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): May 21, 1997
TEXOIL, INC.
(Exact name of registrant as specified in its charter)
NEVADA 0-12633
(STATE OF INCORPORATION) (COMMISSION FILE NUMBER)
88-0177083
(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
EXISTING 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 (the "RIMCO
Agreement") with four limited partnerships of which Resource Investors
Management Company Limited Partnership ("RIMCO") is the controlling general
partner (collectively, the "RIMCO Purchasers"). Under the RIMCO Agreement, the
RIMCO Purchasers provide up to $8,000,000 in two separate financings:
(a) 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 "Tranche A Notes"). Amounts advanced
under the Tranche A Notes 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 Tranche A Notes is exchangeable, in whole or in
part, for The Company's common stock ("Common Stock") at an initial per
share price equal to $.80, subject to anti-dilution adjustments.
Subsidiary can require the RIMCO Purchasers 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 Purchasers certain registration rights in
respect of shares of Common Stock issuable upon exchange of debt under the
Tranche A Notes.
(b) The second financing is in the form of Senior Secured General
Obligation Notes (the "Tranche B Notes") issued by Subsidiary in the
maximum amount of $5,000,000. After $2,800,000 in principal has been
advanced under the Tranche A Notes, Subsidiary may borrow under the
Tranche B Notes until September 1, 1999. The Tranche B Notes will mature
September 1, 2002. Amounts advanced under the Tranche B 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 the RIMCO
Purchasers to secure the notes.
NEW RIMCO FINANCING. On May 21, 1997, the Company and the Subsidiary
entered into an Amended and Restated Note Purchase Agreement with the RIMCO
Purchasers ("Amended RIMCO Agreement"). Under the Amended RIMCO Agreement, the
RIMCO Purchasers continue to provide the up to $8,000,000 agreed upon under the
RIMCO Agreement. In addition, the RIMCO Purchasers will provide an additional
$1,500,000 in a separate financing. Under this new financing, Subsidiary has
issued 10% Senior Secured Exchangeable General Obligation Notes in the aggregate
original principal amount of $1,500,000 to the RIMCO Purchasers in various
amounts (collectively, the "Tranche C Notes"). After $3,000,000 in principal has
been advanced under the Tranche A Notes, Subsidiary may borrow under the Tranche
C Notes. The Tranche C Notes will mature September 1, 1999. Amounts advanced
under the Tranche C Notes will accrue interest at a fixed, annual rate of 10%,
with interest paid monthly and all outstanding principal plus all accrued and
unpaid interest due and payable at maturity. Indebtedness outstanding under the
Tranche C Notes is exchangeable, in whole or in part, for Common Stock at an
initial per share price equal to $1.50, subject to anti-dilution adjustments.
Subsidiary can require the RIMCO Purchasers to make such an exchange if they
have funded at least $1,350,000 under the Tranche C Notes and the average
trading price of Common Stock for any consecutive 20-day trading period is $3.00
or more. The Company granted the RIMCO Purchasers certain registration rights in
respect of shares of Common Stock issuable upon exchange of debt under the
Tranche C Notes.
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The proceeds of the Tranche C Notes are to be used to pay for the
Company's share of drilling and completion costs for the initial well to be
drilled on each of Raceland Prospect and the Green's Lake Prospect (or for such
other purpose as may be consented to in writing by the RIMCO Purchasers).
Under the RIMCO Agreement, the proceeds of the Tranche B Notes could be
used to pay the Company's share of costs to drill, test, complete, equip,
deepen, sidetrack and/or recomplete any well located on the Green's Lake
Prospect, the Laurel Grove Prospect and the Raceland Prospect OTHER THAN THE
FIRST WELL to be drilled by or on behalf of the Company on either of the Green's
Lake Prospect or the Raceland Prospect. The Amended RIMCO Agreement expands this
use of proceeds to permit Tranche B Proceeds to be used to pay the Company's
share of costs to drill, test, complete, equip, deepen, side track and/or
recomplete the first well to be drilled on the Raceland Prospect.
Certain affiliate loans to the Company or the Subsidiary were made
expressly subordinate to the financings under the RIMCO Agreement. In connection
with the execution of the Amended RIMCO Agreement, all such indebtedness
previously made expressly subordinate to the Tranche A Notes and the Tranche B
Notes was also made expressly subordinate to the Tranche C Notes.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Inapplicable.
(b) PRO FORMA FINANCIAL INFORMATION.
Inapplicable.
(c) EXHIBITS.
10.1 Amended and Restated Note Purchase Agreement dated as of May
21, 1997, 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 May 21, 1997, issued by Texoil Company to the
RIMCO Purchasers (filed herewith).
10.3 Amended and Restated Guaranty and Exchange Agreement among
Texoil, Inc., Texoil Company and the RIMCO Purchasers dated as of May 21,
1997 (filed herewith).
10.4 First Amendment to Pledge Agreement dated as of May 21, 1997,
executed by Texoil, Inc. for the benefit of the RIMCO Purchasers (filed
herewith).
10.5 First Amendment to Stock Ownership and Registration Rights
Agreement dated as of May 21, 1997, by and among Texoil Company, Texoil,
Inc. and the RIMCO Purchasers (filed herewith).
10.6 First Amendment to Subordination Agreement dated as of May 21,
1997, among Texoil Company, Texoil, Inc., the RIMCO Purchasers and Opal
Air, Inc. (filed herewith).
<PAGE>
10.7 First Amendment to Subordination Agreement dated as of May 21,
1997, among Texoil Company, Texoil, Inc., the RIMCO Purchasers and T. W.
Hoehn, Jr. and Betty Joe Hoehn Revocable Trust (filed herewith).
10.8 First Amendment to Subordination Agreement dated as of May 21,
1997, among Texoil Company, Texoil, Inc., the RIMCO Purchasers and T. W.
Hoehn, Jr. (filed herewith).
10.9 First Amendment to Subordination Agreement dated as of May 21,
1997, among Texoil Company, Texoil, Inc., the RIMCO Purchasers and T. W.
Hoehn, III (filed herewith).
10.10 First Amendment to Subordination Agreement dated as of May 21,
1997, among Texoil Company, Texoil, Inc., the RIMCO Purchasers and William
F. Seagle (filed herewith).
10.11 First Amendment and Supplement to Mortgage, Assignment of
Production, Security Agreement and Financing Statement dated as of May 21,
1997, from Texoil Company to the RIMCO Purchasers (filed herewith).
10.12 Mortgage, Deed of Trust, Assignment of Production, Security
Agreement and Financing Statement dated as of May 21, 1997, from Texoil
Company to the RIMCO Purchasers.
<PAGE>
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: July 3, 1997
TEXOIL, INC.
By: /S/ RUBEN MEDRANO
Ruben Medrano, President
<PAGE>
INDEX OF EXHIBITS
10.1 Amended and Restated Note Purchase Agreement dated as of May 21,
1997, 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 May 21, 1997, issued by Texoil Company to the RIMCO Purchasers
(filed herewith).
10.3 Amended and Restated Guaranty and Exchange Agreement among Texoil,
Inc., Texoil Company and the RIMCO Purchasers dated as of May 21, 1997 (filed
herewith).
10.4 First Amendment to Pledge Agreement dated as of May 21, 1997,
executed by Texoil, Inc. for the benefit of the RIMCO Purchasers (filed
herewith).
10.5 First Amendment to Stock Ownership and Registration Rights Agreement
dated as of May 21, 1997, by and among Texoil Company, Texoil, Inc. and the
RIMCO Purchasers (filed herewith).
10.6 First Amendment to Subordination Agreement dated as of May 21, 1997,
among Texoil Company, Texoil, Inc., the RIMCO Purchasers and Opal Air, Inc.
(filed herewith).
10.7 First Amendment to Subordination Agreement dated as of May 21, 1997,
among Texoil Company, Texoil, Inc., the RIMCO Purchasers and T. W. Hoehn, Jr.
and Betty Joe Hoehn Revocable Trust (filed herewith).
10.8 First Amendment to Subordination Agreement dated as of May 21, 1997,
among Texoil Company, Texoil, Inc., the RIMCO Purchasers and T. W. Hoehn, Jr.
(filed herewith).
10.9 First Amendment to Subordination Agreement dated as of May 21, 1997,
among Texoil Company, Texoil, Inc., the RIMCO Purchasers and T. W. Hoehn, III
(filed herewith).
10.10 First Amendment to Subordination Agreement dated as of May 21, 1997,
among Texoil Company, Texoil, Inc., the RIMCO Purchasers and William F. Seagle
(filed herewith).
10.11 First Amendment and Supplement to Mortgage, Assignment of
Production, Security Agreement and Financing Statement dated as of May 21, 1997,
from Texoil Company to the RIMCO Purchasers (filed herewith).
10.12 Mortgage, Deed of Trust, Assignment of Production, Security
Agreement and Financing Statement dated as of May 21, 1997, from Texoil Company
to the RIMCO Purchasers.
EXHIBIT 10.1
AMENDED AND RESTATED NOTE PURCHASE AGREEMENT
THIS AMENDED AND RESTATED NOTE PURCHASE AGREEMENT dated as of May
21, 1997 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.
A. The Parent, the Company and the Noteholders entered into that
certain Note Purchase Agreement dated September 6, 1996 (the "ORIGINAL NOTE
PURCHASE AGREEMENT").
B. The Parent, the Company and the holders desire to amend and
restate the Original Note Purchase Agreement in its entirety as set forth
herein.
In consideration of the mutual covenants herein contained, the
Company, the Parent and the Noteholders agree to amend and restate the Original
Note Purchase Agreement 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
Exhibit 10.1 - Page 1
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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
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) Pursuant to the Original Note Purchase Agreement, the Company
has authorized the issue and sale of $3,000,000 aggregate principal amount of
its 10% Senior Secured Exchangeable General Obligation Notes (the "TRANCHE A
NOTES"). Pursuant to the Original Note Purchase Agreement, the Company has
issued 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 are 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
Exhibit 10.1 - Page 2
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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.
(b) Pursuant to the Original Note Purchase Agreement, the Company
has authorized the issue and sale of $5,000,000 aggregate principal amount of
its 10% Senior Secured General Obligation Notes (the "TRANCHE B NOTES").
Pursuant to the Original Note Purchase Agreement, the Company has issued 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 are 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. TRANCHE C NOTES. (a) Subject to the terms and
conditions of this Agreement, each Tranche C Noteholder severally agrees to make
advances to the Company (each a "TRANCHE C ADVANCE") during the period from the
date hereof through November 20, 1997 (the "TRANCHE C COMMITMENT PERIOD") in an
aggregate amount not exceeding the principal amount specified opposite such
Tranche C 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 C
Noteholder's "TRANCHE C COMMITMENT"). Each funding of Tranche C Advances shall
be made on the same date ratably by the Tranche C Noteholders. The Tranche C
Advances made by each Tranche C Noteholder shall be evidenced by the Tranche C
Note issued to such Noteholder. Tranche C Advances, once repaid, may not be
reborrowed.
(b) The Company will authorize the issue and sale of $1,500,000
aggregate principal amount of its 10% Senior Secured Exchangeable General
Obligation Notes (the "TRANCHE C NOTES" and, together with the Tranche A Notes
and the Tranche B Notes, the "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 C Noteholder a Tranche C Note in the principal amount of
such Tranche C Noteholder's Tranche C Commitment. The Tranche C Notes shall be
substantially in the form set out in EXHIBIT 2.03, with such changes therefrom,
if any, as may be approved by the Tranche C Noteholders and the Company. Each
Tranche C Noteholder will note on its internal records, to the extent
applicable, the date and amount of each Tranche C Advance made by such Tranche C
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 C Note endorse on
the reverse side thereof the outstanding principal amount of Tranche C Advances
evidenced thereby. Failure to make any such notation shall not affect the
Company's obligations in respect of such Tranche C Advance. Absent
Exhibit 10.1 - Page 3
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manifest error, any Tranche C Noteholder's records or notations on its Tranche C
Note as to the outstanding principal amount of its Tranche C Advances shall be
rebuttably presumed to be correct.
SECTION 2.04. 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.
(c) The Tranche A Noteholders have previously made Tranche A
Advances of $1,882,655, which Tranche A Advances remain outstanding as of the
date hereof.
SECTION 2.05. 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.
SECTION 2.06. PROCEDURES FOR TRANCHE C ADVANCES. (a) Whenever the
Company desires to obtain a funding of Tranche C Advances, it shall, no less
than 5 Business Days prior to the proposed funding date for such Tranche C
Advances, transmit by telecopy to the Tranche C Noteholders a written request
(each an "ADVANCE REQUEST") setting forth (i) the total amount of the Tranche C
Advances requested, (ii) the proposed date such Tranche C Advances are to be
made, (iii) wire transfer instructions for such Tranche C Advances, and (iv) a
description in reasonable detail of the proposed use of proceeds of such Tranche
C Advances.
Exhibit 10.1 - Page 4
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(b) Upon satisfaction of all conditions to any Tranche C Advance,
the Tranche C Noteholders will make their respective Tranche C 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 2.07. GUARANTY AND EXCHANGE AGREEMENT. (a) At the Closing
provided for in ARTICLE III, Parent and the Company will enter into an Amended
and Restated 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, (b) agree that the Tranche A Notes may be
exchanged for shares of the common stock of Parent in accordance with the terms
thereof and (c) agree that the Tranche C 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
2.07, with such changes therefrom, if any, as may be approved by the
Noteholders, the Company and Parent.
(b) 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.
(c) Upon the exchange of all or a portion of the outstanding
principal amount of a Tranche C Note for common stock of Parent in accordance
with the Guaranty and Exchange Agreement, the amount of the outstanding
principal of such Tranche C Note and the Tranche C Commitment of the holder of
such Tranche C Note shall each be automatically reduced by the principal amount
of such Tranche C Note so exchanged without further notice or action by any
Person; provided, however, that the holder of such Tranche C Note will note on
its internal records such reduction in the principal amount of such Tranche C
Note and will, prior to any transfer of such Tranche C Note, endorse on the
reverse side thereof the outstanding principal amount of such Tranche C Note
taking any such reductions into account. Failure to make any such notation shall
not
Exhibit 10.1 - Page 5
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affect the Company's obligations in respect of such Tranche C Note. Absent
manifest error, any Tranche C Noteholder's records or notations on its Tranche C
Note as to the outstanding principal amount of its Tranche C Note shall be
rebuttably presumed to be correct. Upon the exchange of all of the principal
amount of a Tranche C Note (or so much thereof as shall have been advanced prior
to the expiration of the Tranche C Commitment Period) for common stock of Parent
in accordance with the Guaranty and Exchange Agreement, the holder of such
Tranche C Note shall, reasonably promptly after written request by the Company,
surrender such Tranche C Note for cancellation to the Company at the Company's
principal executive office.
