<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934*
TEXOIL, INC.
(NAME OF ISSUER)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
882 906 209
(CUSIP NUMBER)
ROBERT L. ZORICH
ENCAP INVESTMENTS L.C.
1100 LOUISIANA, SUITE 3150
HOUSTON, TEXAS 77002
(713) 659-6100
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS)
JULY 16, 1998
(DATE OF EVENT WHICH REQUIRES FILING
OF THIS STATEMENT)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 204.13d-1(g), check
the following box. [ ]
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Section 240.13d-7(b) for
other parties to whom copies are to be sent.
The remainder of the cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
<PAGE> 2
<TABLE>
<S> <C>
CUSIP NO.882906209 SCHEDULE 13D
(1) Names of Reporting Persons I.R.S. Identification Nos. of Above Persons
ENCAP INVESTMENTS L.C.
- -------------------------------------------------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ]
(b) [ ]
- -------------------------------------------------------------------------------------------------------------------------
(3) SEC Use Only
- -------------------------------------------------------------------------------------------------------------------------
(4) Source of Funds (See Instructions) OO (SEE ITEM 3)
- -------------------------------------------------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------------------------------------------------
(6) Citizenship or Place of Organization ENCAP INVESTMENTS L.C. IS A LIMITED
LIABILITY COMPANY ORGANIZED UNDER THE
LAWS OF THE STATE OF TEXAS
- -------------------------------------------------------------------------------------------------------------------------
Number of (7) Sole Voting Power 0
Shares Bene- ---------------------------------------------------------------------------------------
ficially
Owned by (8) Shared Voting Power 2,567,225(1)
Each --------------------------------------------------------------------------------------
Reporting
Person With (9) Sole Dispositive Power 0
---------------------------------------------------------------------------------------
(10) Shared Dispositive Power 2,567,225(1)
- ------------------------------------------------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person 2,567,225(2)
- -------------------------------------------------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ](2)
- -------------------------------------------------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11) 6.9%(3)
- -------------------------------------------------------------------------------------------------------------------------
(14) Type of Reporting Person (See Instructions) OO
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Voting and dispositive power is shared among Energy PLC and EnCap
Investments, and EnCap LP and EnCap Investments respectively (defined in Item
2.)
(2) EnCap Investments disclaims any beneficial ownership of EnCap LP's
or Energy PLC's (defined in Item 2) shares.
(3) Based on 36,707,618 shares issued and outstanding as of May 8,
1998 as reported in the Form 10-QSB of the Issuer for the quarter ended March
31, 1998.
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<PAGE> 3
<TABLE>
<S> <C>
CUSIP NO.882906209
SCHEDULE 13D
(1) Names of Reporting Persons I.R.S. Identification Nos. of Above Persons
ENCAP EQUITY 1996 LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group (See Instructions) (a) [ ]
(b) [ ]
- -------------------------------------------------------------------------------------------------------------------------
(3) SEC Use Only
- -------------------------------------------------------------------------------------------------------------------------
(4) Source of Funds (See Instructions) OO (SEE ITEM 3)
- -------------------------------------------------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------------------------------------------------
(6) Citizenship or Place of Organization ENCAP EQUITY 1996 LIMITED PARTNERSHIP IS
A LIMITED PARTNERSHIP ORGANIZED UNDER THE
LAWS OF THE STATE OF TEXAS
- -------------------------------------------------------------------------------------------------------------------------
Number of (7) Sole Voting Power 0
Shares Bene- ---------------------------------------------------------------------------------------
ficially
Owned by (8) Shared Voting Power 1,925,419(1)
Each --------------------------------------------------------------------------------------
Reporting
Person With (9) Sole Dispositive Power 0
---------------------------------------------------------------------------------------
(10) Shared Dispositive Power 1,925,419(1)
- ------------------------------------------------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
1,925,419(2)
- ------------------------------------------------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) [ ](2)
- -------------------------------------------------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
5.2%(3)
- ------------------------------------------------------------------------------------------------------------------------
(14) Type of Reporting Person (See Instructions) PN
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Voting and dispositive power is shared among EnCap LP and EnCap
Investments (defined in Item 2.)
(2) EnCap LP disclaims any beneficial ownership of EnCap Investments'
(defined in Item 2) shares and only claims beneficial ownership of the
above-mentioned 1,925,419 shares. Please see Item 5.
(3) Based on 36,707,618 shares issued and outstanding as of May 8,
1998 as reported in the Form 10-QSB of the Issuer for the fiscal year ended
March 31, 1998.
Page 3
<PAGE> 4
ITEM 1. SECURITY AND ISSUER.
The class of equity securities to which this statement relates is common
stock, par value $.01 per share (the "Common Stock"), of Texoil, Inc., a Nevada
corporation (the "Issuer"). The address of the principal executive offices of
the Issuer is 110 Cypress Station Drive, Suite 220, Houston, Texas 77090.
ITEM 2. IDENTITY AND BACKGROUND.
(a) - (c)
EnCap Equity 1996 Limited Partnership ("EnCap LP"), is a limited
partnership organized and existing under the laws of the State of Texas. EnCap
LP's principal business address and office is located at 1100 Louisiana, Suite
3150, Houston, Texas 77002. The principal business of EnCap LP is making oil
and gas related investments.
EnCap Investments L.C. ("EnCap Investments"), is a limited liability
company organized under the laws of the State of Texas. EnCap Investments is
the general partner of EnCap LP. EnCap Investments also serves as an
investment advisor to Energy Capital Investment Company PLC ("Energy PLC"), a
company organized and existing under the laws of England, under an Investment
Advisory Agreement dated as of February 4, 1994. EnCap Investments' principal
business address and office is located at 1100 Louisiana, Suite 3150, Houston,
Texas 77002. The principal business of EnCap Investments is to act as a
financial consultant, investment advisor and/or finder for its clients with
respect to financial and investment transactions in the oil and gas industry.
The name, business address, present principal occupation or employment
and the name, principal business address of any corporation or other
organization in which such employment is conducted, of the directors of EnCap
Investments (which is the general partner of EnCap LP), are set forth below:
<TABLE>
<CAPTION>
Name, Principal Business Address
of Organization in which Principal
Name and Capacity in Which Principal Occupation
Business Address Serves Occupation is Conducted
---------------- ----------------- ---------- ----------------------------------
<S> <C> <C> <C>
Gary R. Petersen Managing Director Managing Director EnCap Investments L.C.
1100 Louisiana EnCap Investments EnCap Investments 1100 Louisiana, Suite 3150
Suite 3150 L.C. L.C. Houston, TX 77002
Houston, TX 77002
D. Martin Phillips Managing Director Managing Director EnCap Investments L.C.
1100 Louisiana EnCap Investments EnCap Investments 1100 Louisiana, Suite 3150
Suite 3150 L.C. L.C. Houston, TX 77002
Houston, TX 77002
Robert L. Zorich Managing Director Managing Director EnCap Investments L.C.
1100 Louisiana EnCap Investments EnCap Investments 1100 Louisiana, Suite 3150
Suite 3150 L.C. L.C. Houston, TX 77002
Houston, TX 77002
</TABLE>
Page 4
<PAGE> 5
<TABLE>
<CAPTION>
Name, Principal Business Address
of Organization in which Principal
Name and Capacity in Which Principal Occupation
Business Address Serves Occupation is Conducted
---------------- ----------------- ---------- ---------------------------------
<S> <C> <C> <C>
Eugene C. Fiedorek Managing Director Managing EnCap Investments L.C.
3811 Turtle Creek Blvd. EnCap Investments Director 3811 Turtle Creek Blvd.,
Suite 1080 L.C. EnCap Suite 1080
Dallas, TX 75219 Investments L.C. Dallas, Texas 75219
David B. Miller Managing Director Managing Director EnCap Investments L.C.
3811 Turtle Creek Blvd. EnCap Investments EnCap Investments 3811 Turtle Creek Blvd.,
Suite 1080 L.C. L.C. Suite 1080
Dallas, TX 75219 Dallas, Texas 75219
</TABLE>
(d) None of EnCap LP, EnCap Investments or any of the individuals
identified in this Item 2 has, during the last five years, been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors).
(e) None of EnCap LP, EnCap Investments or any of the individuals
identified in this Item 2 has, during the last five years, been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
(f) Each of the individuals identified in this Item 2 is a citizen of
the United States of America.
Page 5
<PAGE> 6
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Cliffwood Energy Company, a California corporation, EnCap LP and Energy
PLC entered into an Agreement of Limited Partnership dated September 27, 1996,
establishing Cliffwood Acquisition - 1996 Limited Partnership ("CLIFFWOOD LP").
On May 4, 1998, the Issuer, Cliffwood Oil & Gas Corp., a Texas corporation and
the new general partner of Cliffwood LP replacing Cliffwood Energy Company
("GENERAL PARTNER"), EnCap LP and Energy PLC entered into the Acquisition and
Distribution Agreement (the "A & D AGREEMENT").
Under the terms of the A & D Agreement, (i) Cliffwood LP distributed to
the General Partner its interest in Cliffwood LP's oil and gas properties and
related assets and (ii) Cliffwood LP sold to the Issuer the remaining portion
of Cliffwood LP's interest in such oil and gas properties. In consideration of
the sale of such oil and gas properties by Cliffwood LP to the Issuer, the
Issuer paid to Cliffwood LP $4,465,000 and agreed to issue post-closing 898,000
shares of Common Stock (the "Purchase Shares") to Cliffwood LP. The A & D
Agreement also provided for the post-closing exchange by EnCap LP and Energy
PLC, on the one hand, and the Issuer, on the other hand, of (a) warrants owned
by EnCap LP and Energy PLC entitling them to purchase 225,000 and 75,000
shares, respectively, of common stock of the General Partner, for (b) an
aggregate of 1,669,225 additional shares (the "EXCHANGE SHARES") of Common
Stock of the Issuer.
Under the terms of the May 1998 Agreement in Respect of Agreement of
Limited Partnership (the "MAY 1998 AGREEMENT"), dated May 4, 1998 between the
General Partner, EnCap LP and Energy PLC, the parties agreed to the manner of
distribution to the limited partners of the cash and Purchase Shares held or to
be received by Cliffwood LP as a result of sale described above.
On July 16, 1998, the Issuer delivered (i) 673,500 shares of the Purchase
Shares and 1,251,919 shares of the Exchange Shares to EnCap LP and (ii) 224,500
shares of the Purchase Shares and 417,306 shares of the Exchange Shares to
Energy PLC.
ITEM 4. PURPOSE OF TRANSACTION.
EnCap LP and EnCap Investments acquired the securities herein reported
for investment purposes. Depending on market conditions, general economic
conditions and other factors that each may deem significant to investment
decisions, EnCap LP may directly and EnCap Investments may indirectly purchase
additional shares of Common Stock in the open market or in private transactions
or may dispose of all or a portion of the shares of Common Stock that either of
them may hereafter acquire.
The reporting persons have no present plans or proposals that relate to
or that would result in any of the actions specified in clauses (a) though (j)
of Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) EnCap LP. EnCap LP is the beneficial owner of 1,925,419 shares of
Common Stock. Based on the 36,707,618 shares of Common Stock outstanding, as
reported in the Issuer's Form 10-QSB for the quarter ended March 31, 1998,
EnCap LP is the beneficial owner of approximately 5.2% of the outstanding
shares of Common Stock.
EnCap Investments. EnCap Investments, as the sole general partner
of EnCap LP and as an investment advisor of Energy PLC, is the beneficial owner
of 2,567,225 shares of Common Stock. Based on the 36,707,618 shares of Common
Stock outstanding, as reported in the Issuer's Form 10-QSB for the
Page 6
<PAGE> 7
quarter ended March 31, 1998, EnCap Investments is the beneficial owner of
approximately 6.9% of the outstanding shares of Common Stock.
Executive Officers and Directors. None of the directors of EnCap
Investments named in Item 2 is the beneficial owner of any shares of Common
Stock.
(b) EnCap LP. Through its general partner, EnCap LP shares the power to
vote or direct the vote and to dispose or direct the disposition of 1,925,419
shares of Common Stock with EnCap Investments, its general partner.
EnCap Investments. EnCap Investments shares the power to vote and
direct the vote or to dispose or direct the disposition of 2,567,225 shares of
Common Stock with each of Energy PLC by virtue of the Investment Agreement (as
defined in Item 6) and EnCap LP as its general partner. EnCap Investments
disclaims beneficial ownership of any shares of Common Stock owned by either
EnCap LP or Energy PLC.
Executive Officers and Directors. No managing director of EnCap
Investments has the power to vote or direct the vote or dispose or direct the
disposition of any shares of Common Stock.
(c) Except as otherwise described herein or in any Exhibit filed
herewith, none of the persons named in response to paragraph (a) above has
effected any transaction in shares of the Common Stock during the past 60 days.
(d) No person other than Energy PLC, EnCap LP and EnCap Investments has
the right to receive or the power to direct the receipt of dividends from, or
the proceeds from the sale of, the shares of Common Stock deemed to be
beneficially owned by them.
(e) It is inapplicable for the purposes herein to state the date on
which a party ceased to be the owner of more than five percent (5%) of the
shares of Common Stock.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO THE SECURITIES OF THE ISSUER.
Except as set forth in Items 5 and 6 or in the Exhibits filed herewith,
there are no contracts, arrangements, understandings or relationships (legal or
otherwise) between any of the individuals or entities described in Item 2 or
between such persons and any other person with respect to the shares of Common
Stock deemed to be beneficially owned by EnCap LP and EnCap Investments.
