) of the then outstanding
Registrable Securities, including not less than a majority (in then market
value) of the then outstanding Registrable Securities held by the Shareholder
Holders, PROVIDED, HOWEVER, that in no event shall any amendment impose any
additional material obligations on any Holder without such Holder's written
consent.
SECTION 4.03 DESCRIPTIVE HEADINGS. Descriptive headings are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
SECTION 4.04 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument. Each counterpart may consist of a number of copies
hereof, each signed by less than all, but together signed by all, of the parties
hereto.
SECTION 4.05 NOTICES. All notices and communications provided for
hereunder shall be in writing and sent (a) by telecopy if the sender on the same
day sends a confirming copy of such notice by a recognized overnight delivery
service (charges prepaid) or (ii) by registered or certified mail with return
receipt requested (postage prepaid) or (iii) by a recognized overnight delivery
service (with charges prepaid).
(i) if to a Shareholder Holder, at its addresses set forth below, or such
other address as it shall have specified to Company in writing,
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(ii) if to any other Holder, at such address as specified to Company in
writing in the notice provided in SECTION 4.08(B), or such other address
as such Holder shall have subsequently specified to Company in writing,
and
(iii) if to the Company, 1600 Smith Street, Suite 4000, Houston, Texas
77002, Telecopy No.: 713-652-9601, or such other address as it shall have
specified to the Holders in writing.
Notices given under this SECTION 4.05 shall be deemed given only when actually
received.
SECTION 4.06 GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the laws
of the State of Texas, excluding choice-of-law principles of the law of such
State that would require the application of the laws of a jurisdiction other
than such State.
SECTION 4.07 SURVIVAL. The representations and warranties made by the
Company herein shall survive the execution and delivery of the Transaction
Documents and the purchase and transfer by the Holders of any of the Registrable
Securities, regardless of any investigation made at any time by or on behalf of
the Shareholder Holders or any other Holder. All statements contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant to this Agreement shall be deemed to be representations and warranties
of the Company under this Agreement.
SECTION 4.08 SUCCESSORS AND ASSIGNS. (a) Subject to the provisions of
SECTION 4.08(B), all covenants and other agreements contained in this Agreement
by or on behalf of any of the parties hereto bind and inure to the benefit of
their respective successors and assigns (including, without limitation, any
subsequent holder of a Note or any Registrable Securities), whether so expressed
or not.
(b) The Registrable Securities and rights of any Holder under this
Agreement with respect to any Registrable Securities may be assigned to any
person who acquires Registrable Securities from a Holder, except that any Person
who acquires such Registrable Securities (x) pursuant to a public offering
registered under the 1933 Act or (y) pursuant to a transfer made in accordance
with Rule 144 under the 1933 Act may not be assigned rights hereunder with
respect to such Registrable Securities. Notwithstanding the foregoing, rights to
cause a Demand Registration under SECTION 2.01(A) may only be assigned if such
rights are expressly assigned in writing from a Holder. Any assignment of
registration rights pursuant to this SECTION 4.08(B) shall be effective upon
receipt by Company of written notice from such assigning Holder (i) stating the
name and address of any assignee, (ii) describing the manner in which the
assignee acquired the Registrable Securities from such Holder and (iii)
identifying the number of Registrable Securities with respect to which the
rights under this Agreement are being assigned.
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SECTION 4.09 ACTIONS BY HOLDERS OF MAJORITY OF REGISTRABLE SECURITIES.
Each of the parties hereto agrees, in connection with the taking of any action
permitted to be taken hereunder by the Holders or Shareholder Holders (as the
case may be), that the Holders or Shareholder Holders (as the case may be)
holding a majority (in then market value) of the then outstanding Registrable
Securities are entitled to take such action.
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IN WITNESS WHEREOF, the Company and the Shareholder Holders have caused
this Agreement to be executed by their respective representatives thereunto duly
authorized, effective as of the date first above written.
TEXOIL, INC.
By: /S/ RUBEN MEDRANO
Ruben Medrano, President
/S/ T. W. HOEHN, JR.
T. W. HOEHN, JR.
/S/ T. W. HOEHN, III
T. W. HOEHN, III
/S/ WILLIAM F. SEAGLE
WILLIAM F. SEAGLE
Addresses for Notices:
T. W. Hoehn, Jr.
2302 Rue Adriane
La Jolla, California 92037
Fax: (619) 454-2043
T. W. Hoehn, III
5454 Paseo del Norte
Carlsbad, California 92008
Fax: (619) 438-0568
William F. Seagle
c/o Wade Hampton Country Club
Highway 107 South
Cashiers, North Carolina 28717
Fax: (704) 743-2120
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