SECTION 2.08. 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 May 21, 1997. At the Closing the Company will deliver to each Tranche C
Noteholder the Tranche C Note to be purchased by such Noteholder, registered in
such Tranche C Noteholder's name. If at the Closing the Company shall fail to
tender such Tranche C 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 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 Tranche C Notes duly executed by the Company;
(b) an amendment and supplement to the Initial Mortgage duly
executed and acknowledged by the Company reflecting this Agreement and
covering all of the Company's Oil and Gas Properties in LaFourche Parish,
Louisiana;
Exhibit 10.1 - Page 6
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(c) the Guaranty and Exchange Agreement duly executed by Parent and
the Company;
(d) an amendment to the Registration Rights Agreement duly executed
by Parent and the Company reflecting this Agreement;
(e) an amendment to the Pledge Agreement duly executed by Parent
reflecting this Agreement;
(f) the New Mortgage duly executed and acknowledged by the Company;
(g) amendments to the Subordination Agreements duly executed by the
holders of the Bridge Shareholder Debt and the New Shareholder Debt
reflecting this Agreement;
(h) UCC-1 financing statements pertaining to the New Mortgage; and
(i) UCC-3 amendments to financing statements pertaining to the
Initial Mortgage.
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; and
(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.
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.
Exhibit 10.1 - Page 7
<PAGE>
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. TITLE INFORMATION. The Noteholders shall have received
title opinions or other title information concerning the Company's Oil and Gas
Properties covered by the New Mortgages in form, scope and substance reasonably
satisfactory to the Noteholders.
SECTION 3.07. 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 3.08. PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and all documents and 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
Exhibit 10.1 - Page 8
<PAGE>
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 $3,000,000 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 or the
Company's share of costs to drill, test, complete, equip, deepen, side
track and/or recomplete the first well to be drilled on the Raceland
Prospect, the Tranche B Noteholders shall have consented in writing to
such use of proceeds, in their sole absolute discretion.
SECTION 4.03. CONDITIONS TO TRANCHE C ADVANCES. Each Tranche C
Noteholder's obligation to fund any Tranche C Advance is subject to the further
condition that an aggregate amount of at least $3,000,000 shall have been
advanced by the Tranche A Noteholders under the Tranche A Notes.
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.
Exhibit 10.1 - Page 9
<PAGE>
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.
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.
Exhibit 10.1 - Page 10
<PAGE>
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 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,
Exhibit 10.1 - Page 11
<PAGE>
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.
SECTION 5.13. USE OF PROCEEDS; MARGIN REGULATIONS. (a) The Company
will apply or has applied the proceeds of the Tranche A Advances to pay for (i)
the Company's share of future 3-D seismic acquisition costs for the Raceland
Prospect, (ii) the Company's share of leasehold acquisition costs for the
Raceland Prospect, the Green's Lake Prospect and the Laurel Grove Prospect,
(iii) 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,
(iv) $200,000 of Indebtedness owing by Parent to Joe C. Richardson, Jr.,
Trustee, and (iv) general corporate purposes.
Exhibit 10.1 - Page 12
<PAGE>
(b) The Company will apply the proceeds of the Tranche B Advances to
pay for (i) Initial Prospect Development Costs, (ii) the Company's share of
costs to drill, test, complete, equip, deepen, side track and/or recomplete the
first well to be drilled on the Raceland Prospect, and (iii) 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.
(c) The Company will apply the proceeds of the Tranche C Advances to
pay for (i) with respect to the first $1,000,000 of Tranche C Advances, the
Company's share of drilling and completion costs for the initial well to be
drilled on each of Raceland Prospect and the Green's Lake Prospect and (ii) with
respect to the Tranche C Advances in excess of $1,000,000, the Company's share
of completion costs for the initial wells to be drilled on each of the Raceland
Prospect and the Green's Lake Prospect, or for such other purpose as may be
consented to in writing by the Tranche C Noteholders.
(d) 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
Exhibit 10.1 - Page 13
<PAGE>
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 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.
Exhibit 10.1 - Page 14
<PAGE>
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.
SECTION 7.03. NO OPTIONAL PREPAYMENTS OF TRANCHE A NOTES OR TRANCHE
C NOTES. The Company shall not have the right to prepay the Tranche A Notes or
the Tranche C 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 canceled, 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.
Exhibit 10.1 - Page 15
<PAGE>
ARTICLE VIII
INFORMATION AS TO COMPANY
SECTION 8.01. FINANCIAL AND BUSINESS INFORMATION. The Company shall
deliver to each of the Noteholders:
(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.
Exhibit 10.1 - Page 16
<PAGE>
(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 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.
Exhibit 10.1 - Page 17
<PAGE>
(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.
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-
Exhibit 10.1 - Page 18
<PAGE>
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.
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
Exhibit 10.1 - Page 19
<PAGE>
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.
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(B), 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.
Exhibit 10.1 - Page 20
<PAGE>
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;
(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
Exhibit 10.1 - Page 21
<PAGE>
(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;
(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.
Exhibit 10.1 - Page 22
<PAGE>
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:
(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
Exhibit 10.1 - Page 23
<PAGE>
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
(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"
Exhibit 10.1 - Page 24
<PAGE>
(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 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.
Exhibit 10.1 - Page 25
<PAGE>
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 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, 1998, the borrowing base (as redetermined from time to time under this
Article XII, the "BORROWING BASE") shall equal or exceed $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, 1998
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.
Exhibit 10.1 - Page 26
<PAGE>
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 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.
Exhibit 10.1 - Page 27
<PAGE>
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 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
Exhibit 10.1 - Page 28
<PAGE>
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 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
Exhibit 10.1 - Page 29
<PAGE>
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 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
Exhibit 10.1 - Page 30
<PAGE>
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 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.
Exhibit 10.1 - Page 31
<PAGE>
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.
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.
Exhibit 10.1 - Page 32
<PAGE>
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: _______________________
Name: Ruben Medrano
Title:President
TEXOIL, INC.
By: _______________________
Name: Ruben Medrano
Title:President
Exhibit 10.1 - Page 33
<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: _______________________
Name: Gary Milavec
Title:Vice President
Exhibit 10.1 - Page 34
<PAGE>
SCHEDULE A
INFORMATION RELATING TO NOTEHOLDERS
NAME AND ADDRESS OF NOTEHOLDER COMMITMENT AMOUNT
- ------------------------------ -----------------
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
==========
TRANCHE C NOTES
- ---------------
RIMCO PARTNERS, L.P. $ 420,000
RIMCO PARTNERS, L.P. II 420,000
RIMCO PARTNERS, L.P. III 180,000
RIMCO PARTNERS, L.P. IV 480,000
----------
$1,500,000
==========
(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.
Exhibit 10.1 - Page 35
<PAGE>
(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
Exhibit 10.1 - Page 36
<PAGE>
SCHEDULE 5.07
None.
Exhibit 10.1 - Page 37
<PAGE>
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, Tranche B Advance or Tranche
C 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 Amended and Restated Note Purchase Agreement,
as amended, modified or restated 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.
Exhibit 10.1 - Page 38
<PAGE>
"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, Tranche B Commitment or
Tranche C 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.
Exhibit 10.1 - Page 39
<PAGE>
"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
Exhibit 10.1 - Page 40
<PAGE>
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 2.07.
"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
Exhibit 10.1 - Page 41
<PAGE>
(f) hereof. 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 dated September 6, 1996
from the Company to the Noteholders granting a first priority lien in favor of
the Noteholders on certain of 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, supplemented or restated 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.
Exhibit 10.1 - Page 42
<PAGE>
"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 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 MORTGAGE" means that certain Mortgage, Deed of Trust,
Assignment of Production, Security Agreement and Financing Statement of even
date herewith from the Company to Gary Milavec, as trustee, and the Noteholders
granting a first priority lien in favor of Gary Milavec, as trustee, and the
Noteholders on certain of the Company's existing Oil and Gas Properties located
in the State of Texas or adjacent state waters and other related assets, as same
may be amended, supplemented or restated from time to time.
"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, the
Tranche B Noteholders and the Tranche C Noteholders.
"NOTES" is defined in SECTION 2.03(B).
Exhibit 10.1 - Page 43
<PAGE>
"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.
"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
Exhibit 10.1 - Page 44
<PAGE>
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.
"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 dated
September 6, 1996 executed by Parent in favor of the Noteholders pledging all of
the common stock of the Company as security for all Parent's obligations under
the Guaranty and Exchange Agreement, 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 dated September 6, 1996 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.
Exhibit 10.1 - Page 45
<PAGE>
"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.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.
"SECURITY DOCUMENTS" means the Initial Mortgage, the Pledge
Agreement , the New Mortgage 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 dated September 6, 1996 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, as amended
from time to time.
"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,
Exhibit 10.1 - Page 46
<PAGE>
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).
"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.
"TRANCHE C ADVANCE" is defined in SECTION 2.03(A).
"TRANCHE C COMMITMENT" is defined in SECTION 2.03(A).
"TRANCHE C COMMITMENT PERIOD" is defined in SECTION 2.03(A).
"TRANCHE C NOTES" is defined in SECTION 2.03(B).
Exhibit 10.1 - Page 47
<PAGE>
"TRANCHE C 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 C Notes.
"TRANSACTION DOCUMENTS" is defined in SECTION 3.01.
"UNSCHEDULED BORROWING BASE REDETERMINATION" is defined in SECTION
12.03.
Exhibit 10.1 - Page 48
EXHIBIT 10.2
TRANCHE C NOTE
TEXOIL COMPANY
10% SENIOR SECURED EXCHANGEABLE
GENERAL OBLIGATION NOTE
No. EN-5 May 21, 1997
________
FOR VALUE RECEIVED, the undersigned, TEXOIL COMPANY, a Tennessee
corporation (the "COMPANY"), hereby promises to pay to RIMCO PARTNERS, L.P., a
Delaware limited partnership (the "TRANCHE C NOTEHOLDER"), or registered
assigns, the principal sum of ____________________________ and NO/100 DOLLARS
($__________), or, if less, the aggregate unpaid principal amount of all Tranche
C Advances (as defined in the Note Purchase Agreement referred to below) made by
the Tranche C Noteholder under this Tranche C 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 C Note shall be due and payable as follows:
(a) commencing on June 1, 1997, 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 C Note is one of a series of Tranche C Notes (herein
called the "TRANCHE C NOTES") issued pursuant to the Amended and Restated 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 C Note is secured by the Security Documents referred to in the Note
Purchase Agreement.
Exhibit 10.2 - Page 1
<PAGE>
This Tranche C Note is exchangeable for shares of common stock of
Parent upon the terms and conditions of that certain Amended and Restated
Guaranty and Exchange Agreement dated of even date herewith among Parent, the
Company and the Noteholders named therein.
All payments made by the Company on this Tranche C 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 C Note, in whole or in part, prior to maturity.
Payments of principal of and interest on this Tranche C 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 C Note is a registered Tranche C Note and, as provided
in the Note Purchase Agreement, upon surrender of this Tranche C 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 C 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 C 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 C 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 C 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: ____________________
Ruben Medrano
President
Exhibit 10.2 - Page 2
EXHIBIT 10.3
AMENDED AND RESTATED GUARANTY AND EXCHANGE AGREEMENT
AMENDED AND RESTATED GUARANTY AND EXCHANGE AGREEMENT dated as of May
21, 1997 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 STATEMENTS
The Parent, the Company and the Noteholders have entered into that
certain Note Purchase Agreement, dated as of September 6, 1996 (the "ORIGINAL
NOTE AGREEMENT").
In connection with the Original Note Agreement, the Parent and the
Noteholders entered into that certain Guaranty and Exchange Agreement dated as
of September 6, 1996 (the "ORIGINAL GUARANTY AGREEMENT").
On even date herewith, the Parent, the Company and the Noteholders
have amended and restated the Original Note Agreement by entering into that
certain Amended and Restated Note Purchase Agreement (the "NOTE AGREEMENT")
whereby the Noteholders have committed to make Tranche C Advances (as defined in
the Amended Note Agreement) of up to $1,500,000.00.
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 to amend and restate the Original Guaranty
Agreement in its entirety 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).
Exhibit 10.3 - Page 1
<PAGE>
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.
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
Exhibit 10.3 - Page 2
<PAGE>
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 and the Tranche C
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 any other reason (except full and
indefeasible payment of the Obligations, including, payment of the Tranche A
Notes and the Tranche C 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 and the
termination of the Commitments.
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
Exhibit 10.3 - Page 3
<PAGE>
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 and the Commitments have terminated. 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
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 SETOFF. 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 setoff and
application, PROVIDED that the failure to give such notice shall not affect the
validity of such setoff and application. The rights of the Noteholders under
this Section are in addition to other rights and remedies (including, without
limitation, other rights of setoff) 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
Exhibit 10.3 - Page 4
<PAGE>
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.
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 OF TRANCHE A NOTES. (a) Each Tranche A
Noteholder shall have the right, at the option of such holder at any time from
the date of issuance 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 "Tranche A Exchange Price" (as
defined below). As used herein, the term "TRANCHE A 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
Exhibit 10.3 - Page 5
<PAGE>
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 "TRANCHE 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 Tranche A 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 Tranche A 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 3.03(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 Tranche A 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 3.05, 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 Tranche A
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).
(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 Tranche A 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 more than twice to exchange outstanding principal
amounts of the Tranche A Notes for Parent Common Stock.