Energy PLC, EnCap LP and the Issuer entered into a Registration Rights
Agreement dated May 4, 1998 (the "Registration Rights Agreement"), pursuant to
which the Issuer agreed to file no later than 30 days after the issuance of the
Purchase Shares and the Exchange Shares with the Securities and Exchange
Commission a shelf registration statement covering the Purchase Shares and the
Exchange Shares (the "Registrable Securities"). The Issuer further agreed to
keep such registration statement effective until EnCap LP and Energy PLC have
disposed of all of the Registrable Securities in the manner described in the
Registration Rights Agreement. In connection with the disposition of the
Registrable Securities under the Registration Rights Agreement, EnCap LP and
Energy PLC agreed that, as of each date specified below, the percentage amount
of the Registrable Securities disposed of by them will not exceed the
percentage amount set forth opposite such date:
June 30, 1998 20%
September 30, 1998 40%
Page 7
<PAGE> 8
December 31, 1998 60%
March 31, 1999 80%
June 30, 1999 100%
EnCap Investments, as the general partner of EnCap LP, is a party to the
Agreement of Limited Partnership of EnCap LP, and is a party to that certain
Investment Advisory Agreement dated February 4, 1994 between EnCap Investments
and Energy PLC (the "Investment Agreement") whereby EnCap Investments acts as
an investment advisor to Energy PLC.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1 - Joint Filing Agreement dated July 16, 1998 between EnCap LP
and EnCap Investments.
Exhibit 4.6 - Investment Advisory Agreement dated February 4, 1994.
Exhibit 4.7 - Acquisition and Distribution Agreement dated May 4, 1998,
between Texoil, Inc., Cliffwood Oil & Gas Corp. and Cliffwood
Acquisition - 1996 Limited Partnership.
Exhibit 4.8 - Registration Rights Agreement dated May 4, 1998, between
Texoil, Inc., Energy Capital Investment Company PLC and EnCap
Equity 1996 Limited Partnership.
Exhibit 4.9 - May 1998 Agreement in Respect of Agreement of Limited
Partnership dated May 4, 1998, between Cliffwood Oil & Gas
Corp., Energy Capital Investment Company PLC and EnCap Equity
1996 Limited Partnership.
Page 8
<PAGE> 9
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: July 24, 1998 ENCAP EQUITY 1996 LIMITED PARTNERSHIP
By: EnCap Investments L.C., General Partner
/s/ ROBERT L. ZORICH
------------------------------------------
Robert L. Zorich
Managing Director
Date: July 24, 1998 ENCAP INVESTMENTS L.C.
/s/ ROBERT L. ZORICH
------------------------------------------
Robert L. Zorich
Managing Director
Page 9
<PAGE> 10
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
Exhibit 1 - Joint Filing Agreement dated July 16, 1998 between EnCap LP and EnCap Investments.
Exhibit 4.6 - Investment Advisory Agreement dated February 4, 1994.
Exhibit 4.7 - Acquisition and Distribution Agreement dated May 4, 1998, between Texoil, Inc., Cliffwood
Oil & Gas Corp. and Cliffwood Acquisition-1996 Limited Partnership.
Exhibit 4.8 - Registration Rights Agreement dated May 4, 1998, between Texoil, Inc., Energy Capital
Investment Company PLC and EnCap Equity 1996 Limited Partnership.
Exhibit 4.9 - May 1998 Agreement in Respect of Agreement of Limited Partnership dated May 4, 1998,
between Cliffwood Oil & Gas Corp., Energy Capital Investment Company PLC and EnCap Equity
1996 Limited Partnership.
</TABLE>
<PAGE> 1
EXHIBIT 1
AGREEMENT
The undersigned reporting persons hereby agree that the statements
filed pursuant to this Schedule 13D dated July 16, 1998, to which this
Agreement is filed as an exhibit, are filed on behalf of each of them.
Date: July 24, 1998 ENCAP EQUITY 1996 LIMITED PARTNERSHIP
/s/ ROBERT L. ZORICH
-----------------------------------
Robert L. Zorich
Managing Director
Date: July 24, 1998 ENCAP INVESTMENTS L.C.
/s/ ROBERT L. ZORICH
-----------------------------------
Robert L. Zorich
Managing Director
<PAGE> 1
EXHIBIT 4.6
DATED 4th February 1994
(1) ENERGY CAPITAL INVESTMENT COMPANY PLC
- and -
(2) ENCAP INVESTMENTS L.C.
-----------------------------
INVESTMENT ADVISORY AGREEMENT
-----------------------------
Hobson Audley
7 Pilgrim Street
London EC4V 6DR
ARG/LJI/2487
<PAGE> 2
INVESTMENT ADVISORY AGREEMENT
AN AGREEMENT made the 4th day of February, One thousand nine hundred and
ninety four.
B E T W E E N
(1) ENERGY CAPITAL INVESTMENT COMPANY PLC (registered in England No.
2867571) whose registered office is at 99 Charterhouse Street, London
EC1M 6AB ("the Company"),
(2) ENCAP INVESTMENTS L.C., a Texas limited liability company whose
principal place of business is at 1100 Louisiana Street, Suite 3150,
Houston, Texas 77002 USA ("EnCap").
WHEREAS:
(A) The Company is desirous of appointing EnCap (subject as hereinafter
provided) to advise the Company in relation to the management and
investment and re-investment of the Company's Investments.
(B) EnCap is engaged in business offering investment management and
advisory services in the USA in relation to the oil and gas industry
and has considerable skill, knowledge and experience in that field.
NOW IT IS HEREBY AGREED as follows:
1. INTERPRETATION
1.1 In this Agreement the following words and expressions shall
where not inconsistent with the context have the following
meanings respectively:
- 1 -
<PAGE> 3
"Affiliate" with regard to another person shall mean any
person directly or indirectly controlling, controlled by or
under common control with, such other person; "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;
"Appointee(s)" means any person or persons to whom EnCap may
have delegated any of its functions hereunder;
"Articles" means the Articles of Association of the Company as
amended from time to time and any reference herein to an
Article shall be taken to refer to the Articles unless
otherwise specified;
"Directors" means the Board of Directors of the Company from
time to time including any duly appointed committee thereof;
"Independent Directors" means the Directors other than those
connected within the meaning of Section 346 of the Companies
Act 1985 with EnCap;
"the Investments" means the assets and rights from time to
time of the Company acquired pursuant to this Agreement and
held in accordance with the Memorandum of Association and
Articles of the Company;
"Investment Policy" means the investment policy of the Company
(as reviewed and amended by the Directors from time to time)
as initially stated in the Particulars and repeated in Part A
of Schedule One;
"Investment Restrictions" means the investment restrictions
(as reviewed and amended by the Directors from time to time or
as amended by statute or rules or
- 2 -
<PAGE> 4
regulations thereunder) as initially stated in the Particulars
and repeated in Part B of Schedule One;
"the Particulars" means the Listing Particulars of the Company
proposed to be dated 4th February 1994;
"the Partnership" means the US Limited Partnership to be
constituted between EnCap, Lincoln National Life Insurance
Company, Internationale Nederlanden (U.S.) Capital Corporation
and others to co-invest with the Company as is referred to in
the Particulars;
"the Placing" means the placing of Ordinary Shares and
Warrants described in the Particulars;
"the Placing Agreement" means the Agreement of even date
herewith made between the Company (1), Greig Middleton & Co.
Limited (2) Henderson Crosthwaite Institutional Brokers
Limited (3), and Rauscher Pierce & Clark Limited (4) described
in the Particulars in paragraph 7(b) of Part IV thereof under
the heading "General Information";
"Schedules" mean the Schedules annexed hereto which form part
of this Agreement;
"the Secretary" means Aberdeen Trust PLC or the Secretary of
the Company for the time being;
"subsidiary" has the meaning ascribed thereto in Section 144
of the Companies Act 1989;
- 3 -
<PAGE> 5
"The London Stock Exchange" means the International Stock
Exchange of the United Kingdom and Republic of Ireland
Limited;
Any reference to EnCap includes a reference to its duly
authorised agents or delegates.
1.2 Words and expressions contained in this Agreement (but not
defined herein) shall bear the same meanings as in the
Articles PROVIDED THAT any alteration or amendment of the
Articles shall not be effective for the purpose of this
Agreement unless any affected party (to the extent that its
rights or duties hereunder are affected by such alteration or
amendment) shall by endorsement hereon or otherwise in writing
have assented thereto.
1.3 The headings to the Clauses of this Agreement are for
convenience only and shall not affect the construction or
interpretation thereof.
2. CONDITIONAL AGREEMENT
This Agreement shall be conditional in all respects upon the Placing
Agreement becoming unconditional in all respects.
3. APPOINTMENT AND FUNCTIONS OF ENCAP
3.1 The Company HEREBY APPOINTS EnCap, subject to and in
accordance with the directions of the Directors, and in
accordance with the Investment Policy and Investment
Restrictions, as advisors and managers in respect of the
investment and re-investment of the Investments on the terms
contained herein and EnCap hereby accepts such appointment and
agrees to assume the obligations set forth herein.
- 4 -
<PAGE> 6
3.2 Without prejudice to the generality of Clause 3.1 above, the
duties to be performed by EnCap on behalf of the Company in
accordance with the Investment Policy and the Investment
Restrictions shall include the following:
3.2.1 EnCap shall, as and when requested by the Board, use
all reasonable endeavours to identify Investments,
conforming with the Investment Policy, for
recommendation to the Board. EnCap shall furnish to
the Directors in relation to any proposed Investment
all such information as the Directors shall reasonably
require or which is in EnCap's possession, to enable
the Directors to consider the proposed Investment.
3.2.2 Following the identification by EnCap of a Proposed
Investment, EnCap shall conduct such further
investigations as the Directors shall reasonably
request and when reasonably requested by the
Directors, EnCap shall report and advise in relation
thereto.
3.2.3 As and when so requested by the Directors, EnCap shall
commission an independent engineering firm approved by
the Directors to furnish to the Directors and EnCap a
report in relation to the proposed Investment. The
terms of reference for such report shall be as agreed
between the Directors and EnCap.
3.2.4 EnCap shall undertake all negotiations with third
parties in relation to a proposed Investment on behalf
of the Company and shall be responsible for procuring,
in accordance with all applicable legal requirements
and best practice, the preparation and execution of
all deeds, documents of title and agreements in
relation to Investments and the perfecting of the
Company's title thereto.
- 5 -
<PAGE> 7
3.2.5 EnCap shall be responsible for advising and
instructing the Company's Corporate Managers for the
time being and Secretary on administrative
requirements in order to implement the making of
Investments.
3.3 Subject to the terms of this Agreement, to such directions as
may from time to time be given by the Directors and to the
overall policy and supervision of the Directors, EnCap is
authorised to act for the Company or any subsidiary and on
behalf of the Company and or any subsidiary either itself or
wholly or in part through its authorised agents or delegates
in the same manner and with the same force and effect as the
Company or any subsidiary might or could do and to exercise
the functions, duties, powers and discretions exercisable by
the Directors under the Articles (including, without prejudice
to the generality of the foregoing, the functions duties
powers and discretions specifically mentioned in Clause 3.2
above) and to manage the investment and re-investment of the
Investments.
3.4 EnCap shall keep or cause to be kept on behalf of the Company
such books, records and statements to give a complete record
of all transactions carried out by EnCap on behalf of the
Company (or any subsidiary) in relation to the investment and
re-investment of the Investments and such other books, records
and statements as may be required to give a complete record of
all other transactions carried out by EnCap on behalf of the
Company (or any subsidiary) and shall permit the Company and
its employees and agents and the auditors for the time being
of the Company to inspect such books, records and statements
at all reasonable times.
3.5 EnCap hereby warrants that it holds all licences, permissions,
authorisations and consents necessary to enable it to carry
out its duties as advisors and managers in the ordinary course
of business. EnCap undertakes to use its best endeavours to
continue to hold all such licences, permissions,
authorisations and consents necessary for its duties hereunder
and to notify the Company immediately should
- 6 -
<PAGE> 8
any such licence, permission, authorisation or consent cease
to be in full force and effect.
3.6 EnCap shall observe and comply with the Memorandum of
Association and Articles of the Company and with any
alterations thereto notified to EnCap by the Company and with
the applicable provisions of the Particulars and the
Investment Restrictions and all obligations deriving from
listing particulars of the Company from time to time issued
and all resolutions of the Directors of which it has notice
and other lawful orders and directions given to it from time
to time by the Directors and all activities engaged in by
EnCap hereunder shall at all times be subject to the control
of and review by the Directors and EnCap shall and shall
procure that any person, firm or company to whom it delegates
any of its functions hereunder shall give effect to all such
decisions.
3.7 EnCap shall procure that all Investments shall be registered
in the name of the Company or any subsidiary or the nominees
of the Company.
3.8 EnCap undertakes with the Company that it will procure that,
during the continuance of this Agreement, the Company shall be
afforded the opportunity (as is provided in the Particulars)
to invest in all investments made by, and investment
arrangements entered into, by the Partnership in all respects
upon the same terms and conditions as are afforded to the
Partnership.
4. INFORMATION OBLIGATIONS OF ENCAP
4.1 EnCap shall keep the Company informed of all material matters
relating to the Investments of the Company, to such extent and
in such form and at such times as the Company shall reasonably
require.
4.2 Without limiting the generality of Clause 4.1 EnCap shall:
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<PAGE> 9
4.2.1 When reasonably requested by the Board deliver to the
Company in respect of each calendar month a summary
report, in such form as the Company shall reasonably
require, relating to the Company's Investments and
any proposed Investment then under consideration;
4.2.2 Within 30 days of the end of each calendar quarter,
deliver to the Company a report, in such form as the
Company shall reasonably require, comprising detailed
financial information in relation to each Investment
of the Company and including detailed cost and
revenue allocations;
4.2.3 Within 90 days of the end of each financial year of
the Company, deliver to the Company a report, in such
form as the Company shall reasonably require,
comprising financial and taxation statements in
relation to the Company's Investments as at the end
of the financial year then ended prepared by a firm
of accountants previously approved by the Company and
reserve reports prepared in relation to the Company's
Investments as at the end of the financial year then
ended, prepared by such independent petroleum
engineer previously approved by the Company.