SECTION 3.02. EXCHANGE OF TRANCHE C NOTES. (a) Each Tranche C
Noteholder shall have the right, at the option of such holder at any time from
the date of issuance up to and including the maturity date of the Tranche C
Notes, to exchange the outstanding principal amount of any Tranche C 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 the
Parent Comment Stock, subject to possible adjustment as provided below. The
number of shares of Parent Common Stock issuable in exchange for a Tranche C
Note shall be equal to the quotient of the principal amount of such Tranche C
Note (or the portion thereof) submitted for exchange plus accrued and
Exhibit 10.3 - Page 6
<PAGE>
unpaid interest due thereon to the effective date of the exchange, divided by
the "Tranche C Exchange Price" (as defined below). As used herein, the term
"TRANCHE C EXCHANGE PRICE" shall mean the price of $1.50 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 3.02(C), 3.02(D) and
3.02(E) hereof, if at any time after an aggregate amount of at least $1,350,000
has been advanced under the Tranche C Notes the Average Price equals or exceeds
$3.00 per share (a "Tranche C Special Exchange Event"), the Company may, at its
option exercisable in its sole discretion at any time during the 30-day period
following such Tranche C Special Exchange Event, exchange all (but not less than
all) of the outstanding principal amount of the Tranche C 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 Tranche C
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
3.03(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 Tranche C
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 C 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 3.05, for which each
such Tranche C Note has been so exchanged. If the Company does not exchange the
Tranche C Notes in accordance with this SECTION 3.02(B) within the 30-day period
following any Tranche C Special Exchange Event, then a new period of trading
days shall begin for purposes of determining whether the Company may exchange
the Tranche C Notes pursuant to this SECTION 3.02(B).
(c) Notwithstanding the provisions of SECTION 3.02(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 Tranche C Special
Exchange Event shall be deemed to occur.
(d) Notwithstanding the provisions of SECTION 3.02(B), the Company
shall not exchange the Tranche C Notes for Parent Common Stock pursuant to
SECTION 3.02(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 3.02(B), the Company
may not exercise its right more than twice to exchange outstanding principal
amounts of the Tranche C Notes for Parent Common Stock.
SECTION 3.03. EXCHANGE PROCEDURE. (a) If any Tranche A Noteholder or
Tranche C Noteholder desires to exchange any Tranche A Note or Tranche C Note
for Parent Common Stock pursuant to SECTION 3.01(A) or SECTION 3.02(A) hereof,
the holder of such Tranche A Note or Tranche C Note shall deliver an irrevocable
written notice to the Company that the holder elects so to
Exhibit 10.3 - Page 7
<PAGE>
exchange such Tranche A Note or Tranche C Note in accordance with the terms of
SECTION 3.01(A) or SECTION 3.02(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) or Section
3.02(B) hereof to exchange the outstanding principal amount of the Tranche A
Notes or Tranche C Notes for Parent Common Stock, the Company shall, within 30
days after the Tranche A Special Exchange Event or Tranche C 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 or the Tranche C Notes, as applicable, at such holder's
address as specified pursuant to the Note Agreement. Each such notice of
exchange shall specify the date such exchange was effected, the Tranche A
Exchange Price or Tranche C Exchange Price, the Exchange Rate (as defined in
SECTION 3.04), and that on and after such exchange date, interest will cease to
accrue on such outstanding principal amount of the Tranche A Notes and Tranche C
Notes being so exchanged.
(c) The Company will, as soon as practicable after such written
notice specified in SECTION 3.03(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 and Tranche C 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 3.05. In the case of an
exchange of a Tranche A Note or a Tranche C Note pursuant to SECTION 3.01(A) or
SECTION 3.02(A) hereof, such exchange shall be deemed to have been made as of
the date of the written notice delivered pursuant to SECTION 3.01(A) or SECTION
3.02(A) hereof, and the Person entitled to receive the Parent Common Stock
deliverable upon exchange of such Tranche A Note or Tranche C 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 or a Tranche C Note for Parent Common Stock
in accordance with this 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 and the amount of the outstanding principal of such Tranche C Note and the
Tranche C Commitment of the holder of such Tranche C Note, as applicable, shall
each be automatically reduced by the principal amount of such Tranche A Note or
Tranche C Note so exchanged.
SECTION 3.04. ADJUSTMENTS. The Tranche A Exchange Price and the
Tranche C 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 or a Tranche C 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 3.04, the
term "SHARES" means, collectively, (i) the shares of Parent Common Stock
issuable upon exchange of the Tranche A Notes and the Tranche C Notes,
respectively, 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
Exhibit 10.3 - Page 8
<PAGE>
operation of this SECTION 3.04 the Tranche A Notes or the Tranche C 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 or Tranche C Notes shall be deemed to refer to and include the
exchange of the Tranche A Notes or Tranche C 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 or Tranche C Note
shall be appropriately adjusted so as to entitle the holder thereof to receive
upon exchange of its Tranche A Note or Tranche C 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 or
Tranche C 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 or a
Tranche C Note, for the same aggregate consideration provided herein, shall be
entitled upon exchange of such Tranche A Note or Tranche C Note to receive in
lieu of the number of shares of Parent Common Stock for which such Tranche A
Note or Tranche C 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 or Tranche C 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, 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 or Tranche C Note
shall, for the same aggregate consideration provided herein, be entitled upon
exchange of such Tranche A Note or Tranche C Note to receive, in lieu of shares
of Parent Common Stock for which such Tranche A Note or Tranche C 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
or Tranche C Note would have received pursuant to the terms of the merger,
consolidation or sale had such holder exchanged such Tranche A Note or
Exhibit 10.3 - Page 9
<PAGE>
Tranche C 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
3.04(C), provision shall be made in connection therewith for the surviving or
acquiring corporations, partnerships or other entities 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 the 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 or Tranche C Note shall, for the same aggregate consideration provided
herein, be entitled to receive upon exchange of such Tranche A Note or Tranche C
Note in lieu of the shares of Parent Common Stock for which such Tranche A Note
or Tranche C 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
or Tranche C 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 3.04(C)) proposes to liquidate and dissolve, Parent shall give notice
thereof as provided in SECTION 3.06(E) hereof and shall permit the holder of a
Tranche A Note or a Tranche C Note to exchange any unexchanged portion thereof
at any time, if such holder should elect to do so, and to participate as a
stockholder of Parent in connection with such dissolution.
(f) If the Tranche A Exchange Price or the Tranche C 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 Tranche A Exchange
Price and the Tranche C Exchange Price.
(g) In order to protect each holder of a Tranche A Note or a Tranche
C 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 3.04(A)) for a
consideration per share which is less than the then Tranche A Exchange Price or
the then Tranche C Exchange Price (a "SPECIAL ISSUANCE"), then forthwith upon
such issuance or sale the number of Shares (as defined in SECTION 3.04), as
determined immediately prior to such Special Issuance, will be increased to
equal the New Exchange Shares (as defined below), and the Tranche A Exchange
Price and the Tranche C Exchange Price, respectively, will be equal to the New
Exchange Price, in each case as determined pursuant to the following formulas:
NES = S x ((OS + SI) / (OS + X))
NEP = (OEP x S) / NES
Exhibit 10.3 - Page 10
<PAGE>
where:
S = the Shares (as defined in SECTION 3.04), 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 3.04) as
determined immediately following the aggregate
adjustment made by reason of this SECTION 3.04(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 Tranche A Exchange Price with respect to Tranche A
Noteholders and the Tranche C Exchange Price with
respect to Tranche C Noteholders, respectively, as 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 3.04 attached hereto.
(h) Whenever the Exchange Rate or the Tranche A Exchange Price or
Tranche C Exchange Price is adjusted as provided in any provision of this
SECTION 3.04:
(i) the Company shall compute the adjusted Exchange Rate and Tranche
A Exchange Price or Tranche C Exchange Price, as applicable, in
accordance with this SECTION 3.04 and shall prepare a certificate
signed by the Senior Financial Officer of the Company setting forth
the adjusted Exchange Rate and Tranche A Exchange Price or Tranche C
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
(ii) a notice stating that the Exchange Rate and the Tranche A
Exchange Price or Tranche C Exchange Price, as applicable, has been
adjusted and setting forth the
Exhibit 10.3 - Page 11
<PAGE>
adjusted Exchange Rate and the Tranche A Exchange Price or Tranche C
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
and Tranche C Note at such holder's address specified pursuant to
the Note Agreement.
(i) If at any time, as a result of any adjustment to the Exchange
Rate made pursuant to this SECTION 3.04, the holder of any Tranche A Note or
Tranche C 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 or Tranche C 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 3.04 with
respect to the Parent Common Stock.
(j) All of the events requiring adjustments pursuant to this SECTION
3.04 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 3.05. 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 or Tranche C Note. Instead of any
fractional share of Parent Common Stock that would otherwise be issuable upon
exchange of a Tranche A Note or a Tranche C 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) or SECTION 3.02(B)
hereof, the business day prior to the effective date of such exchange.
SECTION 3.06. 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 and the
Tranche C 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 and Tranche C 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 and Tranche C
Notes into Parent Common Stock at the Exchange Rate then in effect.
Exhibit 10.3 - Page 12
<PAGE>
(b) If any shares of Parent Common Stock required to be reserved for
purposes of exchange of the Tranche A Notes and Tranche C Notes require
registration with or approval of any governmental 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 and the Tranche C 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 and Tranche C 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 or Tranche C 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 Tranche A Exchange Price
or the Tranche C 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 3.04 in the number of Shares or the Tranche A
Exchange Price or the Tranche C Exchange Price,
Exhibit 10.3 - Page 13
<PAGE>
then the Company shall cause notice of any such intended action to be given to
each holder of the Tranche A Notes and Tranche C 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
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 3.07. 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 and Tranche C 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).
Exhibit 10.3 - Page 14
<PAGE>
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 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, 1996, 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
Exhibit 10.3 - Page 15
<PAGE>
make the statements therein not misleading. Since December 31, 1996, 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 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, 1996.
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,
Exhibit 10.3 - Page 16
<PAGE>
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.
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
Exhibit 10.3 - Page 17
<PAGE>
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 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
4,199,921 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
Exhibit 10.3 - Page 18
<PAGE>
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.
(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.
Exhibit 10.3 - Page 19
<PAGE>
(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) 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
Exhibit 10.3 - Page 20
<PAGE>
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 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.
Exhibit 10.3 - Page 21
<PAGE>
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 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.
Exhibit 10.3 - Page 22
<PAGE>
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;
(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.
Exhibit 10.3 - Page 23
<PAGE>
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.
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.
Exhibit 10.3 - Page 24
<PAGE>
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 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.
Exhibit 10.3 - Page 25
<PAGE>
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.
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.
Exhibit 10.3 - Page 26
<PAGE>
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: ______________________
Ruben Medrano
President
TEXOIL COMPANY
By: ______________________
Ruben Medrano
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: ______________________
Gary Milavec
Vice President
Exhibit 10.3 - Page 27
<PAGE>
SCHEDULE 3.04
AS OF MARCH 1, 1997
<TABLE>
<CAPTION>
COMMON
SHARES PROCEEDS
EXPIRATION AFTER TO
NUMBER CLASS DATE CONVERSION TEXOIL
- ------ ----- ---- ---------- ------
<S> <C> <C> <C> <C>
4,058,648 Common ........................ 4,058,648 -0-
98,423 Employee Salary Compensation-- 98,423 -0-
'95 Plan
42,850 Employee Salary Compensation-- 42,850 -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
50,000 Option to Bill Seagle ($1.56) . 06-__-06 50,000 78,000
30,000 Option to Ruben Medrano ($1.31) 05-02-06 30,000 39,300
20,000 Option to J. D. Hughes ($1.25) 09-19-01 20,000 25,000
900,000 Convertible September 96 Notes 10-01-02 1,125,000 -0-
($.80)
3,000,000 Exchangeable RIMCO Tranche A .. 3,750,000 -0-
Notes ($.80)
TOTAL FULLY DILUTED 12,329,359 7,635,546
========== ==========
</TABLE>
Exhibit 10.3 - Page 28
<PAGE>
SCHEDULE 4.05
SUBSIDIARIES
NAME JURISDICTION OF INCORPORATION
---- -----------------------------
Texoil Company Tennessee
Texoil de Argentina, S.A. Nevada
Exhibit 10.3 - Page 29
<PAGE>
SCHEDULE 4.08
LITIGATION
None
Exhibit 10.3 - Page 30
EXHIBIT 10.4
FIRST AMENDMENT TO
PLEDGE AGREEMENT
THIS FIRST AMENDMENT TO PLEDGE AGREEMENT (this "AMENDMENT") dated as
of May 21, 1997 is made by and among 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 (collectively, the "NOTEHOLDERS") party to the Amended Note
Agreement (as defined below).
PRELIMINARY STATEMENT
A. The Parent and the Noteholders have entered into that certain
Note Purchase Agreement, dated September 6, 1996 (the "ORIGINAL NOTE
AGREEMENT").
B. In connection with the Original Note Agreement, the Parent and
the Noteholders entered into that certain Guaranty and Exchange Agreement dated
as of September 6, 1996 (the "GUARANTY AGREEMENT").
C. The Parent executed that certain Pledge Agreement, dated
September 6, 1996 covering certain shares of capital stock of the Company (the
"PLEDGE AGREEMENT") as security for, INTER ALIA, the obligations of the Company
to the Noteholders existing under the Original Note Agreement, the Notes and the
other Transaction Documents (as defined in the Original Note Agreement).
D. On even date herewith, the Company and the Noteholders have
amended and restated the Original Note Agreement by entering into that certain
Amended and Restated Note Purchase Agreement (the "AMENDED NOTE AGREEMENT")
whereby the Noteholders have committed to make Tranche C Advances (as defined in
the Amended Note Agreement) of up to $1,500,000.00.
E. On even date herewith, the Parent and the Noteholders entered
into that certain Amended and Restated Guaranty and Exchange Agreement (the
"AMENDED GUARANTY AGREEMENT").
F. The Parent and the Noteholders now desire to amend the Pledge
Agreement to secure all of the obligations of the Parent under the Amended
Guaranty Agreement.
G. It is a condition precedent to the effectiveness of the Amended
Note Agreement that the Parent and the Noteholders shall have executed this
Amendment.
Exhibit 10.4 - Page 1
<PAGE>
NOW THEREFORE, in consideration of the foregoing and the mutual
agreements set forth herein, the parties agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
(a)All capitalized terms defined in the Pledge Agreement and not
otherwise defined herein shall have the same meanings herein as in the Pledge
Agreement including, without limitation, defined terms that are defined by
reference to the Amended Note Agreement. All references in the Pledge Agreement
to the Note Agreement shall be references to the Amended Note Agreement (as same
may be modified, amended or amended and restated from time to time).