5. REMUNERATION
5.1 The Company shall during the continuance of this Agreement pay
to EnCap by way of remuneration for the provision of services
and advice pursuant to this Agreement an annual fee, payable
by equal quarterly instalments in arrears on 31st March, 30th
June, 30th September and 31st December in each year,
calculated at the rate of 1% of the Company's NAV as at 31st
December preceding the year in which the payments are due to
be made. For the purposes of this clause "NAV" means the
amount in US dollars of the aggregate of:
5.1.1 All cash at bank and in hand of the Company; and
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<PAGE> 10
5.1.2 All amounts owing to the Company, whether or not due
for payment or repayment at the relevant time,
excluding (i) any amount falling within sub-clause
5.1.4 and (ii) any amount loaned by the Company and
secured on any asset or interest in respect of oil and
gas to the extent that the present worth of future
revenue, discounted at a rate of 10 per cent per
annum, of the proved reserves (as shown in the
relevant independent petroleum engineer's reserve
report prepared as at the relevant date or the closest
practicable date thereto) securing any such loan does
not provide a coverage ratio in respect of the amounts
advanced by the Company and all accrued interest of at
least 1:1; and
5.1.3 The present worth of the future net revenue,
discounted at 15 per cent per annum, of the proved
reserves attributable to any direct equity interests
owned by the Company in oil and gas properties (as
shown in the relevant engineer's reserve report
prepared as at the relevant date or the closest
practicable date thereto); and
5.1.4 In the case of any Investment comprising debt or
equity securities (including without limitation
shares, options, warrants and bonds) that are traded
on a recognised investment exchange, the aggregate of
the market value to the Company of such securities as
at the relevant date (it being agreed that in the
event that an Investment falls within this sub- clause
5.1.4 and any of sub-clause 5.1.2, 5.1.3 and 5.1.5,
the provisions of this sub-clause 5.1.4 shall apply to
the exclusion of the other sub-clauses for the
purposes of calculating NAV); and
5.1.5 In the case of any Investment comprising any equity
securities in any entity (whether corporate or not)
not falling within sub-clause 5.1.4, the value of such
equity securities to the Company calculated on the
basis of that proportion of such entity's NAV
attributable to the Company (the
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<PAGE> 11
NAV of such entity being calculated on the same basis,
mutatis mutandis, as is set out in this Clause);
less an amount equal to all indebtedness of the Company at the
relevant time, whether or not then due for payment or
repayment;
PROVIDING that for the purposes of this clause the NAV of the
Company as at 31st December 1993 shall be deemed to be equal
to the net proceeds of the Placing having deducted all
expenses thereof.
PROVIDING further that the NAV shall be determined by the
Independent Directors using the foregoing principles and
reserve reports prepared by an independent petroleum
engineering firm, which shall use the same assumptions for
future oil and gas prices as those generally utilised by major
oil and gas lending institutions in the USA at the time the
valuation is made;
5.2 The fees payable hereunder are inclusive of all applicable
value added tax and any other sales or services taxes
whatsoever payable from time to time and whether principally
by the Company or EnCap.
5.3 The fees payable pursuant to Clause 5.1 shall be deemed to
accrue on a daily basis.
5.4 By way of further remuneration for the provision of services
and advice pursuant to this Agreement, and provided that this
Agreement shall not previously have been terminated by EnCap
pursuant to Clause 13.1 or by the Company pursuant to Clause
13.2, the Company shall pay to EnCap as soon as such amount
shall have been determined following 31st December 2001 or the
date a special resolution is passed pursuant to Section 84
Insolvency Act 1986 for the voluntary winding up of the
Company, whichever is the earlier, an amount equal to 25%. of
the
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<PAGE> 12
Company's Adjusted NAV as at 31st December 2001 or the date of
the passing of the special resolution for the winding-up of
the Company, as appropriate.
5.5 Adjusted NAV means, at the relevant date:
(a) NAV;
(b) less an amount equal to the aggregate of the
Company's share capital and the amount standing to
the credit of the Company's share premium account as
converted (where appropriate) into US dollars at the
actual exchange rates at which such subscriptions
were converted into US dollars; and
(c) (i) less the amount (if any) by which an 8%
annual rate of return on the aggregate of the
Company's share capital and the amount
standing to the credit of the Company's share
premium account, calculated from the relevant
dates of payment to the Company of such share
capital and share premium, exceeds the
aggregate of the dividends paid by the
Company since its incorporation, inclusive of
any tax credit in respect of such dividends;
or
(ii) aggregating therewith the amount (if any) by
which the aggregate of the dividends paid by
the Company since its incorporation,
inclusive of any tax credit in respect of
such dividends, exceeds an 8% annual rate of
return on the aggregate of the amount
standing to the credit of the Company's share
capital and share premium account calculated
from the relevant dates of payment of such
share capital and share premium.
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<PAGE> 13
5.6 In the event of any dispute with regard to the determination of
any fee payable pursuant to this Clause, such dispute shall be
referred for determination to the Company's auditors, or such
other firm of Chartered Accountants as the Company and EnCap
shall agree. In making a determination such accountants shall
act as experts and not as arbitrators and they shall be
entitled to call for and inspect such documents as they shall
deem appropriate. The determination of such accountants shall
be final and binding on the Company and EnCap.
6. ADDITIONAL SERVICES
If EnCap, being willing and having been called upon so to do, shall
render or perform extra or special services of any kind to the
Company, EnCap shall be entitled to receive such additional reasonable
fees therefor as the Directors in consultation with EnCap may from
time to time agree. If EnCap offers additional services to the
Company, EnCap may determine the level of fees or charges as it deems
fit and proper for the payment of such services and offer to provide
such services to the Company and the Company may accept or reject an
offer of such services as it so determines.
7. EXPENSES
7.1 Unless otherwise agreed between the Company and EnCap, the
Company shall pay or procure payment of the following
expenses:-
7.1.1 All accountancy fees, petroleum consultants' fees and
legal expenses incurred by the Company or EnCap or
the secretary in connection with the identifying,
negotiating and making of Investments and all other
professional and other charges in respect of services
rendered to the Company or EnCap in connection with
the matters aforesaid;
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<PAGE> 14
7.1.2 Any stamp and other duties, taxes, Governmental
charges, brokerage, transfer fees, registration fees
and other charges payable in respect of the
acquisition or realisation of any Investment,
including charges for the transfer of funds or
instructions for delivery of securities by telex,
cable, telephone or otherwise;
7.1.3 All taxes and corporate fees payable by the Company
to the Government or other authority or to any agency
of the Government or authority in the United States
of America or elsewhere;
7.1.4 All charges specifically incurred by EnCap on behalf
of the Company.
EnCap will advise the Company prior to incurring any third
party fees or any third party expenses for the account of the
Company if EnCap believes that such fees or expenses will
exceed US$7,500.
7.2 EnCap shall provide at its own expense:-
7.2.1 Such staff as may be necessary for the due
performance of its duties hereunder;
7.2.2 Such office and other accommodation and office
equipment as may be necessary for the due performance
of its duties hereunder.
7.3 It is hereby expressly declared that the persons employed by
EnCap to perform its obligations under this Agreement shall be
the employees, agents or sub-contractors of EnCap and not of
the Company and accordingly shall not be regarded or treated
as employees of the Company.
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<PAGE> 15
7.4 Any arrangement or other fee (on the appropriate proportion
thereof) paid to EnCap in respect of any Investment shall be
paid or reimbursed by EnCap to the Company.
8. POWER OF DELEGATION
EnCap may with the consent of the Company delegate the whole or any
part of its powers, duties, discretions and functions hereunder to any
person, firm or company.
9. NON-EXCLUSIVITY
9.1 The services of EnCap hereunder are not to be deemed exclusive
to the Company and EnCap or any Affiliate thereof shall be
free to render similar services to others on such terms as
EnCap or such Affiliate may arrange so long as its services
under this Agreement are not thereby impaired, and to retain
for its own use and benefit fees or other moneys payable
thereby, and EnCap shall not be deemed to be affected with
notice of or to be under any duty to disclose to the Company
any fact or thing which may come to the notice of it or any
servant or agent of it in the course of EnCap rendering
similar services to others or in the course of its business in
any other capacity or in any manner whatsoever otherwise than
in the course of carrying out its duties under this Agreement.
9.2 EnCap shall procure that the Company shall have first priority
(together with the Partnership) to make Investments identified
by EnCap complying with the Investment Policy and Investment
Restrictions provided that in the absence of bad faith EnCap
shall not be liable to the Company in respect of it having
arranged any Investment made by any person (including EnCap's
affiliates) which investment the Directors may determine as
having complied with the Investment Policy and Investment
Restrictions.
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<PAGE> 16
10. EXERCISE OF RIGHTS ATTACHED TO INVESTMENTS
Subject as otherwise provided in this Agreement, any rights conferred
by Investments of the Company shall be exercised in such manner as the
Directors may determine and EnCap shall (in so far as it is able)
procure the exercise of such rights in accordance therewith.
11. CUSTODY
EnCap shall be responsible to the Company for procuring the safe
custody of all documents of title, deeds, certificates and agreements
in respect of the Investments of the Company unless otherwise notified
by the Company in writing.
12. LIABILITY AND INDEMNITY
12.1 EnCap shall not be liable to the Company or any subsidiary for
any action taken or not taken by them or for any action taken
or not taken by any other person with respect to the Company
or any subsidiary or in respect of the Investments provided
that EnCap shall remain liable for any loss arising from the
fraud, negligence, wilful default, bad faith or misconduct of
EnCap, its employees and/or any of their agents.
12.2 The Company hereby indemnifies EnCap and each officer,
employee or agent of EnCap against any losses, claims, damages
or liabilities (including legal or other expenses reasonably
incurred) to which such person may become subject by reason of
its being an officer, employee or agent of EnCap (but only to
the extent and with respect to services performed by EnCap or
officers, employees or agents of EnCap for or on behalf of the
Company) or representing the Company or any subsidiary on the
Board of Directors of any company in which the Company or any
subsidiary has invested or otherwise in providing services
under this
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<PAGE> 17
Agreement provided that this indemnity shall not apply in
cases of fraud, negligence, wilful default, bad faith or
misconduct.
13. TERMINATION
13.1 EnCap shall be entitled to resign its appointment hereunder:
(i) by giving at any time not less than one year's notice
in writing to the Company expiring not earlier than
the date of the second anniversary hereof;
(ii) at any time by notice in writing to the Company if
the Company shall go into liquidation or if a
receiver or administrative receiver or administrator
is appointed over any of the assets of the Company;
(iii) at any time if the Company shall commit any breach of
its obligations under this Agreement and (if such
breach shall be capable of remedy) shall fail within
30 days of receipt of notice served by EnCap
requiring it so to do to make good such breach.
13.2 The Company may terminate the appointment of EnCap hereunder:
(i) if EnCap shall go into liquidation (except a
voluntary liquidation for the purposes of
reconstruction or amalgamation upon terms previously
approved in writing by the Company) or if a receiver
or administrative receiver or administrator is
appointed of any of the assets of EnCap or if a
meeting of EnCap's creditors is convened, or if any
analogous insolvency proceeding shall be taken in
respect of EnCap in any jurisdiction, or if EnCap
ceases or threatens to cease to carry on its
business;
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<PAGE> 18
(ii) if EnCap shall commit any significant breach of its
obligations under this Agreement and (if such breach
be capable of remedy) shall fail within 30 days of
receipt of notice served by the Company requiring
them to make good such breach.
13.3 The appointment of EnCap under this Agreement shall terminate
automatically upon the passing of a special resolution of the
Company pursuant to Section 84 of the Insolvency Act 1986
requiring the Company to be wound up.
13.4 On termination of the appointment of EnCap under the
provisions of this Clause, EnCap shall be entitled to receive
all fees and other moneys accrued due up to the date of such
termination but shall not be entitled to compensation in
respect of such termination and EnCap shall deliver to the
Company or as it shall direct, all books of account, records,
registers, correspondence, documents and assets relating to
the affairs of or belonging to the Company or any subsidiary
in the possession of or under the control of EnCap and take
all necessary steps to vest in the Company any assets
previously held in the name of or to the order of EnCap on
behalf of the Company or any subsidiary.
14. CONFIDENTIALITY
14.1 Neither of the parties hereto shall during the continuance of
this Agreement or after its termination disclose to any
person, firm or fund whatsoever (except with the authority of
the relevant party or unless ordered to do so by a court of
competent jurisdiction) any information relating to the
business, investments, finances or other matters of a
confidential nature of the other party of which it may in the
course of its duties hereunder or otherwise become possessed
and each party shall use all reasonable endeavours to prevent
any such disclosure as aforesaid.
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<PAGE> 19
14.2 EnCap and the Company shall be permitted to refer to the
appointment hereunder in their corporate literature provided
that the text of any such reference is approved by the other,
such approval not to be unreasonably withheld or delayed.
15. RELIANCE ON DOCUMENTS
Wherever pursuant to any provision of this Agreement any notice,
instruction or other communication is to be given by, or on behalf of,
the Company (or its Directors) to EnCap, EnCap may accept as
sufficient evidence thereof:
(i) a document signed or purporting to be signed on behalf of the
issuing party or by such person or persons whose signature
EnCap is for the time being authorised by such issuing party
to accept; or
(ii) a message by tested telex, telecopler, facsimile machine, or
cable transmitted by, or on behalf of, the Company (or its
Directors) by such person or person whose messages EnCap is
for the time being authorised by the Company or its Directors
to accept, and EnCap shall not be obliged to accept any
document or message signed or transmitted or purporting to be
signed or transmitted by any other person.
16. NOTICES
Any notice given hereunder shall be in writing and shall be served by
hand or by being sent by prepaid post or telex or telecopier or
facsimile machine in the case of the Company to its registered office
for the time being marked for the attention of the Secretary and in
the case of EnCap to Messrs Hobson Audley, 7 Pilgrim Street, London
EC4V 6DR (marked for the attention of Mr M.C. Audley) or such other
address in the United Kingdom from time to time notified to the
Company for the service of notices.
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<PAGE> 20
17. ASSIGNMENT
Neither party hereto shall be entitled to assign or otherwise part
with any interest in this Agreement unless the prior written consent
of the other has been obtained.
18. INVALIDITY
The invalidity or unenforceability of any part of this Agreement shall
not prejudice or affect the validity or enforceability of the
remainder.
19. PROPER LAW
This Agreement and the rights and obligations of the parties shall be
governed by and construed in accordance with the laws of England and
the parties hereby submit to the non-exclusive jurisdiction of the
Courts of England and Wales.
IN WITNESS whereof the parties hereto have caused this Agreement to be executed
the day and year first before written.