(b)The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Amendment as a whole and not to any particular
Article, Section or other subdivision.
(c)The Article and Section headings herein are for convenience only
and shall not affect the construction hereof.
ARTICLE II
AMENDMENT TO PLEDGE AGREEMENT
The term "Obligations" as defined in Section 3 of the Pledge
Agreement is hereby amended to include, without limitation, the (a) payment of
all obligations of Parent to the Noteholders now or hereafter existing under the
Amended Guaranty Agreement or the other Transaction Documents as such Amended
Guaranty Agreement and other Transaction Documents may be further amended,
amended and restated, extended or otherwise modified from time to time in the
future (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 Amended Guaranty Agreement and the other Transaction
Documents as such Amended Guaranty Agreement and other Transaction Documents may
be further amended, amended and restated, extended or otherwise modified from
time to time in the future (including, without limitation, the obligations,
covenants and conditions contained herein), whether for principal, interest,
fees, expenses or otherwise.
ARTICLE III
CONDITION OF EFFECTIVENESS
This Amendment shall become effective when, and only when, the
following conditions shall have been fulfilled:
Exhibit 10.4 - Page 2
<PAGE>
(a)the Noteholders and the Parent shall have executed a counterpart
of this Amendment;
(b)the Amended Note Agreement shall have become effective; and
(c)the Amended Guaranty Agreement shall have become effective.
ARTICLE IV
MISCELLANEOUS
Section 4.01 REPRESENTATIONS AND WARRANTIES TRUE; NO DEFAULT OR
EVENT OF DEFAULT. Parent hereby represents and warrants to the Noteholders that,
after giving effect to the execution and delivery of this Amendment (a) this
Amendment constitutes a valid and legally binding agreement enforceable against
the Parent in accordance with its terms except, as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other similar laws relating to or affecting the enforcement of
creditors' rights generally and by general principles of equity, (b) the
representations and warranties by the Parent contained in the Pledge Agreement
as amended hereby are true and correct on and as of the date hereof in all
material respects as though made as of the date hereof, and (c) no Event of
Default has occurred and is continuing as of the date hereof.
Section 4.02 REFERENCE TO PLEDGE AGREEMENT AND EFFECT ON NOTES, NOTE
AGREEMENT AND OTHER TRANSACTION DOCUMENTS EXECUTED IN CONNECTION WITH THE PLEDGE
AGREEMENT.
(a)Upon the effectiveness of this Amendment, each reference in the
Pledge Agreement to "this Agreement," "hereunder," "herein," "hereof," or words
of similar import shall mean and be a reference to the Pledge Agreement as
affected and amended hereby.
(b)Upon the effectiveness of this Amendment, each reference in the
Notes, the Amended Note Agreement, the other Transaction Documents and the other
documents and agreements delivered or to be delivered pursuant to the Amended
Note Agreement and the other Transaction Documents to the Pledge Agreement shall
mean and be a reference to the Pledge Agreement, as affected and amended hereby.
(c)The Pledge Agreement and the other Transaction Documents, as
affected and amended hereby, shall remain in full force and effect and are
hereby ratified and confirmed.
Section 4.03 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
Exhibit 10.4 - Page 3
<PAGE>
ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN
THE STATE OF TEXAS.
Section 4.04 EXECUTION IN COUNTERPARTS. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
TEXOIL, INC.
By: _________________
Ruben Medrano
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: _________________
Gary Milavec
Vice President
Exhibit 10.4 - Page 4
EXHIBIT 10.5
FIRST AMENDMENT TO
STOCK OWNERSHIP AND REGISTRATION RIGHTS AGREEMENT
This First Amendment to Stock Ownership and Registration Rights Agreement
(this "First Amendment") dated as of May 21, 1997 is between 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,
each a Delaware limited partnership (collectively, the "RIMCO HOLDERS," and
together with their distributees, successors and assigns, the "HOLDERS").
PRELIMINARY STATEMENTS
A. WHEREAS, that certain Amended and Restated Note Purchase Agreement
dated as of even date herewith among Parent, the Company and the RIMCO Holders
(the "RESTATED NOTE PURCHASE AGREEMENT"), provides for the Company to issue and
sell to the RIMCO Holders the Notes (the Tranche A Notes, the Tranche B Notes
and the Tranche C Notes) in the manner provided therein; and
B. WHEREAS, the Tranche A Notes and the Tranche C Notes are exchangeable
according to their respective terms and the terms of that certain Amended and
Restated Guaranty and Exchange Agreement dated as of even date herewith among
Parent, the Company and the RIMCO Holders (the "RESTATED GUARANTY AND EXCHANGE
AGREEMENT") for shares of common stock of Parent, par value $.01 per share (the
"PARENT COMMON STOCK"), subject to adjustment; and
C. WHEREAS, Parent, the Company and the RIMCO Holders have heretofore
entered into that certain Stock Ownership and Registration Rights Agreement,
dated as of September 6, 1996 (the "REGISTRATION RIGHTS AGREEMENT"), whereby,
among other things, Parent agreed to effect the registration of the offering and
sale of the Registrable Securities (as defined in the Registration Rights
Agreement); and
D. WHEREAS, Parent, the Company and the RIMCO Holders now desire to enter
into this First Amendment to the Registration Rights Agreement with respect to
the matters set forth herein and to include in the Registrable Securities
subject to the Registration Rights Agreement the Shares issuable upon exchange
of the Tranche A Notes and the Tranche C Notes in the manner provided for in the
Restated Guaranty and Exchange Agreement; and
E. WHEREAS, the execution and delivery of this First Amendment is a
condition precedent to the closing of the transactions contemplated by the
Restated Note Purchase Agreement.
Exhibit 10.5 - Page 1
<PAGE>
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Parent, the Company and the RIMCO Holders agree as follows:
SECTION 1. AMENDMENTS.
1.1 The definition of "Shares" in Section 1.01 of the Registration Rights
Agreement is hereby amended in its entirety to read as follows:
"SHARES" means, collectively, shares of Parent Common Stock issued
or issuable upon exchange of the Tranche A Notes and the Tranche C Notes
and all shares of Parent Common Stock exchanged therefor or distributed,
issued or issuable with respect thereto.
1.2 The definition of "Note Purchase Agreement" in Section 1.01 of the
Registration Rights Agreement is hereby amended in its entirety to read as
follows:
"NOTE PURCHASE AGREEMENT" means that certain Amended and Restated
Note Purchase Agreement dated as of May 21, 1997, by and among Parent, the
Company and the RIMCO Holders, as may be amended from time to time.
1.3 The definition of "Guaranty and Exchange Agreement" in Section 1.01 of
the Registration Rights Agreement is hereby amended in its entirety to read as
follows:
"GUARANTY AND EXCHANGE AGREEMENT" means that certain Amended and
Restated Guaranty and Exchange Agreement dated as of May 21, 1997, by and
among Parent, the Company and the RIMCO Holders, as may be amended from
time to time.
1.4 Section 2.01(b) of the Registration Rights Agreement is hereby amended
in its entirety to read as follows:
(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 Restated 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, and
provided, further, that in the event any Tranche C Notes are exchanged for
Parent Common Stock pursuant to the provisions of Section 3.02(b) of the
Restated Guaranty and Exchange Agreement, the Holders shall be
Exhibit 10.5 - Page 2
<PAGE>
entitled to one additional Demand Registration with respect to any Tranche
C Notes that are still outstanding following such exchange.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF PARENT AND THE COMPANY.
2.1 Parent and the Company represent and warrant to the RIMCO Holders
that:
(a) this First Amendment has been duly authorized, executed and
delivered by them and this First Amendment constitutes the legal, valid
and binding obligation of Parent and the Company enforceable against them
in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws or
equitable principles relating to or limiting creditors' rights generally;
(b) the Registration Rights Agreement, as amended by this First
Amendment, constitutes the legal, valid and binding obligation of Parent
and the Company enforceable against them in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles
relating to or limiting creditors' rights generally;
(c) the execution, delivery and performance by Parent and the
Company of this First Amendment (i) has been duly authorized by all
requisite corporate action and, if required, shareholder action, (ii) does
not require the consent or approval of any governmental or regulatory body
or agency, and (iii) will not (A) violate (1) any provision of law,
statute, rule or regulation or its certificate of incorporation or bylaws,
(2) any order of any court or any rule, regulation or order of any other
agency or government binding upon it, or (3) any provision of any material
indenture, agreement or other instrument to which it is a party or by
which its properties or assets are or may be bound, or (B) result in a
breach or constitute (alone or with due notice or lapse of time or both) a
default under any such indenture, agreement or other instrument;
(d) all representations and warranties contained in the Registration
Rights Agreement and in the Note Purchase Agreement, the Guaranty and
Exchange Agreement and the transaction documents executed and delivered
concurrently therewith are true and correct in all material respects with
the same force and effect as if made by Parent or the Company, as
applicable, on and as of the date hereof; and
(e) Parent is not governed by Sections 411 through 444 of the Nevada
General Corporation Law.
SECTION 3. CONDITIONS TO EFFECTIVENESS OF THIS FIRST AMENDMENT.
3.1 This First Amendment shall not become effective until, and shall
become effective when, each of the following conditions shall have been
satisfied:
Exhibit 10.5 - Page 3
<PAGE>
(a) executed counterparts of this First Amendment, duly executed by
Parent, the Company and the RIMCO Holders, shall have been delivered to
the RIMCO Holders;
(b) the RIMCO Holders shall have received a copy of the resolutions
of the Board of Directors of Parent and the Company authorizing the
execution, delivery and performance by Parent and the Company of this
First Amendment, certified by their respective Secretary or Assistant
Secretary;
(c) the representations and warranties of Parent and the Company set
forth in SECTION 2 hereof are true and correct on and as of the date
hereof; and
(d) the RIMCO Holders shall have received the favorable opinion of
counsel to Parent and the Company as to the matters set forth in SECTIONS
2.1(A), 2.1(B), 2.1(C) and 2.1(E) hereof, which opinion shall be in form
and substance satisfactory to the RIMCO Holders.
SECTION 4. PAYMENT OF RIMCO HOLDERS' COUNSEL FEES AND EXPENSES.
4.1 Parent and the Company agree to pay, upon demand, the reasonable fees
and expenses of Andrews & Kurth L.L.P., counsel to the RIMCO Holders, in
connection with the negotiation, preparation, approval, execution and delivery
of this First Amendment.
SECTION 5. MISCELLANEOUS.
5.1 This First Amendment shall be construed in connection with and as part
of the Registration Rights Agreement, and except as modified and expressly
amended by this First Amendment, all terms, conditions, and covenants contained
in the Registration Rights Agreement are hereby ratified and shall be and remain
in full force and effect.
5.2 Any and all notices, requests, certificates and other instruments
executed and delivered after the execution and delivery of this First Amendment
may refer to the Registration Rights Agreement without making specific reference
to this First Amendment but nevertheless all such references shall include this
First Amendment unless the context otherwise requires.
5.3 The descriptive headings of the various Sections or parts of this
First Amendment are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.
5.4 This First Amendment 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.
Exhibit 10.5 - Page 4
<PAGE>
5.5 Capitalized terms used herein shall have the respective meanings
described thereto in the Restated Note Purchase Agreement unless herein defined
or the context shall otherwise require.
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be executed by their respective representatives thereunto duly
authorized, effective as of the date first above written.
TEXOIL, INC.
By: _____________________
Ruben Medrano
President
TEXOIL COMPANY
By: _____________________
Ruben Medrano
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: _____________________
Gary Milavec
Vice President
Exhibit 10.5 - Page 5
EXHIBIT 10.6
FIRST AMENDMENT TO
SUBORDINATION AGREEMENT
THIS FIRST AMENDMENT TO SUBORDINATION AGREEMENT (this "AMENDMENT")
dated as of May 21, 1997 is made 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 STATEMENT
A. The Parent and the Senior Noteholders have entered into that
certain Note Purchase Agreement, dated September 6, 1996 (the "ORIGINAL NOTE
AGREEMENT").
B. In connection with the Original Note Agreement, the Senior
Noteholders, the Company and Parent entered into that certain Guaranty and
Exchange Agreement, dated as of September 6, 1996 (the "ORIGINAL GUARANTY
AGREEMENT").
C. The Subordinate Noteholder and Parent entered into that certain
Amended and Restated Agreement of Purchase and Sale, dated as of September 6,
1996 (the "SUBORDINATE NOTE AGREEMENT"), whereby the Subordinate Noteholder
loaned the Parent $50,000 and the Parent issued the Subordinated Noteholder a
promissory note in the principal amount of $50,000 (the "SUBORDINATE NOTE")
D. As a condition precedent to induce the Senior Noteholders to
purchase the Senior Notes under the Original Note Agreement, the Senior
Noteholders and the Subordinate Noteholder have entered into that certain
Subordination Agreement, dated September 6, 1996 (the "SUBORDINATION
AGREEMENT").
E. On even date herewith, the Parent, the Company and the
Noteholders have amended and restated the Original Note Agreement by entering
into that certain Amended and Restated Note Purchase Agreement (the "AMENDED
NOTE AGREEMENT") whereby the Noteholders have committed to make Tranche C
Advances (as defined in the Amended Note Agreement) of up to $1,500,000.00.
F. In connection with the Amended Note Agreement, the Senior
Noteholders, the Company and Parent have amended and restated the Original
Guaranty Agreement, dated as of even date herewith (the "AMENDED GUARANTY
AGREEMENT").
Exhibit 10.6 - Page 1
<PAGE>
G. The Senior Noteholders and the Subordinate Noteholders now desire
to amend the Subordination Agreement to include within the definition of Senior
Obligations the indebtedness, liabilities and obligations of the Company and
Parent under the Amended Note Agreement and the Amended Guaranty Agreement.
H. It is a condition precedent to the effectiveness of the Amended
Note Agreement that the Senior Noteholders and the Subordinate Noteholder shall
have executed this Amendment.
NOW THEREFORE, in consideration of the foregoing and the mutual
agreements set forth herein, the parties agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
(a) All capitalized terms defined in the Subordination Agreement and
not otherwise defined herein shall have the same meanings herein as in the
Subordination Agreement including, without limitation, defined terms that are
defined by reference to the Amended Note Agreement. All references in the
Subordination Agreement to Note Agreement and Guaranty Agreement shall be
references to the Amended Note Agreement and Amended Guaranty Agreement,
respectively (as same may be modified, amended or amended and restated from time
to time). All references in the Subordination Agreement to the Senior Notes
shall mean the "Notes" (as such term is defined in the Amended Note Agreement)
including, without limitation, the Tranche C Notes.
(b) The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Amendment as a whole and not to any particular
Article, Section or other subdivision.
(c) The Article and Section headings herein are for convenience only
and shall not affect the construction hereof.
ARTICLE II
AMENDMENT TO SUBORDINATION AGREEMENT
The term "Senior Obligations" as defined in Section 1.01 of the
Subordination Agreement is hereby amended to include, without limitation, the
indebtedness, liabilities and obligations of the Company and/or Parent to the
Senior Noteholders under the Amended Note Agreement, the Senior Notes
(including, without limitation, the Tranche C Notes), the Amended Guaranty
Agreement or any other Transaction Document as such documents may be further
amended, amended and restated, extended or otherwise modified from time to time
in the future.
Exhibit 10.6 - Page 2
<PAGE>
ARTICLE III
CONDITION OF EFFECTIVENESS
This Amendment shall become effective when, and only when, the
following conditions shall have been fulfilled:
(a) the Senior Noteholders and the Subordinate Noteholder shall have
executed a counterpart of this Amendment;
(b) the Amended Note Agreement shall have become effective; and
(c) the Amended Guaranty Agreement shall have become effective.
ARTICLE IV
MISCELLANEOUS
Section 4.01 REFERENCE TO SUBORDINATION AGREEMENT AND EFFECT ON
NOTES, NOTE AGREEMENT AND OTHER TRANSACTION DOCUMENTS EXECUTED IN CONNECTION
WITH THE SUBORDINATION AGREEMENT.
(a) Upon the effectiveness of this Amendment, each reference in the
Subordination Agreement to "this Agreement," "hereunder," "herein," "hereof," or
words of similar import shall mean and be a reference to the Subordination
Agreement as affected and amended hereby.
(b) Upon the effectiveness of this Amendment, each reference in the
Notes, the Amended Note Agreement, the other Transaction Documents and the other
documents and agreements delivered or to be delivered pursuant to the Amended
Note Agreement and the other Transaction Documents to the Subordination
Agreement shall mean and be a reference to the Subordination Agreement, as
affected and amended hereby.
(c) The Subordination Agreement and the other Transaction Documents,
as affected and amended hereby, shall remain in full force and effect and are
hereby ratified and confirmed.
Section 4.02 GOVERNING LAW; TERMS. THIS AMENDMENT 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.
Section 4.03 EXECUTION IN COUNTERPARTS. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when
Exhibit 10.6 - Page 3
<PAGE>
so executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
OPAL AIR, INC.
By: _______________________
T.W. Hoehn, Jr.
President
Address for Notices:
2302 Rue Adriane
La Jolla, California 92037
Attention: T.W. Hoehn, Jr.
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: _______________________
Name: Gary Milavec
Title:Vice President
Exhibit 10.6 - Page 4
<PAGE>
TEXOIL, INC.
By: _______________________
Name: Ruben Medrano
Title: President
TEXOIL COMPANY
By: _______________________
Name: Ruben Medrano
Title: President
Exhibit 10.6 - Page 5
EXHIBIT 10.7
FIRST AMENDMENT TO
SUBORDINATION AGREEMENT
THIS FIRST AMENDMENT TO SUBORDINATION AGREEMENT (this "AMENDMENT")
dated as of May 21, 1997 is made among 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 STATEMENT
A. The Parent and the Senior Noteholders have entered into that
certain Note Purchase Agreement, dated September 6, 1996 (the "ORIGINAL NOTE
AGREEMENT").
B. In connection with the Original Note Agreement, the Senior
Noteholders, the Company and Parent entered into that certain Guaranty and
Exchange Agreement, dated as of September 6, 1996 (the "ORIGINAL GUARANTY
AGREEMENT").
C. The Subordinate Noteholder and Parent entered into that certain
Amended and Restated Agreement of Purchase and Sale, dated as of September 6,
1996 (the "SUBORDINATE NOTE AGREEMENT"), whereby the Subordinate Noteholder
loaned the Parent $1,000,000 and the Parent issued the Subordinated Noteholder a
promissory note in the principal amount of $1,000,000 (the "SUBORDINATE NOTE")
D. As a condition precedent to induce the Senior Noteholders to
purchase the Senior Notes under the Original Note Agreement, the Senior
Noteholders and the Subordinate Noteholder have entered into that certain
Subordination Agreement, dated September 6, 1996 (the "SUBORDINATION
AGREEMENT").
E. On even date herewith, the Parent, the Company and the
Noteholders have amended and restated the Original Note Agreement by entering
into that certain Amended and Restated Note Purchase Agreement (the "AMENDED
NOTE AGREEMENT") whereby the Noteholders have committed to make Tranche C
Advances (as defined in the Amended Note Agreement) of up to $1,500,000.00.
F. In connection with the Amended Note Agreement, the Senior
Noteholders, the Company and Parent have amended and restated the Original
Guaranty Agreement, dated as of even date herewith (the "AMENDED GUARANTY
AGREEMENT").
Exhibit 10.7 - Page 1
<PAGE>
G. The Senior Noteholders and the Subordinate Noteholders now desire
to amend the Subordination Agreement to include within the definition of Senior
Obligations the indebtedness, liabilities and obligations of the Company and
Parent under the Amended Note Agreement and the Amended Guaranty Agreement.
H. It is a condition precedent to the effectiveness of the Amended
Note Agreement that the Senior Noteholders and the Subordinate Noteholder shall
have executed this Amendment.
NOW THEREFORE, in consideration of the foregoing and the mutual
agreements set forth herein, the parties agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
(a) All capitalized terms defined in the Subordination Agreement and
not otherwise defined herein shall have the same meanings herein as in the
Subordination Agreement including, without limitation, defined terms that are
defined by reference to the Amended Note Agreement. All references in the
Subordination Agreement to Note Agreement and Guaranty Agreement shall be
references to the Amended Note Agreement and Amended Guaranty Agreement,
respectively (as same may be modified, amended or amended and restated from time
to time). All references in the Subordination Agreement to the Senior Notes
shall mean the "Notes" (as such term is defined in the Amended Note Agreement)
including, without limitation, the Tranche C Notes.
(b) The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Amendment as a whole and not to any particular
Article, Section or other subdivision.
(c) The Article and Section headings herein are for convenience only
and shall not affect the construction hereof.
ARTICLE II
AMENDMENT TO SUBORDINATION AGREEMENT
The term "Senior Obligations" as defined in Section 1.01 of the
Subordination Agreement is hereby amended to include, without limitation, the
indebtedness, liabilities and obligations of the Company and/or Parent to the
Senior Noteholders under the Amended Note Agreement, the Senior Notes
(including, without limitation, the Tranche C Notes), the Amended Guaranty
Agreement or any other Transaction Document as such documents may be further
amended, amended and restated, extended or otherwise modified from time to time
in the future.
Exhibit 10.7 - Page 2
<PAGE>
ARTICLE III
CONDITION OF EFFECTIVENESS
This Amendment shall become effective when, and only when, the
following conditions shall have been fulfilled:
(a) the Senior Noteholders and the Subordinate Noteholder shall have
executed a counterpart of this Amendment;
(b) the Amended Note Agreement shall have become effective; and
(c) the Amended Guaranty Agreement shall have become effective.
ARTICLE IV
MISCELLANEOUS
Section 4.01 REFERENCE TO SUBORDINATION AGREEMENT AND EFFECT ON
NOTES, NOTE AGREEMENT AND OTHER TRANSACTION DOCUMENTS EXECUTED IN CONNECTION
WITH THE SUBORDINATION AGREEMENT.
(a) Upon the effectiveness of this Amendment, each reference in the
Subordination Agreement to "this Agreement," "hereunder," "herein," "hereof," or
words of similar import shall mean and be a reference to the Subordination
Agreement as affected and amended hereby.
(b) Upon the effectiveness of this Amendment, each reference in the
Notes, the Amended Note Agreement, the other Transaction Documents and the other
documents and agreements delivered or to be delivered pursuant to the Amended
Note Agreement and the other Transaction Documents to the Subordination
Agreement shall mean and be a reference to the Subordination Agreement, as
affected and amended hereby.
(c) The Subordination Agreement and the other Transaction Documents,
as affected and amended hereby, shall remain in full force and effect and are
hereby ratified and confirmed.
Section 4.02 GOVERNING LAW; TERMS. THIS AMENDMENT 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.
Section 4.03 EXECUTION IN COUNTERPARTS. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when
Exhibit 10.7 - Page 3
<PAGE>
so executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
T.W. HOEHN, JR. AND BETTY JOE HOEHN
REVOCABLE TRUST
By: _______________________
T. W. Hoehn, Jr.
Trustee
Address for Notices:
2302 Rue Adriane
La Jolla, California 92037
Attention: T. W. Hoehn, Jr.
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: _______________________
Name: Gary Milavec
Title:Vice President
Exhibit 10.7 - Page 4
<PAGE>
TEXOIL, INC.
By: _______________________
Name: Ruben Medrano
Title: President
TEXOIL COMPANY
By: _______________________
Name: Ruben Medrano
Title: President
Exhibit 10.7 - Page 5
EXHIBIT 10.8
FIRST AMENDMENT TO
SUBORDINATION AGREEMENT
THIS FIRST AMENDMENT TO SUBORDINATION AGREEMENT (this "AMENDMENT")
dated as of May 21, 1997 is made 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 STATEMENT
A. The Parent and the Senior Noteholders have entered into that
certain Note Purchase Agreement, dated September 6, 1996 (the "ORIGINAL NOTE
AGREEMENT").
B. In connection with the Original Note Agreement, the Senior
Noteholders, the Company and Parent entered into that certain Guaranty and
Exchange Agreement, dated as of September 6, 1996 (the "ORIGINAL GUARANTY
AGREEMENT").
C. The Subordinate Noteholder and Parent entered into that certain
Amended and Restated Agreement of Purchase and Sale, dated as of September 6,
1996 (the "SUBORDINATE NOTE AGREEMENT"), whereby the Subordinate Noteholder
loaned the Parent $550,000 and the Parent issued the Subordinated Noteholder a
promissory note in the principal amount of $550,000 (the "SUBORDINATE NOTE")
D. As a condition precedent to induce the Senior Noteholders to
purchase the Senior Notes under the Original Note Agreement, the Senior
Noteholders and the Subordinate Noteholder have entered into that certain
Subordination Agreement, dated September 6, 1996 (the "SUBORDINATION
AGREEMENT").
E. On even date herewith, the Parent, the Company and the
Noteholders have amended and restated the Original Note Agreement by entering
into that certain Amended and Restated Note Purchase Agreement (the "AMENDED
NOTE AGREEMENT") whereby the Noteholders have committed to make Tranche C
Advances (as defined in the Amended Note Agreement) of up to $1,500,000.00.
F. In connection with the Amended Note Agreement, the Senior
Noteholders, the Company and Parent have amended and restated the Original
Guaranty Agreement, dated as of even date herewith (the "AMENDED GUARANTY
AGREEMENT").
Exhibit 10.8 - Page 1
<PAGE>
G. The Senior Noteholders and the Subordinate Noteholders now desire
to amend the Subordination Agreement to include within the definition of Senior
Obligations the indebtedness, liabilities and obligations of the Company and
Parent under the Amended Note Agreement and the Amended Guaranty Agreement.
H. It is a condition precedent to the effectiveness of the Amended
Note Agreement that the Senior Noteholders and the Subordinate Noteholder shall
have executed this Amendment.
NOW THEREFORE, in consideration of the foregoing and the mutual
agreements set forth herein, the parties agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
(a) All capitalized terms defined in the Subordination Agreement and
not otherwise defined herein shall have the same meanings herein as in the
Subordination Agreement including, without limitation, defined terms that are
defined by reference to the Amended Note Agreement. All references in the
Subordination Agreement to Note Agreement and Guaranty Agreement shall be
references to the Amended Note Agreement and Amended Guaranty Agreement,
respectively (as same may be modified, amended or amended and restated from time
to time). All references in the Subordination Agreement to the Senior Notes
shall mean the "Notes" (as such term is defined in the Amended Note Agreement)
including, without limitation, the Tranche C Notes.
(b) The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Amendment as a whole and not to any particular
Article, Section or other subdivision.
(c) The Article and Section headings herein are for convenience only
and shall not affect the construction hereof.
ARTICLE II
AMENDMENT TO SUBORDINATION AGREEMENT
The term "Senior Obligations" as defined in Section 1.01 of the
Subordination Agreement is hereby amended to include, without limitation, the
indebtedness, liabilities and obligations of the Company and/or Parent to the
Senior Noteholders under the Amended Note Agreement, the Senior Notes
(including, without limitation, the Tranche C Notes), the Amended Guaranty
Agreement or any other Transaction Document as such documents may be further
amended, amended and restated, extended or otherwise modified from time to time
in the future.
Exhibit 10.8 - Page 2
<PAGE>
ARTICLE III
CONDITION OF EFFECTIVENESS
This Amendment shall become effective when, and only when, the
following conditions shall have been fulfilled:
(a) the Senior Noteholders and the Subordinate Noteholder shall have
executed a counterpart of this Amendment;
(b) the Amended Note Agreement shall have become effective; and
(c) the Amended Guaranty Agreement shall have become effective.
ARTICLE IV
MISCELLANEOUS
Section 4.01 REFERENCE TO SUBORDINATION AGREEMENT AND EFFECT ON
NOTES, NOTE AGREEMENT AND OTHER TRANSACTION DOCUMENTS EXECUTED IN CONNECTION
WITH THE SUBORDINATION AGREEMENT.
(a) Upon the effectiveness of this Amendment, each reference in the
Subordination Agreement to "this Agreement," "hereunder," "herein," "hereof," or
words of similar import shall mean and be a reference to the Subordination
Agreement as affected and amended hereby.