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<PAGE> 21
SCHEDULE ONE
PART A
INVESTMENT POLICY
Any investment will, at the time it is undertaken, be limited to 15 per cent of
the Company's assets. The Company will not take legal or management control of
underlying investments, nor will it be actively involved in the management of
the projects or entities which it invests.
Investments are expected to take the form of mezzanine-style debt instruments
together with long term equity in the form of royalty interests, net profit
interests, production payments, working interests and other interests in oil
and gas. The right is reserved also to hold other forms of debt or equity
securities including options or warrants and investments may take the form of
partnership arrangements, participations, joint ventures, limited liability
company interests, corporation shares and other forms of equity investment.
Care will be taken both on initial investment and on re-investment to ensure
that sufficient income will accrue to the Company as a return on capital
invested to cover administrative expenses and to permit a progressive dividend
policy.
No investments will be made which require mandatory funding beyond a fixed
amount. Funding of any investment may be made in instalments.
Whilst the Company has the power to borrow up to its capital and reserves,
there is currently no intention to utilise this.
The Company will invest in project equity opportunities in the upstream sector
of the oil and gas industry where risks can be quantified by engineering
analysis. EnCap will only recommend Investments to the Directors which meet the
following criteria:
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<PAGE> 22
o All investments will be supported by proved oil and gas reserves.
o The proved oil and gas reserves must have been confirmed by a
qualified, independent petroleum engineering firm chosen from a
pre-approved list. Reserves will be risk valued according to category
and specific opportunity with no value given to non-proven categories
unless geological evidence is sufficient to justify inclusion of some
probable value.
o Proposed investments must offer a pre-tax return to the Company of at
least 20% p.a. net of all fees and performance-related compensation.
Evaluations will be made on the basis of reports provided by
independent engineering firms utilising hydrocarbon price projections
generally used by major commercial banks active in energy financing.
o Neither EnCap nor the Company will act as operator for any oil and gas
properties or projects. It will propose investments only where it
believes that a proposed operator/project sponsor has experienced
management and personnel with high integrity and a proven track record
and experience in the area where the investment is to be made. The
operator must demonstrate sufficient financial strength both in terms
of net worth and cash flow, to administer and operate the project
throughout the expected term of the investment.
o No investment will be proposed where a likelihood exists of adverse
selection by the operator/project sponsor (i.e. minimal potential for
conflicts of interest).
o Each operator/project sponsor must contribute an acceptable portion of
the cost of the project on a basis that is subordinate or similar to
the investment to be made by the Company.
o No Investment will be made unless the Partnership, EnCap or other
funds managed by EnCap, or investors procured by EnCap also invest on
a substantial basis.
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<PAGE> 23
SCHEDULE ONE
PART B
INVESTMENT RESTRICTIONS
(i) A reasonable spread of investments will normally be maintained, any
new investment being limited to not more than 15 per cent of the
group's assets (before deducting borrowed money) at the time it is
made, for which purpose any existing interest in the project must be
aggregated with the proposed new investment;
(ii) The policy statement set out in Schedule 1 Part A will be adhered to
for at least 3 years from the date hereof;
(iii) Dividends will only be paid to the extent that they are covered by
income received from underlying investments, shares of profits of
associated companies being unavailable for this purpose unless and
until distributed to the Company; and
(iv) Realisation of any investment carried at directors' valuation
amounting to 50 per cent or more of the portfolio will be conditional
on shareholders' approval.
None of the restrictions set out above will require the realisation of any
relevant asset of the Company where any of such restrictions is breached by
reason of any event outside the control of the Company and occurring after the
investment in the relevant asset is made or by reason of the receipt or
exercise of any rights, bonuses or benefits in the nature of capital, or any
scheme of arrangement for amalgamation, reconstruction, conversion or exchange,
or of any repayment or redemption.
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<PAGE> 24
SIGNED by )
for and on behalf of )
ENERGY CAPITAL INVESTMENT )
COMPANY PLC )
in the presence of:- )
SIGNED by. )
for and on behalf of )
EnCAP INVESTMENTS L.C. )
in the presence of:- )
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<PAGE> 1
EXHIBIT 4.7
ACQUISITION AND DISTRIBUTION AGREEMENT
THIS ACQUISITION AND DISTRIBUTION AGREEMENT (this "AGREEMENT") is made
and entered into as of this 4th day of May 1998, by and between Texoil, Inc., a
Nevada corporation ("TEXOIL"), Cliffwood Oil & Gas Corp., a Texas corporation
(the "GENERAL PARTNER"), and Cliffwood Acquisition - 1996 Limited Partnership,
a Texas limited partnership (the "PARTNERSHIP").
RECITALS:
A. The Partnership was formed in 1996 and is governed by that
certain Agreement of Limited Partnership dated as of September 27, 1996, as
amended (the "PARTNERSHIP AGREEMENT"). The General Partner is the sole general
partner of the Partnership. The limited partners of the Partnership are EnCap
Equity 1996 Limited Partnership, a Texas limited partnership ("ENCAP LP"), and
Energy Capital Investment Company PLC, an English investment company ("ECIC")
(individually, a "LIMITED PARTNER" and collectively, the "LIMITED PARTNERS").
B. Texoil, the General Partner and the Partnership deem in it in
their mutual best interests to enter into the transaction contemplated hereby.
As provided more particularly herein, the transaction contemplated hereby
essentially has two components: (i) an in-kind distribution to the General
Partner by the Partnership of the General Partner's interest in the
Partnership's oil and gas properties and related assets; and (ii) a sale by the
Partnership to Texoil of the remaining portion of the Partnership's interest in
such oil and gas properties and related assets.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing Recitals and the
mutual covenants and agreements contained herein, the parties hereto do hereby
agree as follows:
ARTICLE I
DEFINITIONS AND REFERENCES
SECTION 1.1. CERTAIN DEFINED TERMS. When used in this Agreement,
the following terms shall have the respective meanings assigned to them in this
Section 1.1 or in the sections, subsections or other subdivisions referred to
below:
"AGREEMENT" shall mean this Agreement, as hereafter changed, amended
or modified in accordance with the terms hereof.
"CASH PORTION" shall have the meaning assigned to such term in Article
III.
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<PAGE> 2
"CLOSING" and "CLOSING DATE" shall have the respective meanings
assigned to such terms in Section 6.1.
"COMMON STOCK" shall mean shares of Texoil common stock, $.01 par
value per share.
"ECIC" shall have the meaning assigned to such term in Paragraph A of
the Recitals hereto.
"EFFECTIVE DATE" shall have the meaning assigned to such term in
Section 6.2(a).
"ENCAP LP" shall have the meaning assigned to it in Paragraph A of the
Recitals hereto.
"EXCHANGE SHARES" shall have the meaning assigned to it in Section
9.13.
"GENERAL PARTNER"shall have the meaning assigned to such term in the
introductory paragraph to this Agreement.
"LIMITED PARTNERS" shall have the meaning assigned to such term in
Paragraph A of the Recitals hereto.
"OIL AND PROPERTIES" shall have the meaning assigned to such term in
Article II.
"PARTNERSHIP" shall have the meaning assigned to such term in the
introductory paragraph to this Agreement.
"PROPERTIES" shall have the meaning assigned to such term in Article
II.
"PURCHASE SHARES" shall have the meaning assigned to it in Article
III.
"PURCHASED PORTION" shall have the meaning assigned to such term in
Article II.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
and all rules and regulations under such Act.
"STOCK AUTHORIZATION APPROVAL" shall have the meaning assigned to it
in Section 9.13.
"TEXOIL" shall have the meaning assigned to such term in the
introductory paragraph to this Agreement.
SECTION 1.2. REFERENCES AND CONSTRUCTION.
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<PAGE> 3
(a) All references in this Agreement to articles, sections,
subsections and other subdivisions refer to corresponding articles, sections,
subsections and other subdivisions of this Agreement unless expressly provided
otherwise.
(b) Titles appearing at the beginning of any of such subdivisions
are for convenience only and shall not constitute part of such subdivisions and
shall be disregarded in construing the language contained in such subdivisions.
(c) The words "this Agreement", "this instrument", "herein",
"hereof", "hereby", "hereunder" and words of similar import refer to this
Agreement as a whole and not to any particular subdivision unless expressly so
limited.
(d) Words in the singular form shall be construed to include the
plural and vice versa, unless the context otherwise requires. Pronouns in
masculine, feminine and neuter genders shall be construed to include any other
gender.
(e) Unless the context otherwise requires or unless otherwise
provided herein, the terms defined in this Agreement which refer to a
particular agreement, instrument or document also refer to and include all
renewals, extensions, modifications, amendments or restatements of such
agreement, instrument or document, provided that nothing contained in this
subsection shall be construed to authorize such renewal, extension,
modification, amendment or restatement.
(f) Examples shall not be construed to limit, expressly or by
implication, the matter they illustrate.
(g) The word "includes" and its derivatives means "includes, but
is not limited to" and corresponding derivative expressions.
(h) No consideration shall be given to the fact or presumption
that one party had a greater or lesser hand in drafting this Agreement.
(i) Unless otherwise indicated, all references herein to "$" or
"dollars" shall refer to U.S. Dollars.
(j) Exhibits II, 6.2(a), 6.3(c) and 6.3(d) are attached hereto.
Each such Exhibit is incorporated herein by reference for all purposes and
references to this Agreement shall also include such Exhibit unless the context
in which used shall otherwise require.
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<PAGE> 4
ARTICLE II
PROPERTY TO BE TRANSFERRED
The Partnership agrees to transfer and assign, and the General Partner
agrees to receive, subject to the terms and provisions herein contained
(including the last full paragraph of this Article II), the following described
properties, rights and interests:
(a) All right, title and interest of the Partnership in
and to the oil, gas and/or mineral leases described in Exhibit II
hereto (and any ratification and/or amendments to such leases, whether
or not such ratifications or amendments are described on Exhibit II)
insofar as such leases (and such ratifications and amendments ) cover
the lands and depths described on such Exhibit II; and
(b) Without limiting the foregoing, all other right,
title and interest (of whatever kind or character, whether legal or
equitable, and whether vested or contingent) of the Partnership in and
to the oil, gas and other minerals in and under or that may be
produced from the lands and depths described on Exhibit II (including
interests in oil, gas and/or mineral leases covering such lands and
depths, overriding royalties, production payments and net profits
interests in such lands or such leases, and fee mineral interests, fee
royalty interests and all other interests of any kind or character in
such oil, gas and other minerals); and
(c) All rights, titles and interests of the Partnership
in and to all permits; licenses; servitudes; easements; rights-of-way;
orders; farm-in and farm-out agreements; bottom hole agreements; crude
oil, condensate and natural gas purchase and sale, gathering,
transportation and marketing agreements; hydrocarbon storage
agreements; acreage contribution agreements; operating agreements;
balancing agreements; pooling agreements; unitization agreements;
processing agreements; saltwater disposal agreements; options;
facility ore equipment leases; and other contracts, agreements, and
rights owned by the Partnership, in whole or in part, to the extent
that they are (i) appurtenant to or affect the properties described in
subsections (a) and (b) above or (ii) used or held for use in
connection with the ownership or operation of the properties described
in subsections (a) and (b) above or the production or treatment of
oil, gas, and other hydrocarbons and associated products on or
produced from the properties described in subsections (a) and (b)
above, or the sale or disposal of water, oil, gas and other
hydrocarbons and associated products; and
(d) All rights, titles and interests of the Partnership
in and to all materials, supplies, machinery, equipment, improvements
and other personal property and fixtures (including, but not by way of
limitation, all wells, saltwater disposal wells, wellhead equipment,
compression equipment, flow lines, pipelines, gathering systems,
processing and separation systems, and other equipment) whether or not
located on the properties described in subsections (a), (b) and (c)
above and used in connection with the exploration, development,
operation or maintenance thereof and all oil, gas and other
hydrocarbons produced from or allocated thereto; and
(e) All of the files, records, information, and data,
whether written or electronically stored, relating to the interests of
the Partnership in the properties
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described in subsections (a), (b) and (c) above, including without
limitation: (i) land and title records (including abstracts of title,
title opinions, and title curative documents); (ii) contract files;
(iii) correspondence; (iv) operations, environmental, production and
accounting records (but not including general financial accounting or
tax accounting records); (v) facility and well records; and (vi)
geological, geophysical and other scientific and technical data and
information relating to the properties described in subsections (a),
(b) and (c) above that is nonproprietary and that the Partnership has
the unencumbered right to transfer.
The properties and interests specified in the foregoing subsections (a), (b)
and (c) are herein sometimes collectively called the "OIL AND GAS PROPERTIES,"
and the properties and interests specified in the foregoing subsections
(a),(b),(c), (d) and (e) are herein sometimes collectively called the
"PROPERTIES".
It is specifically agreed that the transfer contemplated by this
Article II shall be deemed to constitute (x) an in-kind distribution to the
General Partner by the Partnership of the General Partner's interest in the
Properties (which, for purposes hereof, shall constitute 10% of the
Partnership's interest in the Properties) and (y) a sale by the Partnership to
Texoil, and a purchase by Texoil from the Partnership, of the Partnership's
entire interest in the Properties less the interest described in clause (x)
above. The portion of the Partnership's interest in the Properties described
in clause (y) of the immediately preceding sentence shall be herein called the
"PURCHASED PORTION". It is hereby acknowledged and affirmed that Texoil has
directed the Partnership to convey and assign to the General Partner, a
wholly-owned subsidiary of Texoil, the Purchased Portion.
ARTICLE III
PURCHASE PRICE FOR PURCHASED PORTION
In consideration of the sale by the Partnership to Texoil of the
Purchased Portion, as provided in the last full paragraph of Article II, Texoil
shall pay to the Partnership an aggregate purchase price consisting of the
following: (a) $4,465,000 cash (the "CASH PORTION"); and (b) 898,000 shares of
Common Stock (the "PURCHASE SHARES").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP
The Partnership hereby represents and warrants to Texoil as follows:
SECTION 4.1. ORGANIZATION AND EXISTENCE. The Partnership is a
limited partnership duly formed and validly existing under the laws of the
State of Texas.