(b) Upon the effectiveness of this Amendment, each reference in the
Notes, the Amended Note Agreement, the other Transaction Documents and the other
documents and agreements delivered or to be delivered pursuant to the Amended
Note Agreement and the other Transaction Documents to the Subordination
Agreement shall mean and be a reference to the Subordination Agreement, as
affected and amended hereby.
(c) The Subordination Agreement and the other Transaction Documents,
as affected and amended hereby, shall remain in full force and effect and are
hereby ratified and confirmed.
Section 4.02 GOVERNING LAW; TERMS. THIS AMENDMENT 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.
Section 4.03 EXECUTION IN COUNTERPARTS. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when
Exhibit 10.8 - Page 3
<PAGE>
so executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
_________________________________
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: _________________________
Name: Gary Milavec
Title:Vice President
Exhibit 10.8 - Page 4
<PAGE>
TEXOIL, INC.
By: _________________________
Name: Ruben Medrano
Title: President
TEXOIL COMPANY
By: _________________________
Name: Ruben Medrano
Title: President
Exhibit 10.8 - Page 5
EXHIBIT 10.9
FIRST AMENDMENT TO
SUBORDINATION AGREEMENT
THIS FIRST AMENDMENT TO SUBORDINATION AGREEMENT (this "AMENDMENT")
dated as of May 21, 1997 is made 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 STATEMENT
A. The Parent and the Senior Noteholders have entered into that
certain Note Purchase Agreement, dated September 6, 1996 (the "ORIGINAL NOTE
AGREEMENT").
B. In connection with the Original Note Agreement, the Senior
Noteholders, the Company and Parent entered into that certain Guaranty and
Exchange Agreement, dated as of September 6, 1996 (the "ORIGINAL GUARANTY
AGREEMENT").
C. The Subordinate Noteholder and Parent entered into that certain
Amended and Restated Agreement of Purchase and Sale, dated as of September 6,
1996 (the "SUBORDINATE NOTE AGREEMENT"), whereby the Subordinate Noteholder
loaned the Parent $300,000 and the Parent issued the Subordinated Noteholder a
promissory note in the principal amount of $300,000 (the "SUBORDINATE NOTE")
D. As a condition precedent to induce the Senior Noteholders to
purchase the Senior Notes under the Original Note Agreement, the Senior
Noteholders and the Subordinate Noteholder have entered into that certain
Subordination Agreement, dated September 6, 1996 (the "SUBORDINATION
AGREEMENT").
E. On even date herewith, the Parent, the Company and the
Noteholders have amended and restated the Original Note Agreement by entering
into that certain Amended and Restated Note Purchase Agreement (the "AMENDED
NOTE AGREEMENT") whereby the Noteholders have committed to make Tranche C
Advances (as defined in the Amended Note Agreement) of up to $1,500,000.00.
F. In connection with the Amended Note Agreement, the Senior
Noteholders, the Company and Parent have amended and restated the Original
Guaranty Agreement, dated as of even date herewith (the "AMENDED GUARANTY
AGREEMENT").
Exhibit 10.9 - Page 1
<PAGE>
G. The Senior Noteholders and the Subordinate Noteholders now desire
to amend the Subordination Agreement to include within the definition of Senior
Obligations the indebtedness, liabilities and obligations of the Company and
Parent under the Amended Note Agreement and the Amended Guaranty Agreement.
H. It is a condition precedent to the effectiveness of the Amended
Note Agreement that the Senior Noteholders and the Subordinate Noteholder shall
have executed this Amendment.
NOW THEREFORE, in consideration of the foregoing and the mutual
agreements set forth herein, the parties agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
(a) All capitalized terms defined in the Subordination Agreement and
not otherwise defined herein shall have the same meanings herein as in the
Subordination Agreement including, without limitation, defined terms that are
defined by reference to the Amended Note Agreement. All references in the
Subordination Agreement to Note Agreement and Guaranty Agreement shall be
references to the Amended Note Agreement and Amended Guaranty Agreement,
respectively (as same may be modified, amended or amended and restated from time
to time). All references in the Subordination Agreement to the Senior Notes
shall mean the "Notes" (as such term is defined in the Amended Note Agreement)
including, without limitation, the Tranche C Notes.
(b) The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Amendment as a whole and not to any particular
Article, Section or other subdivision.
(c) The Article and Section headings herein are for convenience only
and shall not affect the construction hereof.
ARTICLE II
AMENDMENT TO SUBORDINATION AGREEMENT
The term "Senior Obligations" as defined in Section 1.01 of the
Subordination Agreement is hereby amended to include, without limitation, the
indebtedness, liabilities and obligations of the Company and/or Parent to the
Senior Noteholders under the Amended Note Agreement, the Senior Notes
(including, without limitation, the Tranche C Notes), the Amended Guaranty
Agreement or any other Transaction Document as such documents may be further
amended, amended and restated, extended or otherwise modified from time to time
in the future.
Exhibit 10.9 - Page 2
<PAGE>
ARTICLE III
CONDITION OF EFFECTIVENESS
This Amendment shall become effective when, and only when, the
following conditions shall have been fulfilled:
(a) the Senior Noteholders and the Subordinate Noteholder shall have
executed a counterpart of this Amendment;
(b) the Amended Note Agreement shall have become effective; and
(c) the Amended Guaranty Agreement shall have become effective.
ARTICLE IV
MISCELLANEOUS
Section 4.01 REFERENCE TO SUBORDINATION AGREEMENT AND EFFECT ON
NOTES, NOTE AGREEMENT AND OTHER TRANSACTION DOCUMENTS EXECUTED IN CONNECTION
WITH THE SUBORDINATION AGREEMENT.
(a) Upon the effectiveness of this Amendment, each reference in the
Subordination Agreement to "this Agreement," "hereunder," "herein," "hereof," or
words of similar import shall mean and be a reference to the Subordination
Agreement as affected and amended hereby.
(b) Upon the effectiveness of this Amendment, each reference in the
Notes, the Amended Note Agreement, the other Transaction Documents and the other
documents and agreements delivered or to be delivered pursuant to the Amended
Note Agreement and the other Transaction Documents to the Subordination
Agreement shall mean and be a reference to the Subordination Agreement, as
affected and amended hereby.
(c) The Subordination Agreement and the other Transaction Documents,
as affected and amended hereby, shall remain in full force and effect and are
hereby ratified and confirmed.
Section 4.02 GOVERNING LAW; TERMS. THIS AMENDMENT 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.
Section 4.03 EXECUTION IN COUNTERPARTS. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when
Exhibit 10.9 - Page 3
<PAGE>
so executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
______________________________
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: ___________________________
Name: Gary Milavec
Title:Vice President
Exhibit 10.9 - Page 4
<PAGE>
TEXOIL, INC.
By: ___________________________
Name: Ruben Medrano
Title: President
TEXOIL COMPANY
By: ___________________________
Name: Ruben Medrano
Title: President
Exhibit 10.9 - Page 5
EXHIBIT 10.10
FIRST AMENDMENT TO
SUBORDINATION AGREEMENT
THIS FIRST AMENDMENT TO SUBORDINATION AGREEMENT (this "AMENDMENT")
dated as of May 21, 1997 is made 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 STATEMENT
A. The Parent and the Senior Noteholders have entered into that
certain Note Purchase Agreement, dated September 6, 1996 (the "ORIGINAL NOTE
AGREEMENT").
B. In connection with the Original Note Agreement, the Senior
Noteholders, the Company and Parent entered into that certain Guaranty and
Exchange Agreement, dated as of September 6, 1996 (the "ORIGINAL GUARANTY
AGREEMENT").
C. The Subordinate Noteholder and Parent entered into that certain
Amended and Restated Agreement of Purchase and Sale, dated as of September 6,
1996 (the "SUBORDINATE NOTE AGREEMENT"), whereby the Subordinate Noteholder
loaned the Parent $50,000 and the Parent issued the Subordinated Noteholder a
promissory note in the principal amount of $50,000 (the "SUBORDINATE NOTE")
D. As a condition precedent to induce the Senior Noteholders to
purchase the Senior Notes under the Original Note Agreement, the Senior
Noteholders and the Subordinate Noteholder have entered into that certain
Subordination Agreement, dated September 6, 1996 (the "SUBORDINATION
AGREEMENT").
E. On even date herewith, the Parent, the Company and the
Noteholders have amended and restated the Original Note Agreement by entering
into that certain Amended and Restated Note Purchase Agreement (the "AMENDED
NOTE AGREEMENT") whereby the Noteholders have committed to make Tranche C
Advances (as defined in the Amended Note Agreement) of up to $1,500,000.00.
F. In connection with the Amended Note Agreement, the Senior
Noteholders, the Company and Parent have amended and restated the Original
Guaranty Agreement, dated as of even date herewith (the "AMENDED GUARANTY
AGREEMENT").
Exhibit 10.10 - Page 1
<PAGE>
G. The Senior Noteholders and the Subordinate Noteholders now desire
to amend the Subordination Agreement to include within the definition of Senior
Obligations the indebtedness, liabilities and obligations of the Company and
Parent under the Amended Note Agreement and the Amended Guaranty Agreement.
H. It is a condition precedent to the effectiveness of the Amended
Note Agreement that the Senior Noteholders and the Subordinate Noteholder shall
have executed this Amendment.
NOW THEREFORE, in consideration of the foregoing and the mutual
agreements set forth herein, the parties agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
(a) All capitalized terms defined in the Subordination Agreement and
not otherwise defined herein shall have the same meanings herein as in the
Subordination Agreement including, without limitation, defined terms that are
defined by reference to the Amended Note Agreement. All references in the
Subordination Agreement to Note Agreement and Guaranty Agreement shall be
references to the Amended Note Agreement and Amended Guaranty Agreement,
respectively (as same may be modified, amended or amended and restated from time
to time). All references in the Subordination Agreement to the Senior Notes
shall mean the "Notes" (as such term is defined in the Amended Note Agreement)
including, without limitation, the Tranche C Notes.
(b) The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Amendment as a whole and not to any particular
Article, Section or other subdivision.
(c) The Article and Section headings herein are for convenience only
and shall not affect the construction hereof.
ARTICLE II
AMENDMENT TO SUBORDINATION AGREEMENT
The term "Senior Obligations" as defined in Section 1.01 of the
Subordination Agreement is hereby amended to include, without limitation, the
indebtedness, liabilities and obligations of the Company and/or Parent to the
Senior Noteholders under the Amended Note Agreement, the Senior Notes
(including, without limitation, the Tranche C Notes), the Amended Guaranty
Agreement or any other Transaction Document as such documents may be further
amended, amended and restated, extended or otherwise modified from time to time
in the future.
Exhibit 10.10 - Page 2
<PAGE>
ARTICLE III
CONDITION OF EFFECTIVENESS
This Amendment shall become effective when, and only when, the
following conditions shall have been fulfilled:
(a) the Senior Noteholders and the Subordinate Noteholder shall have
executed a counterpart of this Amendment;
(b) the Amended Note Agreement shall have become effective; and
(c) the Amended Guaranty Agreement shall have become effective.
ARTICLE IV
MISCELLANEOUS
Section 4.01 REFERENCE TO SUBORDINATION AGREEMENT AND EFFECT ON
NOTES, NOTE AGREEMENT AND OTHER TRANSACTION DOCUMENTS EXECUTED IN CONNECTION
WITH THE SUBORDINATION AGREEMENT.
(a) Upon the effectiveness of this Amendment, each reference in the
Subordination Agreement to "this Agreement," "hereunder," "herein," "hereof," or
words of similar import shall mean and be a reference to the Subordination
Agreement as affected and amended hereby.
(b) Upon the effectiveness of this Amendment, each reference in the
Notes, the Amended Note Agreement, the other Transaction Documents and the other
documents and agreements delivered or to be delivered pursuant to the Amended
Note Agreement and the other Transaction Documents to the Subordination
Agreement shall mean and be a reference to the Subordination Agreement, as
affected and amended hereby.
(c) The Subordination Agreement and the other Transaction Documents,
as affected and amended hereby, shall remain in full force and effect and are
hereby ratified and confirmed.
Section 4.02 GOVERNING LAW; TERMS. THIS AMENDMENT 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.
Section 4.03 EXECUTION IN COUNTERPARTS. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when
Exhibit 10.10 - Page 3
<PAGE>
so executed shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
________________________________
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: _________________________
Name: Gary Milavec
Title:Vice President
Exhibit 10.10 - Page 4
<PAGE>
TEXOIL, INC.
By: _________________________
Name: Ruben Medrano
Title: President
TEXOIL COMPANY
By: _________________________
Name: Ruben Medrano
Title: President
Exhibit 10.10 - Page 5
EXHIBIT 10.11
FIRST AMENDMENT AND SUPPLEMENT TO
MORTGAGE, ASSIGNMENT OF PRODUCTION, SECURITY
AGREEMENT AND FINANCING STATEMENT
THIS FIRST AMENDMENT AND SUPPLEMENT TO MORTGAGE, ASSIGNMENT OF
PRODUCTION, SECURITY AGREEMENT AND FINANCING STATEMENT (this "AMENDMENT") dated
as of May 21, 1997 is made by and among TEXOIL COMPANY, a Tennessee corporation
("MORTGAGOR") 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, "MORTGAGEES").
RECITALS
A. Mortgagor and Texoil, Inc., a Nevada corporation (the "PARENT") entered
into a Note Purchase Agreement, dated September 6, 1996 (the "ORIGINAL NOTE
AGREEMENT"), 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, the "MORTGAGEES") whereby such Mortgagees agreed to
lend Mortgagor principal amounts not to exceed $8,000,000 in the aggregate;
B. As security for Mortgagor's obligations under the Original Note
Agreement, on September 6, 1996, Mortgagor executed that certain Mortgage,
Assignment of Production, Security Agreement and Financing Statement (the
"EXISTING MORTGAGE") which is recorded in the Clerk of Courts of those Louisiana
parishes as more particularly set forth on Schedule I attached hereto.
D. On even date herewith, Mortgagor, the Parent and the Mortgagees have
amended and restated the Original Note Agreement by entering into that certain
Amended and Restated Note Purchase Agreement (the "AMENDED NOTE AGREEMENT")
whereby the maximum aggregate principal amount the Mortgagees have agreed to
lend Mortgagor has been increased to $9,500,000 in the aggregate.
E. Mortgagor and the Mortgagees desire to amend and supplement the
Existing Mortgage as set forth herein by, among other things, amending the
definitions of "Notes" in the Existing Mortgage to refer to the Tranche C Notes
(as defined in the Amended Note Agreement) issued by Mortgagor in connection
with the Amended Note Agreement and supplementing the Mortgaged Property covered
by Exhibit A attached hereto.
Exhibit 10.11 - Page 1
<PAGE>
AGREEMENTS
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Mortgagor and the Mortgagees, hereby agree as follows:
1. DEFINITIONS. Reference is hereby made to the Existing Mortgage, the
provision thereof being incorporated herein by reference. Unless otherwise
specifically defined herein, each capitalized term which is defined in the
Existing Mortgage shall have the same meaning in this Amendment as in the
Existing Mortgage.
2. AMENDMENTS. The Existing Mortgage is amended as follows:
a. The definition of Notes in the Existing Mortgage is hereby
amended in its entirety to read as follows:
"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 Amended Note Agreement, and with a present maturity date of September
1, 1999 or such earlier date as provided for in the Amended Note
Agreement, all as more particularly described therein or in the Amended
Note Agreement, (ii) 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 Amended
Note Agreement, and with a present maturity date of September 1, 2002 or
such earlier date as provided for in the Amended Note Agreement, (iii)
those four (4) 10% Senior Secured Exchangeable General Obligation Notes,
each dated as of May 21, 1997 issued by Mortgagor in the aggregate
principal sum not to exceed $1,500,000 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 Amended Note Agreement, and with a present maturity
date of September 1, 1999 or such earlier date as provided for in the
Amended Note Agreement, all as more particularly described therein or in
the Amended Note Agreement and (iv) any note given in substitution for any
of the foregoing notes, 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.
Exhibit 10.11 - Page 2
<PAGE>
b. Exhibit A of the Mortgage is hereby amended and supplemented to
include Exhibit A attached to this Amendment.
c. All references in the Existing Mortgage to "Note Agreement" shall
hereafter be deemed to be references to the Amended Note Agreement as same
may be amended, restated, extended or otherwise modified from time to time
in the future.
3. CONFIRMATION OF LIEN. 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 grants Mortgagees a
continuing security interest in and to the Mortgaged Property described in and
covered by the Existing Mortgage (as amended and supplemented hereby).
4. CONTINUED EFFECT AND EXTENSION OF LIEN. None of the liens,
security interest or other rights and interests granted by Mortgagor under the
Existing Mortgage are hereby released, diminished or impaired. The Existing
Mortgage is hereby amended, renewed, supplemented, ratified and reaffirmed in
accordance with the terms of this Amendment. Mortgagor further reaffirms all
covenants, representations and warranties set forth in the Existing Mortgage as
of the date hereof.
5. COUNTERPARTS. This Amendment may be executed in multiple
counterparts, each of which shall for all purposes be deemed to be an original,
and all of which are identical.
Exhibit 10.11 - Page 3
<PAGE>
IN WITNESS WHEREOF, Mortgagor and Mortgagees have executed or caused
to be executed this Amendment on the date set forth in the acknowledgments
below, to be effective as of May 21, 1997.
WITNESSES: MORTGAGOR:
TEXOIL COMPANY
_____________________
By: _______________________
_____________________ Ruben Medrano
President
The address of the Mortgagor/Debtor is:
1600 Smith, Suite 4000
Houston, Texas 77002
WITNESSES: MORTGAGEES:
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: __________________________
Gary Milavec
Vice President
The address of the Mortgagees/Secured Party is:
600 Travis Street, Suite 6875
Houston, Texas 77002
Exhibit 10.11 - Page 4
<PAGE>
STATE OF TEXAS ss.
ss.
COUNTY OF HARRIS ss.
BEFORE ME, ____________________, a Notary in and for the said State
and County, this day personally appeared Ruben Medrano, appearing herein in his
capacity as President of Texoil Company, a Tennessee corporation, to me
personally known to be the identical person whose name is subscribed to the
foregoing instrument as representing Texoil Company and acknowledged to me in
the presence of the undersigned witnesses, that he executed the same on the date
hereof on behalf of said corporation, and that it was executed for the uses,
purposes and considerations therein expressed by authority of the Board of
Directors of said corporation, as the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto signed this acknowledgment with
the said appearer and the two competent witnesses at Houston, Texas, on the 21st
day of May, 1997, after reading of the whole.
WITNESSES: _________________________
_________________________
_________________________
_________________________
Notary
Exhibit 10.11 - Page 5
<PAGE>
STATE OF TEXAS ss.
ss.
COUNTY OF HARRIS ss.
BEFORE ME, _____________________, a Notary in and for the said State
and County, this day personally appeared Gary Milavec, appearing herein in his
capacity as Vice President of RIMCO Associates, Inc., to me personally known to
be the identical person whose name is subscribed to the foregoing instrument as
representing RIMCO Associates, Inc., general partner of Resource Investors
Management Company Limited Partnership, general partner of 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 acknowledged to me in the presence of
the undersigned witnesses, that he executed the same on the date hereof on
behalf of RIMCO Associates, Inc. and said limited partnerships, and that it was
executed for the uses, purposes and considerations therein expressed by
authority of the Board of Directors of RIMCO Associates, Inc., as the free act
and deed of RIMCO Associates, Inc. and said limited partnerships.
IN WITNESS WHEREOF, I have hereunto signed this acknowledgment with
the said appearer and the two competent witnesses at Houston, Texas, on the 21st
day of May, 1997, after reading of the whole.
WITNESSES: _________________________
_________________________
_________________________
_________________________
Notary
Exhibit 10.11 - Page 6
<PAGE>
SCHEDULE I
TO
FIRST AMENDMENT AND SUPPLEMENT TO MORTGAGE,
ASSIGNMENT OF PRODUCTION, SECURITY AGREEMENT AND
FINANCING STATEMENT
FROM
TEXOIL COMPANY
TO
RIMCO PARTNERS, L.P., RIMCO PARTNERS, L.P. II,
RIMCO PARTNERS, L.P. III AND RIMCO PARTNERS, L.P. IV
FILING JURISDICTION RECORDING INFORMATION
------------------- ---------------------
Louisiana / Iberville Parish MOB 297, Entry 193
September 9, 1996
Louisiana / LaFourche Parish MOB No. 723, Folio 630, Entry No. 803082
September 10, 1996
Louisiana / Plaquemines Parish MOB 259, Folio 86
September 12, 1996
Louisiana / Saint Bernard Parish MOB 809, Folio 137
September 9, 1996
Exhibit 10.11 - Page 7
EXHIBIT 10.12
MORTGAGE, DEED OF TRUST, ASSIGNMENT OF PRODUCTION,
SECURITY AGREEMENT AND FINANCING STATEMENT
DATED MAY 21, 1997
FROM
TEXOIL COMPANY
(MORTGAGOR AND DEBTOR)
TO
GARY MILAVEC, TRUSTEE
AND
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 and the mailing
address of the Trustee is 600 Travis, Suite 6875, 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, and this financing statement is to be filed or filed for record, among
other places, in the real estate records.
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 and Deed of Trust
of 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, and this financing
statement is to be filed or filed for record, among other places, in the real
estate records. This instrument creates a lien on rights in, or relating to,
Lands of the Mortgagor which are described in Exhibit A hereto and, where
applicable, is to be tract indexed with respect to all Lands described in said
Exhibit A.
Recorded counterparts should be returned to:
William P. Swenson
Andrews & Kurth L.L.P.
4200 Texas Commerce Tower
Houston, Texas 77002
Exhibit 10.12 - Page 1
<PAGE>
MORTGAGE, DEED OF TRUST, ASSIGNMENT OF PRODUCTION, SECURITY
AGREEMENT AND FINANCING STATEMENT
THIS Mortgage, Deed of Trust, Assignment of Production, Security
Agreement and Financing Statement (this "MORTGAGE") dated as of May 21, 1997, is
from TEXOIL COMPANY, a Tennessee corporation ("MORTGAGOR"), to GARY MILAVEC, as
trustee (the "TRUSTEE"), 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, "MORTGAGEES") .
RECITALS
WHEREAS, Mortgagor and Texoil, Inc., a Nevada corporation have
entered into an Amended and Restated Note Purchase Agreement, dated as of May
21, 1997 with Mortgagees (such Amended and Restated Note Purchase Agreement, as
same may from time to time be amended, modified or amended and restated 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, (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 (c) to Mortgagees Mortgagor's 10% Senior
Secured Exchangeable General Obligation Notes in the maximum aggregate principal
amount of $1,500,000; and
WHEREAS, Mortgagor is granting the Lien under this Mortgage to the
Trustee and the 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:
Exhibit 10.12 - Page 2
<PAGE>
ARTICLE I
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. Unless the context otherwise requires, as
used in this Mortgage and all amendments, restatements, 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.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any
federal, state, province, city, town, municipality, county, local or other
political subdivision thereof
Exhibit 10.12 - Page 3
<PAGE>
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, Deed of Trust, Assignment of
Production, Security Agreement and Financing Statement, as same may from
time to time be amended, modified, supplemented or restated.
Exhibit 10.12 - Page 4
<PAGE>
"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) 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, (iii) those four (4) 10% Senior Secured Exchangeable General
Obligation Notes, each dated as of May 21, 1997 issued by Mortgagor in the
aggregate principal sum not to exceed $1,500,000 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 and (iv) any note given in substitution for any of the foregoing
notes, 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.
Exhibit 10.12 - Page 5
<PAGE>
"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 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
Exhibit 10.12 - Page 6
<PAGE>
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, 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 Texas Business and Commerce
Code 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.
Exhibit 10.12 - Page 7
<PAGE>
ARTICLE II
MORTGAGE, DEED OF TRUST
2.1 GRANT OF MORTGAGE, DEED OF TRUST ON REAL PROPERTY AND SECURITY
INTEREST IN PERSONAL PROPERTY. Mortgagor, for and in consideration of the
premises and of the debts and trusts hereinafter mentioned, and to secure the
Indebtedness, has granted, bargained, sold, mortgaged, warranted, assigned,
transferred and conveyed, and by these presents does grant, bargain, sell,
mortgage, warrant, assign, transfer and convey unto the Trustee, in trust, for
the use and benefit of the Mortgagees and their respective successors and
assigns, with power of sale, all of Mortgagor's right, title and 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;
Exhibit 10.12 - Page 8
<PAGE>
(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;
(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
including, but not limited to, those liens and security interests provided
for in Tex. Bus. & Com. Code Ann. ss. 9.319 (Tex. UCC) (Vernon Supp.
1989), as amended;
(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 the Mortgagees and Trustee are hereby authorized to receive
the same as additional security for the benefit of the Mortgagees; 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 the Leases or the 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 neither the Mortgagees nor
the Trustee shall 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 the Trustee and its
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.
Exhibit 10.12 - Page 9
<PAGE>
ARTICLE III
PARTICULAR WARRANTIES AND REPRESENTATIONS OF MORTGAGOR
Mortgagor hereby warrants and represents to the Trustee and
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 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. Subject to Permitted Encumbrances, Mortgagor has good and
defensible title to all of the 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 lien and
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 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
Exhibit 10.12 - Page 10
<PAGE>
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 the Trustee and
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 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;
Exhibit 10.12 - Page 11
<PAGE>
(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
(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
Exhibit 10.12 - Page 12
<PAGE>
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 the Trustee and the
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 PROPERTY. 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 the Trustee or the
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 Texas.
4.5 ADVERSE CLAIMS. Mortgagor will warrant and forever defend the
title to the Mortgaged Property unto the Trustee and the 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 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
Exhibit 10.12 - Page 13
<PAGE>
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 and/or the
Trustee 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 and Trustee 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 the
Mortgagees and the Trustee, 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 the Mortgagees or the Trustee 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
"mortgagee-in-possession" or otherwise responsible or liable in any manner with
Exhibit 10.12 - Page 14
<PAGE>
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, including, but not limited to, those liens and security interests
provided for in the Tex. Bus. & Com. Code Ann. ss.9.319 (Tex. UCC) (Vernon Supp.
1989), as amended. 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
Exhibit 10.12 - Page 15
<PAGE>
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 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.
Exhibit 10.12 - Page 16
<PAGE>
5.6 STATUS OF ASSIGNMENT. Notwithstanding the other provisions of
this ARTICLE V, the Mortgagees or the Trustee or any receiver appointed in
judicial proceedings for the enforcement of this 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 THE TRUSTEE, THE
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 or the Trustee 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 the Trustee
and the Mortgagees hereunder, Mortgagor hereby appoints the Trustee and the
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 the Trustee and
the 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.
Exhibit 10.12 - Page 17
<PAGE>
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 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 POWER OF SALE OF REAL PROPERTY CONSTITUTING A PART OF THE
MORTGAGED PROPERTY. Upon the occurrence of an Event of Default, the Trustee or
his successors or substitutes shall have the right and power to sell (the power
of sale permitted and provided for by statute being hereby expressly granted to
the Trustee and/or the Mortgagees by the Mortgagor), at one or more sales, as an
entirety or in parcels, as he or they may elect (or as required by law), the
real property constituting a part of the Mortgaged Property, at such place or
places and otherwise in such manner and upon such notice as may be required by
applicable law, or, in the absence of any such requirement, as the Trustee may
deem appropriate, and upon receipt of the sale price to make conveyance to the
purchaser or purchasers, and Mortgagor or its successors and assigns shall
warrant
Exhibit 10.12 - Page 18
<PAGE>
good and defensible title to such real property subject only to Permitted
Encumbrances to such purchaser or purchasers. The Trustee shall give such notice
of the sale of all or any portion of the Mortgaged Property as is required to
comply with the laws of the jurisdiction in which such Mortgaged Property is
located. The Trustee may postpone the sale of all or any portion of such real
property by public announcement at the time and place of such sale, and from
time to time thereafter may further postpone such sale by public announcement
made at time of sale fixed by the preceding postponement. The right of sale
hereunder shall not be exhausted by one or any sale, and the Trustee may make
other and successive sales until all of the Mortgaged Property be legally sold.
7.2 RIGHTS OF THE TRUSTEE WITH RESPECT TO PERSONAL PROPERTY
CONSTITUTING A PART OF THE MORTGAGED PROPERTY. Upon the occurrence and during
the continuance of an Event of Default, the Trustee or his successors or
substitutes 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 the Trustee 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.