SECTION 4.2. POWER AND AUTHORITY. The Partnership has full
partnership power and partnership authority to execute, deliver, and perform
this Agreement and each other
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agreement, instrument, or document executed or to be executed by the
Partnership in connection with the transactions contemplated hereby to which it
is a party and to consummate the transactions contemplated hereby and thereby.
The execution, delivery, and performance by the Partnership of this Agreement
and each other agreement, instrument, or document executed or to be executed by
the Partnership in connection with the transactions contemplated hereby to
which it is a party, and the consummation by it of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
partnership action of the Partnership.
SECTION 4.3. VALID AND BINDING AGREEMENT. This Agreement has been
duly executed and delivered by the Partnership and constitutes, and each other
agreement, instrument, or document executed or to be executed by the
Partnership in connection with the transactions contemplated hereby to which it
is a party has been, or when executed will be, duly executed and delivered by
the Partnership and constitutes, or when executed and delivered will
constitute, a valid and legally binding obligation of the Partnership,
enforceable against it in accordance with their respective terms, except that
such enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium, and similar laws affecting creditors' rights
generally and (b) equitable principles which may limit the availability of
certain equitable remedies (such as specific performance) in certain instances.
SECTION 4.4. NON-CONTRAVENTION. Other than requirements (if any)
that there be obtained consents to assignment (or waivers of preferential
rights to purchase) from third parties, and except for approvals required to be
obtained from governmental entities who are lessors under leases forming a part
of the Oil and Gas Properties (or who administer such leases on behalf of such
lessors) which are customarily obtained post-closing, neither the execution,
delivery, and performance by the Partnership of this Agreement and each other
agreement, instrument, or document executed or to be executed by the
Partnership in connection with the transactions contemplated hereby to which it
is a party nor the consummation by it of the transactions contemplated hereby
and thereby do and will (a) conflict with or result in a violation of any
provision of the partnership agreement or other governing instruments of the
Partnership, (b) conflict with or result in a violation of any provision of, or
constitute (with or without the giving of notice or the passage of time or
both) a default under, or give rise (with or without the giving of notice or
the passage of time or both) to any right of termination, cancellation, or
acceleration under, any bond, debenture, note, mortgage, indenture, lease,
contract, agreement, or other instrument or obligation to which the Partnership
is a party or by which the Partnership or any of its properties may be bound,
(c) result in the creation or imposition of any lien or other encumbrance upon
the properties of the Partnership, or (d) violate any applicable law, rule or
regulation binding upon the Partnership.
SECTION 4.5. APPROVALS. Other than requirements (if any) that there
be obtained consents to assignment (or waivers of preferential rights to
purchase) from third parties, and except for approvals required to be obtained
from governmental entities who are lessors under leases forming a part of the
Oil and Gas Properties (or who administer such leases on behalf of such
lessors) which are customarily obtained post-closing, no consent, approval,
order, or
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authorization of, or declaration, filing, or registration with, any court or
governmental agency or of any third party is required to be obtained or made by
the Partnership in connection with the execution, delivery, or performance by
the Partnership of this Agreement and each other agreement, instrument, or
document executed or to be executed by the Partnership in connection with the
transactions contemplated hereby to which it is a party or the consummation by
it of the transactions contemplated hereby and thereby.
SECTION 4.6. INVESTMENT INTENT. The Partnership is acquiring the
Purchase Shares to be acquired by it hereunder for its own account for
investment and not with a view to, or for sale or other disposition in
connection with, any distribution of all or any part thereof, except (i) in an
offering covered by a registration statement filed with the Securities and
Exchange Commission under the Securities Act covering the Purchase Shares, or
(ii) pursuant to an applicable exemption under the Securities Act; provided,
however, that it is specifically acknowledged and agreed that the Partnership
shall be permitted to make a distribution of the Purchase Shares to the Limited
Partners immediately after receipt by the Partnership of such shares.
SECTION 4.7. INVESTMENT EXPERIENCE. The Partnership acknowledges
that it is able to fend for itself, can bear the economic risk of its
investment in the Purchase Shares to be acquired by it hereunder, and has such
knowledge and experience in financial and business matters that it is capable
of evaluating the merits and risks of an investment in the Purchase Shares.
The Partnership represents that it has not been organized for the purpose of
acquiring the Purchase Shares to be acquired by it hereunder.
SECTION 4.8. RESTRICTED SECURITIES. The Partnership understands that
the Purchase Shares will not have been registered pursuant to the Securities
Act or any applicable state securities laws, that such Purchase Shares will be
characterized as "restricted securities" under federal securities laws, and
that under such laws and applicable regulations such Purchase Shares cannot be
sold or otherwise disposed of without registration under the Securities Act or
an exemption therefrom.
SECTION 4.9. LEGEND. It is agreed and understood by the Partnership
that the certificates representing the Purchase Shares shall each conspicuously
set forth on the face or back thereof, in addition to any legends required by
applicable law or other agreement, a legend in substantially the following
form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. SUCH SHARES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
UNLESS THEY ARE FIRST REGISTERED PURSUANT TO THAT ACT AND APPLICABLE
STATE SECURITIES LAWS OR UNLESS THE CORPORATION RECEIVES A WRITTEN
OPINION OF COUNSEL, WHICH OPINION AND COUNSEL ARE SATISFACTORY TO THE
CORPORATION, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
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<PAGE> 8
SECTION 4.10. DISCLAIMER OF WARRANTIES. Other than those expressly
set out in this Article IV, the Partnership hereby expressly disclaims any and
all representations or warranties with respect to the Properties or the
transaction contemplated hereby, and Texoil agrees that the Properties are
being sold or otherwise transferred by the Partnership "where is" and "as is".
Specifically as a part of (but not in limitation of) the foregoing, Texoil
acknowledges that the Partnership has not made, and the Partnership hereby
expressly disclaims, any representation or warranty (express, implied, under
common law, by statute or otherwise) as to the condition of the Properties
(INCLUDING WITHOUT LIMITATION, THE PARTNERSHIP DISCLAIMS ANY IMPLIED OR EXPRESS
WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR CONFORMITY TO
MODELS OR SAMPLES OF MATERIALS), status of title to the Properties, the
compliance by the Partnership with environmental or other laws, rules,
regulations and/or orders, the extent of oil, gas and/or other mineral
reserves, the recoverability of or the cost of recovering any of such reserves,
the value of reserves, prices (or anticipated prices) at which production has
been or will be sold and the ability to sell oil or gas production from the
Properties.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TEXOIL ENTITIES
Texoil and the General Partner (in this Article V, a "TEXOIL ENTITY")
hereby jointly and severally represent and warrant to the Partnership and for
the benefit of the Limited Partners as follows:
SECTION 5.1. ORGANIZATION AND EXISTENCE. Each Texoil Entity is a
corporation duly organized, legally existing and in good standing under the
laws of its state of incorporation, and, in the instance of Texoil, is
qualified to do business in the State of Texas.
SECTION 5.2. POWER AND AUTHORITY. Subject to the Stock Authorization
Approval, each Texoil Entity has full corporate power and corporate authority
to execute, deliver, and perform this Agreement and each other agreement,
instrument, or document executed or to be executed by such Texoil Entity in
connection with the transactions contemplated hereby to which it is a party and
to consummate the transactions contemplated hereby and thereby. The execution,
delivery, and performance by each Texoil Entity of this Agreement and each
other agreement, instrument, or document executed or to be executed by such
Texoil Entity in connection with the transactions contemplated hereby to which
it is a party, and the consummation by it of the transactions contemplated
hereby and thereby, have been duly authorized by all necessary corporate action
of such Texoil Entity except for the Stock Authorization Approval.
SECTION 5.3. VALID AND BINDING AGREEMENT. This Agreement has been
duly executed and delivered by each Texoil Entity and constitutes, and each
other agreement, instrument, or document executed or to be executed by such
Texoil Entity in connection with the transactions contemplated hereby to which
it is a party has been, or when executed will be, duly executed
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and delivered by such Texoil Entity and constitutes, or when executed and
delivered will constitute, a valid and legally binding obligation of such
Texoil Entity, enforceable against it in accordance with their respective
terms, except that such enforceability may be limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting
creditors' rights generally and (b) equitable principles which may limit the
availability of certain equitable remedies (such as specific performance) in
certain instances.
SECTION 5.4. NON-CONTRAVENTION. The execution, delivery, and
performance by each Texoil Entity of this Agreement and each other agreement,
instrument, or document executed or to be executed by such Texoil Entity in
connection with the transactions contemplated hereby to which it is a party and
the consummation by it of the transactions contemplated hereby and thereby do
not and will not (a) conflict with or result in a violation of any provision of
the charter or bylaws or other governing instruments of such Texoil Entity, (b)
conflict with or result in a violation of any provision of, or constitute (with
or without the giving of notice or the passage of time or both) a default
under, or give rise (with or without the giving of notice or the passage of
time or both) to any right of termination, cancellation, or acceleration under,
any bond, debenture, note, mortgage, indenture, lease, contract, agreement, or
other instrument or obligation to which such Texoil Entity is a party or by
which such Texoil Entity or any of its properties may be bound, (c) result in
the creation or imposition of any lien or other encumbrance upon the properties
of such Texoil Entity, or (d) violate any applicable law, rule or regulation
binding upon such Texoil Entity.
SECTION 5.5. APPROVALS. No consent, approval, order, or
authorization of, or declaration, filing, or registration with, any court or
governmental agency or of any third party is required to be obtained or made by
each Texoil Entity in connection with the execution, delivery, or performance
by such Texoil Entity of this Agreement and each other agreement, instrument,
or document executed or to be executed by such Texoil Entity in connection with
the transactions contemplated hereby to which it is a party or the consummation
by it of the transactions contemplated hereby and thereby, other than the Stock
Authorization Approval and compliance with any applicable requirements of the
Securities Act and any applicable state securities laws.
SECTION 5.6. PENDING LITIGATION. There are no pending suits,
actions, or other proceedings in which any Texoil Entity is a party which
affect the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
SECTION 5.7. KNOWLEDGEABLE PURCHASER. Each Texoil Entity is a
knowledgeable purchaser, owner and operator of oil and gas properties, has the
ability to evaluate (and in fact has evaluated) the Properties for purchase,
and is acquiring the Properties for its own account and not with the intent to
make a distribution within the meaning of the Securities Act of 1933 (and the
rules and regulations pertaining thereto) or a distribution thereof in
violation of any other applicable securities laws.
SECTION 5.8. TEXOIL COMMON STOCK. Upon receipt of the Stock
Authorization Approval, the Purchase Shares and the Exchange Shares will be
duly authorized for such
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issuance and, when issued and delivered by Texoil in accordance with the
provisions of this Agreement, will be validly issued, fully paid, and
nonassessable.
SECTION 5.9. SEC FILINGS. Texoil is current in its obligations to
file all periodic report and proxy statements with the Commission required to
be filed under the Exchange Act. Texoil's Annual Report on Form-10KSB for the
year ended December 31, 1997 (the "SEC DOCUMENTS") do not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.
Since December 31, 1997, there have been no material developments, transactions
or events affecting Texoil (other than developments or events affecting the oil
and gas exploration and production industry generally) other than as disclosed
by Texoil in the SEC Documents or to the Partnership and the Limited Partners
in writing. There are no material liabilities of Texoil (contingent or
otherwise), other than as disclosed in the SEC Documents and the financial
statements included therein.
ARTICLE VI
CLOSING OF TRANSACTION
SECTION 6.1. THE CLOSING. The closing (herein called the "CLOSING")
of the transaction contemplated hereby shall take place in the offices of
Thompson & Knight, P.C., at 1700 Chase Tower, 600 Travis Street, Houston,
Texas, at 10:30 a.m. Central Standard Time, on the date hereof (such date and
time being herein called the "CLOSING DATE").
SECTION 6.2. THE PARTNERSHIP'S CLOSING OBLIGATIONS. At the Closing,
the Partnership shall:
(a) execute, acknowledge and deliver to Texoil and the
General Partner Assignments of the Properties (the "ASSIGNMENTS"), in
the form attached hereto as Exhibit 6.2(a), being effective as to runs
of oil and deliveries of gas as of 12:01 o'clock a.m., Central
Daylight Time on February 1, 1998 (the "EFFECTIVE DATE");
(b) to the extent requested by Texoil or the General
Partner, execute and deliver to Texoil or the General Partner (i)
letters in lieu of transfer orders (or similar documentation), in form
acceptable to both parties; and
(c) to the extent requested by Texoil or the General
Partner, execute and deliver an affidavit or other certification (as
permitted by such code) that the Partnership is not a "foreign Person"
within the meaning of Section 1445 (or similar provisions) of the
Internal Revenue Code of 1986 as amended (i.e., the Partnership is not
a non-resident alien, foreign corporation, foreign partnership,
foreign trust or foreign estate as those terms are defined in such
code and regulations promulgated thereunder).
SECTION 6.3. TEXOIL'S AND GENERAL PARTNER'S CLOSING OBLIGATIONS. At
the Closing:
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(a) Texoil shall deliver to the Partnership, by wire
transfer to an account or accounts designated by the Partnership in a
bank located in the United States, an amount equal to the Cash
Portion;
(b) (i) The General Partner shall furnish to the
Partnership such evidence (including, without limitation, evidence of
satisfaction of all applicable bonding requirements) as the
Partnership or the Limited Partners may require that the General
Partner is qualified with the applicable authorities to succeed the
Partnership as the owner and, where applicable, operator of the
Properties, (ii) with respect to properties operated by the
Partnership where the General Partner is to succeed the Partnership as
operator, the General Partner shall execute and deliver to the
Partnership appropriate evidence reflecting change of operator as
required by applicable authorities, and (iii) the General Partner
shall execute and deliver to the Partnership such forms as the
Partnership or the Limited Partners may reasonably request for filing
with the applicable authorities to reflect the General Partner's
assumption of plugging and abandonment liabilities with respect to the
wells located on the Properties or on units in which the Properties
participate;
(c) Texoil shall execute and deliver that certain
Registration Rights Agreement substantially in the form of the
document attached hereto as Exhibit 6.3(c); and
(d) Texoil and the General Partner shall cause to be
delivered to the Partnership an opinion of counsel reasonably
acceptable to the Partnership, which opinion shall cover the matters
described in Exhibit 6.3(d) and shall be in form and scope reasonably
acceptable to the Limited Partners.
SECTION 6.4. DELIVERY OF FILES. Within 30 days after the Closing,
the Partnership shall deliver to the General Partner the files and other
materials referenced in subsection (e) of Article II. Notwithstanding the
foregoing, to the extent such files or other materials include items which the
Partnership cannot provide to the General Partner without, in the opinion of
the Partnership, breaching confidentiality agreements with other parties, the
Partnership shall have no obligation to furnish such items. The Partnership
may retain copies of all or any parts of the files or other materials so
furnished, and all costs of copying such files shall be borne by the
Partnership. So long as such files or other materials so delivered by the
Partnership to Texoil are maintained by the General Partner or an affiliate,
the General Partner shall permit the Partnership, its partners and their
respective representatives to have access to the same for a period of three
years after Closing. The General Partner shall advise the Partnership and its
partners before it destroys any such files or other materials (and will, if
requested by the Partnership or any partner thereof, deliver to the Partnership
or such partner any files or other materials it intends to destroy).
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ARTICLE VII
ASSUMPTION AND INDEMNIFICATION
The General Partner agrees, as of the date of Closing (and, upon the
execution and delivery of the Assignments by the Partnership, the General
Partner shall be deemed to have agreed), (a) to assume, and to timely pay and
perform, all duties, obligations and liabilities relating to the ownership
and/or operation of the Properties, whether arising before, on or after the
Effective Date (including, without limitation, those arising under the
contracts and agreements described in Article II(c), and (b) to indemnify and
hold the Partnership, its partners and its and such partners' parent and
subsidiary companies and other affiliates, and its and their respective
shareholders, members, owners, directors, officers, managers, employees and
agents harmless from and against any and all claims, actions, liabilities,
losses, damages, costs or expenses (including court costs and attorneys' fees)
of any kind or character arising out of or otherwise relating to the ownership
and/or operation of the Properties, whether arising before, on or after the
Effective Date. In connection with (but not in limitation of) the foregoing,
it is specifically understood and agreed that matters arising out of or
otherwise relating to the ownership and/or operation of the Properties shall
include all matters arising out of the condition of the Properties (including,
without limitation, within such matters all obligations to properly plug and
abandon, or replug and re-abandon, wells located on the Properties, to restore
the surface, and to comply with, or to bring the Properties into compliance
with, applicable environmental laws including conducting any remediation
activities which may be required on, or otherwise in connection with activities
on, the Properties), regardless of when the events occurred which give rise to
such condition (AND REGARDLESS OF WHETHER THE PARTNERSHIP, ITS PARTNERS AND ITS
AND SUCH PARTNERS' PARENT AND SUBSIDIARY COMPANIES AND OTHER AFFILIATES, AND
ITS AND THEIR RESPECTIVE SHAREHOLDERS, MEMBERS, OWNERS, DIRECTORS, OFFICERS,
MANAGERS, EMPLOYEES AND AGENTS, WERE WHOLLY OR PARTIALLY NEGLIGENT OR OTHERWISE
AT FAULT), and the above provided for assumptions and indemnifications by the
General Partner shall expressly cover and include such matters so arising out
of such condition.
ARTICLE VIII
NOTICES
All notices and other communications required under this Agreement
shall (unless otherwise specifically provided herein) be in writing and be
delivered personally, by recognized commercial courier or delivery service
(which provides a receipt), by telecopier (with receipt acknowledged), or by
registered or certified mail (postage prepaid), at the following addresses:
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If to the Partnership: Cliffwood Acquisition - 1996 Limited Partnership
c/o Cliffwood Oil & Gas Corp.
110 Cypress Station Dr.
Suite 220
Houston, Texas 77090
Attention: Frank A. Lodzinski
Fax No.: 281-537-8324
with a copy to:
EnCap Investments, L.C.
1100 Louisiana, Suite 3150
Houston, Texas 77002
Attention: Robert L. Zorich
Fax No.: 713-659-6130
If to Texoil or
the General Partner: c/o Texoil, Inc.
110 Cypress Station Dr.
Suite 220
Houston, Texas 77090
Attention: Frank A. Lodzinski
Fax No.: 281-537-8324
and shall be considered delivered on the date of receipt. Either Texoil and
the General Partner, on the one hand, or the Partnership, on the other hand,
may specify as its proper address any other post office address within the
continental limits of the United States by giving notice to the other, in the
manner provided in this Article, at least ten (10) days prior to the effective
date of such change of address.
ARTICLE IX
MISCELLANEOUS MATTERS
SECTION 9.1. SURVIVAL OF PROVISIONS. All representations and
warranties made herein by Texoil, the General Partner and the Partnership shall
be continuing and shall be true and correct on and as of the date of Closing
with the same force and effect as if made at that time; further, all of such
representations and warranties shall survive the Closing and the delivery of
the Assignments. The provisions of, and the obligations of the parties under,
Article VI (to the extent the same are, by mutual agreement, not performed at
Closing), and Articles VII through IX inclusive shall survive the Closing and
the delivery of the Assignments.
SECTION 9.2. FURTHER ASSURANCES. From time to time after the
Closing, at the request of any party hereto and without further consideration,
the Partnership, on the one hand, and
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Texoil and the General Partner, on the other hand, shall execute and deliver to
the requesting party such instruments and documents and take such other action
(but without incurring any material financial obligation) as such requesting
party may reasonably request in order to consummate more fully and effectively
the transactions contemplated hereby.
SECTION 9.3. BINDING EFFECT; SUCCESSORS AND ASSIGNS. The Agreement
shall be binding on the parties hereto and their respective successors and
permitted assigns. No party hereto shall have the right to assign its rights
under this Agreement without the prior written consent of the other party first
having been obtained.
SECTION 9.4. COMMISSIONS. Texoil and the General Partner jointly and
severally agree to indemnify and hold harmless the Partnership and the Limited
Partners from and against any and all claims, obligations, actions,
liabilities, losses, damages, costs or expenses (including court costs and
attorneys fees) of any kind or character arising out of or resulting from any
agreement, arrangement or understanding alleged to have been made by, or on
behalf of, Texoil or the General Partner with any broker or finder in
connection with this Agreement or the transactions contemplated hereby.
SECTION 9.5. EXPENSES; SALES TAXES; FILINGS AND RECORDING FEES.
(a) Texoil and the General Partner, on the one hand, and the
Partnership, on the other hand, shall bear and pay all expenses incurred by
them or it in connection with the transaction contemplated by this Agreement.
(b) Notwithstanding anything to the contrary herein, since the
transaction contemplated hereby is an isolated transaction, no sales tax will
be collected from Texoil or the General Partner. If, however, this transaction
is later deemed to be other than an occasional sale, Texoil and the General
Partner jointly and severally agree to be solely responsible, and shall
indemnify and hold the Partnership (and their respective partners, and each of
their and each such partners' parent and subsidiary companies and other
affiliates, and shareholders, managers, owners, directors, officers, employees,
consultants, and agents, respectively) harmless, from any and all sales or
transfer taxes or fees (including related penalty, interest or legal costs) due
by virtue of this transaction on the Properties transferred pursuant hereto and
Texoil or the General Partner shall remit such sales or transfer taxes at that
time. The Partnership, the General Partner and Texoil agree to cooperate with
each other in demonstrating that the requirements for an occasional or isolated
sale or any other sales tax exemption have been met.
(c) Texoil and the General Partner shall be solely responsible for
all filings and recordings of assignments and other documents related to the
Properties and for all fees connected therewith, and Texoil or the General
Partner shall furnish the Partnership and its partners with pertinent recording
data. The Partnership (or the Limited Partners) shall not be responsible for
any loss to Texoil or the General Partner because of Texoil's or the General
Partner's failure to file or record documents correctly or promptly.
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SECTION 9.6. ENTIRE AGREEMENT. This Agreement and the documents
referred to herein to be delivered at Closing contain the entire understanding
of the parties hereto with respect to subject matter hereof and supersede all
prior agreements, understandings, negotiations, and discussions among the
parties with respect to such subject matter. Time is of the essence in this
Agreement.
SECTION 9.7. PUBLIC STATEMENTS. The Partnership, on the one hand,
and Texoil, on the other hand, shall consult with each other with regard to all
publicity and other releases at or prior to Closing concerning this Agreement
and the transactions contemplated hereby and, except as required by applicable
law or the applicable rules or regulations of any governmental body or stock
exchange, neither the Partnership, on the one hand, nor Texoil, on the other
hand, shall issue any publicity or other release without the prior consent of
the other.
SECTION 9.8. INJUNCTIVE RELIEF. The parties hereto acknowledge and
agree that irreparable damage would occur in the event any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of the provisions
of this Agreement, and shall be entitled to enforce specifically the provisions
of this Agreement, in any court of the United States or any state thereof
having jurisdiction, in addition to any other remedy to which the parties may
be entitled under this Agreement or at law or in equity.
SECTION 9.9. DECEPTIVE TRADE PRACTICES. To the extent applicable to
the transaction contemplated hereby or any portion thereof, TEXOIL CAN AND DOES
EXPRESSLY WAIVE THE PROVISIONS OF THE TEXAS DECEPTIVE TRADE PRACTICES-CONSUMER
PROTECTION ACT, SECTION 17.41 ET SEQ., TEXAS BUSINESS & COMMERCE CODE, OTHER
THAN SECTION 17.555, WHICH IS NOT WAIVED, AND ALL OTHER CONSUMER PROTECTION
LAWS OF THE STATE OF TEXAS, OR ANY OTHER STATE, APPLICABLE TO THIS TRANSACTION
THAT MAY BE WAIVED BY THE PARTIES. IN CONNECTION WITH SUCH WAIVER, TEXOIL
HEREBY REPRESENTS TO THE PARTNERSHIP THAT TEXOIL (a) IS IN THE BUSINESS OF
SEEKING OR ACQUIRING BY PURCHASE OR LEASE, GOODS OR SERVICES FOR COMMERCIAL OR
BUSINESS USE, (b) HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS
MATTERS THAT ENABLES IT TO EVALUATE THE MERITS AND RISKS OF THE TRANSACTIONS
CONTEMPLATED HEREBY, (c) IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING
POSITION AND (d) HAS ASSETS OF $5,000,000 OR MORE ACCORDING TO ITS MOST RECENT
FINANCIAL STATEMENTS.
SECTION 9.10. AMENDMENTS. This Agreement may be amended, modified,
supplemented, restated or discharged (and provisions hereof may be waived) only
by an instrument in writing signed by the parties hereto.
SECTION 9.11. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
SECTION 9.12. COUNTERPARTS. This Agreement may be executed in
counterparts, all of which are identical and all of which constitute one and
the same instrument. It shall not be
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necessary for Texoil, the General Partner, the Partnership and the Limited
Partners to sign the same counterpart.
SECTION 9.13. POST-CLOSING COVENANT OF TEXOIL REGARDING STOCK
AUTHORIZATION APPROVAL. Texoil covenants and agrees with and for the benefit
of the Partnership and the Limited Partners that (a) immediately after the
Closing, it will commence to take all necessary steps to amend its charter or
other applicable documents so as to increase the number of authorized shares of
Common Stock to an amount sufficient to permit it to duly issue (i) to the
Partnership, the Purchase Shares, and (ii) to the Limited Partners, the
Exchange Shares, including, if necessary, obtaining the requisite consent or
approval of the shareholders of Texoil, and (b) it will have duly completed the
actions described in the immediately preceding clause (a) no later than May 25,
1998. The actions described in clause (a) of the immediately preceding
sentence shall be herein called the "STOCK AUTHORIZATION APPROVAL".
Immediately upon receipt of the Stock Authorization Approval, Texoil shall (A)
issue and deliver to the Partnership a certificate or certificates representing
the Purchase Shares registered in the name of the Partnership or, if requested
by the Partnership, the Limited Partners; (B) shall issue and deliver to the
Limited Partners, in consideration of and upon the delivery of the instruments
described in Section 9.14(c), a certificate or certificates representing
shares of Common Stock (the "EXCHANGE SHARES") as follows: EnCap LP - 1,251,919
shares of Common Stock; and EClC- 417,306 shares of Common Stock; and (C) shall
cause to be delivered to the Limited Partners an opinion of counsel reasonably
satisfactory to the Limited Partners to the effect that the Purchase Shares and
the Exchange Shares have been duly and validly authorized and issued and are
fully paid and non-assessable.
SECTION 9.14. JOINDER. Each Limited Partner joins in the execution
of this Agreement for the limited purposes of making the representations,
warranties and covenants below:
(a) Each Limited Partner severally (and not jointly and severally)
represents and warrants to Texoil and the General Partner that such Limited
Partner has not placed a mortgage, lien or other similar encumbrance on the
Properties.
(b) In connection with the contemplated distribution by the
Partnership to such Limited Partner of Purchase Shares and the receipt by such
Limited Partner of Exchange Shares under Section 9.13, each Limited Partner
severally (and not jointly and severally) represents and warrants to Texoil as
follows:
(i) Such Limited Partner is acquiring the Purchase Shares
to be received by it upon distribution from the Partnership and the
Exchange Shares for its own account for investment and not with a view
to, or for sale or other disposition in connection with, any
distribution of all or any part thereof, except (i) in an offering
covered by a registration statement filed with the Securities and
Exchange Commission under the Securities Act covering the Purchase
Shares and the Exchange Shares, or (ii) pursuant to an applicable
exemption under the Securities Act.
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<PAGE> 17
(ii) Such Limited Partner acknowledges that it is able to
fend for itself, can bear the economic risk of its investment in the
Purchase Shares to be received from the Partnership and the Exchange
Shares, and has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks
of an investment in the Purchase Shares and the Exchange Shares. Such
Limited Partner has not been organized for the purpose of acquiring
the Purchase Shares to be received by it from the Partnership or the
Exchange Shares.
(iii) Such Limited Partner understands that the Purchase
Shares and the Exchange Shares will not have been registered pursuant
to the Securities Act or any applicable state securities laws, that
such Purchase Shares and Exchange Shares will be characterized as
"restricted securities" under federal securities laws, and that under
such laws and applicable regulations such Purchase Shares and Exchange
Shares cannot be sold or otherwise disposed of without registration
under the Securities Act or an exemption therefrom.