The Trustee may require Mortgagor to assemble such personal property and make it
available to the Trustee at a place to be designated by the Trustee 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, the Trustee 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.
7.3 RIGHTS OF THE TRUSTEE WITH RESPECT TO FIXTURES CONSTITUTING A
PART OF THE MORTGAGED PROPERTY. Upon the occurrence and during the continuance
of an Event of Default, the Trustee 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.
7.4 JUDICIAL PROCEEDINGS. Upon occurrence and during the continuance
of an Event of Default, the Trustee or 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
Exhibit 10.12 - Page 19
<PAGE>
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 set forth in Section 7.9 hereof; and said receiver may be authorized to
sell and dispose of the Mortgaged Property under orders of the Court appointing
such receiver.
7.5 POSSESSION OF THE MORTGAGED PROPERTY. It shall not be necessary
for the Trustee to have physically present or constructively in his possession
at any sale held by the Trustee 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.
7.6 CERTAIN ASPECTS OF A SALE. Mortgagees shall have the right to
become the purchaser at any sale held by the Trustee or 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 or appointment of any
successor Trustee hereunder.
7.7 RECEIPT TO PURCHASER. Upon any sale, whether made under the
Uniform Commercial Code, the power of sale herein granted or conferred or by
virtue of judicial proceedings, the receipt of the Trustee or of 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 representatives, shall not,
after paying such purchase money and receiving such receipt of the Trustee 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.
7.8 EFFECT OF SALE. Any sale or sales of the Mortgaged Property or
any part thereof, whether under the Uniform Commercial Code, the power of sale
herein granted and conferred 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
Exhibit 10.12 - Page 20
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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 Mortgagor, or Mortgagor's successors or assigns.
Nevertheless, Mortgagor, if requested by the Trustee or the Mortgagees so to do,
shall join in the execution and delivery of all proper conveyances, assignments
and transfers of the properties so sold.
7.9 APPLICATION OF PROCEEDS. The proceeds of any sale of the
Mortgaged Property, or any part thereof, whether under the Uniform Commercial
Code, the power of sale herein granted and conferred 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 the
Trustee and the 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 the Trustee or the 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.
7.10 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,
Exhibit 10.12 - Page 21
<PAGE>
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 hereof, or sold in
inverse order of alienation, and agrees that the Trustee or 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.
7.12 COSTS AND EXPENSES. All reasonable costs and expenses
(including reasonable attorneys' fees) incurred by the Trustee and the
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.
7.13 OPERATION OF PROPERTY BY THE TRUSTEE. Upon the occurrence and
during the continuation of an Event of Default and in addition to all other
rights herein conferred on the Trustee, the Trustee (or any person, firm or
corporation designated by the Trustee) 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 Trustee, or any person, firm or corporation designated by the Trustee, 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 Trustee or any person, firm or corporation
designated by the Trustee, 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.
7.14 SALE OF PROPERTY IN TEXAS. Upon the occurrence and continuance
of an Event of Default, the Trustee is hereby authorized and empowered to sell
or offer for sale any part of the Mortgaged Property located in the State of
Texas, with or without having first taken possession of same, to the highest
bidder for cash at public auction. Such sale shall be made at the courthouse (or
such other place designated by the commissioner's court) of the county in Texas
in which the Texas portion of the Mortgaged Property or any part thereof is
situated, as herein described, between the
Exhibit 10.12 - Page 22
<PAGE>
hours of 10:00 a.m. and 4:00 p.m. on the first Tuesday of any month, beginning
within three (3) hours of the time provided in the notices described herein,
after posting a written or printed notice or notices of the place, earliest time
at which the sale will begin and the terms of said sale, and the portion of the
Mortgaged Property to be sold, by posting (or having some person or persons
acting for the Trustee post) for at least twenty-one (21) days preceding the
date of the sale, written or printed notice of the proposed sale at the
courthouse door (or such other place designated by the commissioner's court) of
said county in which the sale is to be made; and if such portion of the
Mortgaged Property lies in more than one county, one such notice of sale shall
be posted at the courthouse door (or such other place designated by the
commissioner's court) of each county in which such part of the Mortgaged
Property is situated and such part of the Mortgaged Property may be sold at the
courthouse door (or such other place designated by the commissioner's court) of
any one of such counties, and the notice so posted shall designate in which
county such property shall be sold. In addition to such posting of notice, the
Mortgagees, the Trustee or other holder of the Indebtedness hereby secured (or
some person or persons acting for the Trustee, the Mortgagees or other such
holder) shall, at least twenty-one (21) days preceding the date of sale, file a
copy of such notice(s) in the office of the county clerk in each of such
counties and serve or cause to be served written notice of the proposed sale by
certified mail on Mortgagor and on each other debtor, if any, obligated to pay
the Indebtedness according to the records of the Mortgagees. Service of such
notice shall be completed upon deposit of the notice, enclosed in a postpaid
wrapper properly addressed to Mortgagor and such other debtors at their most
recent address or addresses as shown by the records of the Mortgagees in a post
office or official depository under the care and custody of the United States
Postal Service. The affidavit of any person having knowledge of the facts to the
effect that such a service was completed shall be prima facie evidence of the
fact of service. Mortgagor agrees that no notice of any sale, other than as set
out in this paragraph, need be given by the Trustee, the Mortgagees or any other
person. Mortgagor hereby designates as its address for the purpose of such
notice, the address set out on the signature page hereof; and agrees that such
address shall be changed only by depositing notice of such change enclosed in a
postpaid wrapper in a post office or official depository under the care and
custody of the United States Postal Service, certified mail, postage prepaid,
return receipt requested, addressed to the Mortgagees at the addresses set out
herein (or to such other address as the Mortgagees may have designated by notice
given as above provided to Mortgagor and such other debtors). Any such notice of
change of address of Mortgagor or other debtors or of the Mortgagees shall be
effective three (3) business days after such deposit if such post office or
official depository is located in the State of Texas, otherwise to be effective
upon receipt. Mortgagor authorizes and empowers the Trustee to sell the Texas
portion of the Mortgaged Property in lots or parcels or in its entirety as the
Trustee shall deem expedient; and to execute and deliver to the purchaser or
purchasers thereof good and sufficient deeds of conveyance thereto, with
evidence of warranty as given by Mortgagor to Trustee in this Mortgage, and the
title of such purchaser or purchasers when so made by the Trustee, Mortgagor
binds itself to warrant and forever defend. Where portions of the Mortgaged
Property lie in different counties, sales in such counties may be conducted in
any order that the Trustee may deem expedient; and one or more such sales may be
Exhibit 10.12 - Page 23
<PAGE>
conducted in the same month, or in successive or different months as the Trustee
may deem expedient. The Trustee may postpone the sale of all or any part of the
Mortgaged Property by public announcement at the time and place of such sale,
and from time to time thereafter may further postpone such sale by public
announcement made at the time of sale fixed by the preceding postponement. The
right of sale hereunder shall not be exhausted by one or any sale, and the
Trustee may make other and successive sales until all of the Mortgaged Property
be legally sold.
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 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 of the state or states where such
Mortgaged Property is located, 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 or to the Trustee, 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
Exhibit 10.12 - Page 24
<PAGE>
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 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.
Exhibit 10.12 - Page 25
<PAGE>
(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 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 deed of
trust, 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
Exhibit 10.12 - Page 26
<PAGE>
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 as
attorney-in-fact shall be 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
Exhibit 10.12 - Page 27
<PAGE>
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) Without precluding any other methods of sale, Debtor
acknowledges that the sale of the Collateral shall have been made in a
commercially reasonable manner if conducted in conformity with reasonable
commercial practices of banks disposing of similar property. Secured Party
shall not be liable for any depreciation in the value of the Collateral.
ARTICLE IX
MISCELLANEOUS
9.1 SUCCESSOR TRUSTEES. The Trustee may resign in writing addressed
to the Mortgagees or be removed at any time with or without cause by an
instrument in writing duly executed by the Mortgagees. In case of the death,
resignation or removal of a Trustee, a successor Trustee or Trustees may be
appointed by the Required Holders from time to time by instrument of
substitution complying with any applicable requirements of law, and in the
absence of any such requirement without other formality than appointment and
designation in writing. Such appointment and designation shall be full evidence
of the right and authority to make the same and of all facts therein recited,
and upon the making of any such appointment and designation, this conveyance
shall vest in the named successor Trustee or Trustees all the estate and title
of the prior Trustee or Trustees in all of the Mortgaged Property and such
successor Trustee or Trustees shall thereupon succeed to all the rights, powers,
privileges, immunities and duties hereby conferred upon the Trustee named
herein. All references herein to the Trustee shall be deemed to refer to the
Trustees from time to time acting hereunder.
9.2 LEGAL PROCEEDINGS BY AND AGAINST TRUSTEE. The Trustee shall not
be required to take any action for the enforcement of this instrument or the
exercise of any rights or remedies hereunder or to appear in or defend any
action, suit or other proceeding in connection therewith, where, in the opinion
of the Trustee, such action will be likely to involve him in expense or
liability,
Exhibit 10.12 - Page 28
<PAGE>
unless the Trustee be tendered security and indemnity satisfactory to him
against cost, expense or liability in connection therewith.
9.3 RESPONSIBILITIES OF TRUSTEE. It shall be no part of the duty of
the Trustee to see to any recording, filing or registration of this instrument
or of any instrument supplemental hereto, or to see to the payment of or be
under any duty in respect of any tax or assessment or other governmental charge
which may be levied or assessed on the Mortgaged Property or against Mortgagor
or to see to the performance or observance by Mortgagor of any of the covenants
or agreements herein contained. The Trustee shall not be responsible for the
execution, acknowledg ment or validity of this instrument or of any instrument
supplemental hereto, or for the sufficiency of the security purported to be
created hereby, and the Trustee makes no representation in respect thereof. The
Trustee shall have the right to consult with counsel upon any matters arising
hereunder and shall be fully protected in relying as to legal matters on the
advice of such counsel. The Trustee shall not incur any personal liability
hereunder except for his own willful misconduct; and the Trustee shall have the
right to rely on any instrument, document or signature authorizing or supporting
any action taken or proposed to be taken by him hereunder which is believed by
him in good faith to be genuine.
9.4 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.
Exhibit 10.12 - Page 29
<PAGE>
9.5 ADVANCES BY MORTGAGEES OR TRUSTEE. 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, the Trustee, the 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. The 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.
9.6 DEFENSE OF CLAIMS. Mortgagor will notify the Trustee and the
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 Mortgagees, as may be
necessary to preserve Mortgagor's, the Trustee's and Mortgagees' rights affected
thereby; and should the Mortgagor fail or refuse to take any such action,
Mortgagees or the Trustee 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, or the Trustee on behalf of the
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 the Mortgagees, the Trustee or any
receiver or keeper appointed hereunder; provided, however, that in no event
shall such interest rate ever exceed the Highest Lawful Rate.
9.7 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. Any partial release of Mortgaged Property from
the Lien created by this Mortgage shall be effective upon execution thereof by
the Required Holders without the joinder of the Trustee.
9.8 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.
The Trustee or the 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.
Exhibit 10.12 - Page 30
<PAGE>
9.9 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,
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.
9.10 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..
9.11 USURY SAVINGS. In no event shall any provision of this
instrument, the Note Agreement, the Notes, the other Transaction Documents or
any other instrument evidencing or securing the Notes ever obligate Mortgagor to
pay or allow the Mortgagees to collect interest on the Notes or any other
indebtedness secured hereby at a rate greater than the maximum non-usurious rate
permitted by applicable law (herein referred to as the "Highest Lawful Rate"),
or obligate Mortgagor to pay any amounts that would be held or deemed to
constitute interest under applicable law which, when added to the interest
payable on the Notes or any other indebtedness secured hereby, would be held to
constitute the payment by Mortgagor of interest at a rate greater than the
Highest Lawful Rate; and this provision shall control over any provision to the
contrary. To the extent the Highest Lawful Rate is determined by reference to
the laws of the State of Texas, same shall be determined by reference to the
indicated (weekly) rate ceiling (as defined and described in Texas Revised Civil
Statutes Article 5069-1.04, as amended) at the applicable time in effect.
9.12 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 the Trustee and the Mortgagees in order to
effectuate the 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.
9.13 RIGHTS CUMULATIVE. Each and every right, power and remedy
herein given to the Trustee or the 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 the Trustee or the Mortgagees, and the
exercise, or the beginning of the exercise, of any such right, power or remedy
shall not be
Exhibit 10.12 - Page 31
<PAGE>
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 the Trustee or the
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.
9.14 BINDING EFFECT. This Mortgage is binding upon Mortgagor and
Mortgagor's successors and assigns and shall inure to the benefit of the
Trustee, his successors and assigns, the Mortgagees, their respective successors
and assigns, and the provisions hereof shall likewise constitute covenants
running with the land.
9.15 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.
9.16 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.
9.17 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.
9.18 SURVIVAL OF AGREEMENTS. All representations and warranties of
Mortgagor herein and all covenants and agreements herein not fully and finally
performed before the 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.
9.19 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
Exhibit 10.12 - Page 32
<PAGE>
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, AND THE
EXERCISE OF THE REMEDIES WITH RESPECT TO THE FORECLOSURES, OF THE LIEN ON THE
MORTGAGED PROPERTY LOCATED IN A PARTICULAR JURISDICTION SHALL BE GOVERNED BY THE
SUBSTANTIVE LAWS OF THE JURISDICTION IN WHICH SUCH MORTGAGED PROPERTY IS
SITUATED.
9.20 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 9.20 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.
IN WITNESS WHEREOF, Mortgagor has executed this Mortgage, Assignment
of Production, Security Agreement and Financing Statement in multiple originals
on the 21st day of May, 1997.
MORTGAGOR:
TEXOIL COMPANY
By: ________________________
Name: Ruben Medrano
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
Exhibit 10.12 - Page 33
<PAGE>
STATE OF TEXAS ss.
ss.
COUNTY OF HARRIS ss.
This instrument was acknowledged before me on May 21, 1997 by Ruben
Medrano, President of Texoil Company, a Tennessee corporation.
_______________________________________
Notary Public in and for
the State of Texas
Printed Name: _________________________
My Commission Expires: ________________
Exhibit 10.12 - Page 34