(iv) It is agreed and understood by such Limited Partner
that the certificates representing the Purchase Shares and the
Exchange Shares shall each conspicuously set forth on the face or back
thereof, in addition to any legends required by applicable law or
other agreement, a legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. SUCH SHARES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
UNLESS THEY ARE FIRST REGISTERED PURSUANT TO THAT ACT AND APPLICABLE
STATE SECURITIES LAWS OR UNLESS THE CORPORATION RECEIVES A WRITTEN
OPINION OF COUNSEL, WHICH OPINION AND COUNSEL ARE SATISFACTORY TO THE
CORPORATION, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
(c) In consideration of and against receipt by the Limited
Partners of the Exchange Shares as provided in Section 9.13, (i) ECIC will
transfer and assign to Texoil Stock Purchase Warrant No. 001 dated September
27, 1996, entitling ECIC to purchase 75,000 shares of the common stock of
Cliffwood Oil & Gas Corp., a Texas corporation; and (ii) EnCap LP will transfer
and assign Stock Purchase Warrant No. 002 dated September 27, 1996, entitling
EnCap LP to purchase 225,000 shares of the common stock of Cliffwood Oil & Gas
Corp., a Texas corporation.
(d) At the Closing, each Limited Partner will execute and deliver
that certain Registration Rights Agreement substantially in the form of the
document attached hereto as Exhibit 6.3(c).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 18
IN WITNESS WHEREOF, this Agreement is executed by the parties hereto
on the date set forth above.
CLIFFWOOD ACQUISITION - 1996 LIMITED
PARTNERSHIP
By: CLIFFWOOD OIL & GAS CORP.,
General Partner
By: /s/ Frank A. Lodzinski
--------------------------------
Frank A. Lodzinski, President
TEXOIL, INC.
By: /s/ Frank A. Lodzinski
--------------------------------
Frank A. Lodzinski, President
CLIFFWOOD OIL & GAS CORP.
By: /s/ Frank A. Lodzinski
--------------------------------
Frank A. Lodzinski
EXECUTED FOR THE SOLE
PURPOSE OF BEING BOUND
BY SECTION 9.14:
ENCAP EQUITY 1996 LIMITED PARTNERSHIP
By: EnCap Investments L.C.
By: /s/ Robert L. Zorich
-----------------------------------
Robert L. Zorich, Managing Director
ENERGY CAPITAL INVESTMENT COMPANY PLC
By: /s/ Gary R. Petersen
-----------------------------------
Gary R. Petersen, Director
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<PAGE> 1
EXHIBIT 4.8
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made
and entered into as of this 4th day of May, 1998, by and among Texoil, Inc., a
Nevada corporation (the "COMPANY"), Energy Capital Investment Company PLC, an
English investment company ("ENERGY PLC"), and EnCap Equity 1996 Limited
Partnership, a Texas limited partnership ("ENCAP LP").
RECITALS:
A. Reference is herein made to that certain Acquisition and
Distribution Agreement dated as of even date herewith (the "A&D AGREEMENT") by
and among the Company, Cliffwood Oil & Gas Corp., a Texas corporation ("COGC"),
and Cliffwood Acquisition - 1996 Limited Partnership, a Texas limited
partnership (the "PARTNERSHIP").
B. Energy PLC and EnCap LP are limited partners in the
Partnership. Under the terms of the documents governing the Partnership, the
Limited Partners are required to consent to the execution, delivery and
performance by the Partnership of the A&D Agreement. The Company acknowledges
and agrees that the shares of Common Stock (as defined herein) to be issued by
the Company to the Partnership under the A&D Agreement will be immediately
distributed to the Limited Partners by the Partnership. Under the A&D
Agreement, the Company has also agreed to issue shares of Common Stock to
Energy PLC and EnCap LP in exchange for certain stock purchase warrants held by
Energy PLC and EnCap LP entitling them to purchase shares of common stock in
COGC, a wholly-owned subsidiary of the Company. In order to induce Energy PLC
and EnCap LP to consent to the execution, delivery and performance by the
Partnership of the A&D Agreement and to exchange the abovementioned stock
purchase warrants (and recognizing that Energy PLC and EnCap LP would not be
willing to grant such consent and exchange such stock purchase warrants in the
absence of this Agreement), the Company has agreed to provide Energy PLC and
EnCap LP with the registration rights set forth herein.
AGREEMENT:
NOW, THEREFORE, for and in consideration of the foregoing Recitals and
the mutual covenants contained herein, the sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby
agree as follows:
SECTION 1. DEFINITIONS AND REFERENCES.
(a) When used in this Agreement, the following terms shall have
the respective meanings assigned to them in this Section 1 or in the sections,
subsections or other subdivisions referred to below:
"A&D AGREEMENT" shall have the meaning assigned to such term in
Paragraph A of the Recitals hereto.
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<PAGE> 2
"AGREEMENT" shall mean this Agreement, as hereafter changed, modified
or amended in accordance with the terms hereof.
"CLOSING DATE" shall have the meaning assigned to it in the A&D
Agreement.
"COMMISSION" shall mean the Securities and Exchange Commission (or any
successor body thereto).
"COMMON STOCK" shall mean the common stock of the Company, $.01 par
value per share.
"COMPANY" shall have the meaning assigned to it in the introductory
paragraph hereof.
"ENCAP LP" shall have the meaning assigned to it in the introductory
paragraph hereof.
"ENERGY PLC" shall have the meaning assigned to it in the introductory
paragraph hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and all rules and regulations promulgated under such Act.
"HOLDER" shall mean any Person that holds Registrable Securities.
"HOLDER INDEMNIFIED PARTIES" shall have the meaning assigned to it in
Section 9(a).
"PERSON" shall mean any individual, corporation, partnership, joint
venture, limited partnership, limited liability company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"REGISTRABLE SECURITIES" shall mean (i) the shares of Common Stock
issued pursuant to the A&D Agreement (which, for purposes hereof, shall mean
the Closing Shares, as defined in the A&D Agreement, and the shares of Common
Stock issued and delivered by the Company pursuant to Section 6.3(f) of the A&D
Agreement) and (ii) any securities issued or issuable with respect to the
shares described in clause (i) above by way of a stock dividend or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization.
"REGISTRATION EXPENSES" shall mean all expenses incident to the
Company's performance of or compliance with the registration rights granted
hereunder, including (without limitation) all registration and filing fees,
fees and expenses of compliance with securities and blue sky laws, printing and
engraving expenses, messenger, telephone and delivery expenses, and fees and
disbursements of counsel for the Company, fees and expenses
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<PAGE> 3
of the Company's independent certified public accountants, fees and expenses of
underwriters (excluding discounts and commissions), and the fees and
disbursements of one counsel to the selling Holders; provided, that
Registration Expenses shall not include any Selling Expenses.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
and all rules and regulations under such Act.
"SELLING EXPENSES" shall mean underwriting discounts or commissions,
any selling commissions and stock transfer taxes attributable to sales of
Registrable Securities.
(b) All references in this Agreement to sections, subsections and
other subdivisions refer to corresponding sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any of such subdivisions are for convenience only
and shall not constitute part of such subdivisions and shall be disregarded in
construing the language contained herein. The words "this Agreement", "this
instrument", "herein", "hereof", "hereby", "hereunder" and words of similar
import refer to this Agreement as a whole and not to any particular subdivision
unless expressly so limited. Words in the singular form shall be construed to
include the plural and vice versa, unless the context otherwise requires.
Pronouns in masculine, feminine and neuter genders shall be construed to
include any other gender.
SECTION 2. SHELF REGISTRATION. The Company will use its best efforts
to prepare and file with the Commission promptly after the Closing Date and in
any event no later than 30 days after the Closing Date a shelf registration
statement on Form S-3 or other appropriate form pursuant to Rule 415 of the
Securities Act covering the sale by the Holders of all of the Registrable
Securities. The Company shall use its best efforts to cause the registration
statement to be declared effective as promptly as possible after the Closing
Date and to keep such registration statement effective until the Holders have
disposed of all of the Registrable Securities. The Holders agree to furnish to
the Company such information regarding the distribution of the Registrable
Securities covered by the registration statement filed under this Section as
the Company may from time to time reasonably request in writing and such other
information as may be legally required in connection with such registration
statement.
SECTION 3. AGREEMENT OF HOLDERS REGARDING THE DISPOSITION OF THE
REGISTRABLE SECURITIES. In connection with the disposition of the
Registrable Securities by the Holders, the Holders hereby agree with the
Company that, as of each date specified below, the percentage amount of the
Registrable Securities disposed of by them pursuant to the registration
statement filed under Section 2 will not exceed the percentage amount set forth
opposite such date:
<TABLE>
<CAPTION>
Date Cumulative Percentage Amount
---- ----------------------------
<S> <C>
June 30, 1998 20%
September 30, 1998 40%
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
December 31, 1998 60%
March 31, 1999 80%
June 30, 1999 100%
</TABLE>
SECTION 4. REGISTRATION PROCEDURES.
(a) In connection with a registration statement filed pursuant to
Section 2, the Company will:
(i) at least seven days prior to filing the registration
statement or prospectus or any amendments or supplements thereto,
furnish copies of all such documents proposed to be filed to any
holder of Registrable Securities covered by such registration
statement;
(ii) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used
in connection therewith as may be necessary to keep such registration
statement effective as provided in Rule 415 of the Securities Act and
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration
statement;
(iii) notify the Holders promptly after the Company shall
receive notice thereof of the time when such registration statement
has been filed and becomes effective;
(iv) furnish to each Holder such number of copies of such
registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including, without
limitation, each preliminary prospectus) and such other documents as
such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such Holder;
(v) use its reasonable best efforts to register or
qualify such Registrable Securities under such other securities or
blue sky laws of such jurisdictions within the United States as any
seller of Registrable Securities reasonably requests and do any and
all other acts and things which may be reasonably necessary or
advisable to enable such seller to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such seller
(provided that the Company will not be required to qualify generally
to do business or subject itself to any general service of process in
any jurisdiction where it is otherwise not then so subject);
(vi) notify each seller of such Registrable Securities, at
any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the
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<PAGE> 5
happening of any event which requires the making of any change in the
prospectus included in such registration statement so that such
document will not contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and, at the
request of any such seller, the Company will prepare a supplement or
amendment to such prospectus so that such prospectus will not contain
an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading;
(vii) use its reasonable best efforts to cause all such
Registrable Securities to be listed on each securities exchange or
exchanges, automated quotation system or over-the-counter market upon
which securities of the Company of the same class are then listed;
(viii) enter into such customary agreements (including,
without limitation, underwriting agreements in customary form,
substance and scope) and take all such other action as the Holders of
a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities;
(ix) otherwise use its reasonable best efforts to comply
with all applicable rules and regulations of the Commission;
(x) in the event of the issuance of any stop order
suspending the effectiveness of a registration statement, or of any
order suspending or preventing the use of any related prospectus or
suspending the qualification of any common stock included in such
registration statement for sale in any jurisdiction, the Company will
use its reasonable best efforts promptly to obtain the withdrawal of
such order;
(xi) use its reasonable best efforts to cause such
Registrable Securities covered by such registration statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the sellers thereof to
consummate the disposition of such Registrable Securities; and
(xii) use its reasonable best efforts to obtain a comfort
letter from the Company's public accountants in customary form and
covering such matters of the type customarily covered by comfort
letters with respect to offerings of the type being made pursuant to
the registration statement as the Holders of the Registrable
Securities reasonably request.
(b) Each Holder of Registrable Securities will be deemed to have
agreed as follows:
(i) upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 4(a)(vi), the
Holders of Registrable Securities covered by such registration
statement will forthwith discontinue disposition of any
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<PAGE> 6
such Registrable Securities until the Holders of Registrable
Securities receive copies of the supplemented or amended prospectus
contemplated by Section 4(a)(vi), or until they are advised in writing
by the Company that the use of the applicable prospectus may be
resumed, and they have received copies of any additional or
supplemental filings that are incorporated or deemed to be
incorporated by reference in such prospectus (it being the agreement
of the parties hereto, however, that the obligation of the Company
with respect to maintaining the subject registration statement current
and effective shall be extended by a period of days equal to the
period the Holders of Registrable Securities are required by this
Section 4(b)(i) to discontinue disposition of such Registrable
Securities); and
(ii) furnish to the Company such information regarding
each Holder, the Registrable Securities held by such Holder and the
intended method of disposition thereof as the Company shall reasonably
request and as shall be reasonably required in connection with the
preparation of the applicable registration statement and other actions
taken by the Company under this Agreement, and it shall be a condition
precedent to the obligation of the Company to take any action pursuant
to this Agreement in respect of the Registrable Securities that such
information has been furnished to the Company by the Holders of
Registrable Securities.
SECTION 5. EXPENSES OF REGISTRATION. The Company shall pay all
Registration Expenses in connection with the registration effected pursuant to
Section 2 and, in any event, shall pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal and accounting duties), the expense of any annual audit and
the fees and expenses incurred in connection with the listing of the securities
to be registered on each securities exchange on which similar securities issued
by the Company are then listed. All Selling Expenses incurred in connection
with a registration effected pursuant to the terms hereof shall be borne by the
seller or sellers of Registrable Securities pro rata based upon the number of
Registrable Securities included in such registration or as otherwise agreed by
such sellers.
SECTION 6. INDEMNIFICATION.
(a) The Company shall indemnify and hold harmless, with respect to
any registration statement filed by it, to the full extent permitted by law,
each Holder of Registrable Securities covered by such registration statement,
and each other Person, if any, who controls such Holder within the meaning of
Section 15 of the Securities Act (collectively, "HOLDER INDEMNIFIED PARTIES")
against all losses, claims, damages, liabilities and expenses, joint or several
to which any such Holder Indemnified Party may become subject under the
Securities Act, the Exchange Act, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon (i) any untrue statement or alleged untrue statement of a material fact
contained in any registration statement in which such Registrable Securities
were included as contemplated hereby or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein
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<PAGE> 7
not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary, final or summary prospectus,
together with the documents incorporated by reference therein (as amended or
supplemented if the Company shall have filed with the Commission any amendment
thereof or supplement thereto), or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, or (iii) any violation by the Company of any
federal, state or common law rule or regulation applicable to the Company and
relating to action of or inaction by the Company in connection with any such
registration; and in each such case, the Company shall reimburse each such
Holder Indemnified Party for any reasonable legal or other expenses incurred by
any of them in connection with investigating or defending any such loss, claim,
damage, liability, expense, action or proceeding; provided, however, that the
Company shall not be liable to any such Holder Indemnified Party in any such
case to the extent, that any such loss, claim, damage, liability or expense (or
action or proceeding, whether commenced or threatened, in respect thereof)
arises out of or is based upon any untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement or
amendment thereof or supplement thereto or in any such preliminary, final or
summary prospectus in reliance upon and in conformity with written information
furnished to the Company by or on behalf of any such Holder Indemnified Party
for use in the preparation thereof. Such indemnity and reimbursement of
expenses and other obligations shall remain in full force and effect regardless
of any investigation made by or on behalf of the Holder Indemnified Parties and
shall survive the transfer of such securities by such Holder Indemnified
Parties.
(b) Each Holder of Registrable Securities participating in any
registration hereunder shall severally (and not jointly or jointly and
severally) indemnify and hold harmless, to the fullest extent permitted by law,
the Company, its directors, officers, employees and agents, and each Person who
controls the Company (within the meaning of Section 15 of the Securities Act)
(collectively, "COMPANY INDEMNIFIED PARTIES") against all losses, claims,
damages, liabilities and expenses to which any Company Indemnified Party may
become subject under the Securities Act, the Exchange Act, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of a material fact contained in any registration statement in which
such Holder's Registrable Securities were included or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary, final or summary prospectus, together with the documents
incorporated by reference therein (as amended or supplemented if the Company
shall have filed with the Commission any amendment thereof or supplement
thereto), or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading to the extent in the cases described in clauses (i) and (ii), that
such untrue statement or omission was furnished in writing by such Holder for
use in the preparation thereof, or (iii) any violation by such Holder of any
federal, state or common law
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<PAGE> 8
rule or regulation applicable to such Holder and relating to action of or
inaction by such Holder in connection with any such registration; and in each
such case, such Holder shall reimburse each such Company Indemnified Party for
any reasonable legal or other expenses incurred by any of them in connection
with investigating or defending any such loss, claim, damage, liability,
expense, action or proceeding. Such indemnity obligation shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Company Indemnified Parties (except as provided above) and shall survive the
transfer of such securities by such Holder.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) of written notice of the commencement of any action,
suit, proceeding, investigation or threat thereof made in writing with respect
to which a claim for indemnification may be made pursuant to this Section 6,
such indemnified party shall, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the indemnifying party of
the threat or commencement thereof; provided, however, that the failure to so
notify the indemnifying party shall not relieve it from any liability which it
may have to any indemnified party except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. If any such claim
or action referred to under subsection (a) or (b) is brought against any
indemnified party and it then notifies the indemnifying party of the threat or
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it wishes, jointly with any other indemnifying
party similarly notified, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. After notice from the indemnifying
party to such indemnified party of its election so to assume the defense of any
such claim or action, the indemnifying party shall not be liable to such
indemnified party under this Section 6 for any legal expenses of counsel or any
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation unless
the indemnifying party has failed to assume the defense of such claim or action
or to employ counsel reasonably satisfactory to such indemnified party. Under
no circumstances will the indemnifying party be obligated to pay the fees and
expenses of more than one law firm for all indemnified parties. The
indemnifying party shall not be required to indemnify the indemnified party
with respect to any amounts paid in settlement of any action, proceeding or
investigation entered into without the written consent of the indemnifying
party, which consent shall not be unreasonably withheld. No indemnifying party
shall consent to the entry of any judgment or enter into any settlement without
the consent of the indemnified party unless (i) such judgment or settlement
does not impose any obligation or liability upon the indemnified party other
than the execution, delivery or approval thereof, and (ii) such judgment or
settlement includes as an unconditional term thereof the giving by the claimant
or plaintiff to such indemnified party of a full release and discharge from all
liability in respect of such claim for all persons that may be entitled to or
obligated to provide indemnification or contribution under this Section 6.
(d) Indemnification similar to that specified in the preceding
subsections of this Section 6 (with appropriate modifications) shall be given
by the Company and each seller of Registrable Securities with respect to any
required registration or qualification of securities under any state securities
or blue sky laws.
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<PAGE> 9
(e) If the indemnification provided for in this Section 6 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b), then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the losses,
claims, damages, liabilities or expenses (or actions or proceedings in respect
thereof) referred to in subsection (a) or (b) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and the indemnified party on the other in connection with the statements,
omissions, actions or inactions which resulted in such losses, claims, damages,
liabilities or expenses as well as any other relevant equitable considerations.
The relative fault of the indemnifying party and the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the indemnifying party
or the indemnified party, any action or inaction by any such party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement, omission, action or inaction. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect thereof)
pursuant to this subsection (e) shall be deemed to include, without limitation,
any reasonable legal or other expenses incurred by such indemnified party in
connection with investigating or defending any such action or claim (which
shall be limited as provided in subsection (c) if the indemnifying party has
assumed the defense of any such action in accordance with the provisions
thereof) which is the subject of this subsection (e). No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Promptly after receipt by an
indemnified party under this subsection (e) of written notice of the
commencement of any action, suit, proceeding, investigation or threat thereof
made in writing with respect to which a claim for contribution may be made
against an indemnifying party under this subsection (e), such indemnified party
shall, if a claim for contribution in respect thereof is to be made against an
indemnifying party, give written notice to the indemnifying party in writing of
the commencement thereof (if the notice specified in subsection (c) has not
been given with respect to such action); provided, however, that the failure to
so notify the indemnifying party shall not relieve it from any obligation to
provide contribution which it may have to any indemnified party under this
subsection (e) except to the extent that the indemnifying party is actually
prejudiced by the failure to give notice.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this paragraph were determined by pro rata allocation
or by any other method of allocation which does not take account the equitable
considerations referred to in the immediately preceding paragraph.
If indemnification is available under this Section 6, the indemnifying
parties shall indemnify each indemnified party to the fullest extent provided
in subsections (a) and (b), without regard to the relative fault of said
indemnifying party or any other equitable consideration provided for in this
subsection. The provisions of this subsection shall be in addition to any
other rights to indemnification or contribution which any indemnified party may
have pursuant to law or contract, shall remain in full force and effect
regardless of any
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<PAGE> 10
investigation made by or on behalf of any indemnified party, and shall survive
the transfer of securities by any such party.
(f) In connection with any underwritten offering contemplated by
this Agreement which includes Registrable Securities, the Company and all
sellers of Registrable Securities included in any registration statement shall
agree to customary provisions for indemnification and contribution (consistent
with the other provisions of this Section 6) in respect of losses, claims,
damages, liabilities and expenses of the underwriters of such offering.
SECTION 7. SELECTION OF UNDERWRITERS. If a registration
effected pursuant to Section 2 is an underwritten offering or a best efforts
underwritten offering, the investment bankers or investment bankers and manager
or managers that will administer the offering shall be selected by the Holders
of a majority of the Registrable Securities to be registered in such
registration; provided, however, that such investment bankers and managers must
be reasonably satisfactory to the Company.
SECTION 8. RULE 144. The Company covenants to each Holder that,
to the extent that the Company shall be required to do so under the Exchange
Act, the Company shall (a) timely file the reports required to be filed by it
under the Exchange Act or the Securities Act (including, but not limited to,
the reports under Section 13 and 15(d) of the Exchange Act referred to in
subparagraph (c) (1) of Rule 144 adopted by the Commission under the Securities
Act) and the rules and regulations adopted by the Commission thereunder, and
(b) take such further action as any Holder may reasonably request, all to the
extent required from time to time to enable such Holder to sell Registrable
Securities without registration under the Securities Act within the limitations
of the exemption provided by Rule 144 under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any Holder, the Company shall
deliver to such Holder a written statement as to whether it has complied with
such requirements. Each Holder agrees that if such Holder is able to sell
Registrable Securities without registration pursuant to an exemption under Rule
144, such Holder shall use reasonable efforts to attempt to do so, giving due
consideration to the quantity of Registrable Securities such Holder desires to
sell.
SECTION 9. MISCELLANEOUS.
(a) From and after the date of this Agreement, the Company will
not, without the prior written consent of the Holders of a majority of the
number of Registrable Securities then outstanding, enter into any agreement
with respect to its securities which is inconsistent with or violates the
rights granted to the Holders of Registrable Securities in this Agreement.
Without limiting the foregoing, the Company also specifically agrees that
during the period commencing on the date hereof and ending when the Holders
have disposed of all of their Registrable Securities, the Company will not
enter into an agreement with a third party pertaining to the registration by
the Company of such third party's Common Stock on terms more favorable to the
third party than those afforded to the Holders hereunder (including, without
limitation, Section 3). The Company represents and warrants to Energy PLC and
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<PAGE> 11
EnCap LP that, as of the date hereof, the Company is not a party to any
agreement with a third party pertaining to the registration by the Company of
such third party's Common Stock other than those listed in Exhibit 9(a)
attached hereto (which Exhibit also sets forth the principal terms of each such
agreement and which agreements are, in this subsection (a), called an "EXISTING
AGREEMENT"). The Company covenants and agrees with the Holders of Registrable
Securities that if a party to an existing agreement is permitted under the
terms thereof to dispose or otherwise transfer all or a portion of its Common
Stock on a basis more favorable than that accorded the Holders under Section 3,
the Company will consent to an amendment to this Agreement reasonably proposed
by the Holders that would permit the Holders to dispose or transfer of their
Registrable Securities on the same basis as such third party and/or shall
otherwise take all reasonable actions as are reasonably requested by the
Holders so as to accord the Holders with the right to dispose or transfer of
their Registrable Securities on the same basis as such third party.
(b) Energy PLC and EnCap LP agree, and each other Holder of
Registrable Securities (including Registrable Securities in any registration
statement filed pursuant to this Agreement) will be deemed to have agreed that
if any Registrable Securities are being registered in any registration pursuant
to this Agreement, the Holder thereof will comply with all anti-stabilization,
manipulation and similar provisions of Section 10 of the Exchange Act, as
amended, and any rules promulgated thereunder by the Commission and, at the
request of the Company, will execute and deliver to the Company and to any
underwriter participating in such offering, an appropriate agreement to such
effect.
(c) All questions concerning the construction, validity and
interpretation of this Agreement shall be governed by the internal law, and not
the law of conflicts, of the State of Texas.
(d) All covenants and agreements in this Agreement by or on behalf
of any of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto. In addition, the
rights and obligations under this Agreement shall automatically be transferred
to and binding on any transferee or assignee of the Registrable Securities;
provided, that (i) the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the Registrable Securities with respect to which
such registration rights are being transferred or assigned, (ii) such
transferee or assignee agrees in writing to be bound by and subject to the
terms and conditions of this Agreement, (iii) the transfer and assignment of
the subject Registrable Securities is in compliance with the Securities Act and
applicable state securities laws or an exemption from the registration
requirements of the Securities Act and applicable state securities laws, and
(iv) such assignment of rights and obligations under this Agreement shall be
effective only if immediately following such transfer the further disposition
of such Registrable Securities by the transferee or assignee is restricted
under the Securities Act.
(e) This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect
of the subject matter herein contained. There are
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<PAGE> 12
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein, with respect to the registration rights granted by
the Company to the Holders of the Registrable Securities. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
(f) All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or
sent by reputable express courier service (charges prepaid), or mailed to the
recipient by certified or registered mail, return receipt requested and postage
prepaid, or sent by telefax, to the parties at the following address (or to
such other address or to the attention of such other person as the recipient
party has specified by prior like notice to the sending party):
If to the Company:
Texoil, Inc.
110 Cypress Station Dr.
Suite 220
Houston, Texas 77090
Telecopier No.: (281)537-8324
Attention: Frank A. Lodzinski
If to Energy PLC or EnCap LP:
c/o EnCap Investments L.C.
1100 Louisiana
Suite 3150
Houston, Texas 77002
Telecopier No.: (713) 659-6130
Attention: Robert L. Zorich, Managing Director
(g) If any provision of this Agreement is held to be
unenforceable, this Agreement shall be considered divisible and such provision
shall be deemed inoperative to the extent it is deemed unenforceable, and in
all other respects this Agreement shall remain in full force and effect;
provided, however, that if any such provision may be made enforceable by
limitation thereof, then such provision shall be deemed to be so limited and
shall be enforceable to the maximum extent permitted by applicable law.
(h) This Agreement may be executed by the parties hereto in any
number of counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same agreement. Each counterpart may
consist of a number of copies hereof each signed by less than all, but together
signed by all, the parties hereto.
(i) Each Holder of Registrable Securities, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific
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<PAGE> 13
performance of its rights under this Agreement. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of breach by it of the provisions of this Agreement and hereby agrees to
waive (to the extent permitted by law) the defense in any action for specific
performance that a remedy of law would be adequate.
(j) In any action or proceeding brought to enforce any provision
of this Agreement, or where any provision hereof is validly asserted as a
defense, the successful party shall be entitled to recover reasonable
attorneys' fees in addition to any other available remedy.
(k) The Company agrees to remove any legends on certificates
representing Registrable Securities describing transfer restrictions applicable
to such securities upon the sale of such securities (i) pursuant to an
effective Registration Statement under the Securities Act or (ii) in accordance
with the provisions of Rule 144 under the Securities Act.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 14
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
TEXOIL, INC.
By: /s/ Frank A. Lodzinski
------------------------------
Name: Frank A. Lodzinski
Title: President
ENERGY CAPITAL INVESTMENT
COMPANY PLC
By: /s/ Gary R. Petersen
------------------------------
Name: Gary R. Petersen
Title: Director
ENCAP EQUITY 1996 LIMITED
PARTNERSHIP
By: /s/ Robert L. Zorich
------------------------------
Name: Robert L. Zorich
Title: Managing Director
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<PAGE> 1
EXHIBIT 4.9
MAY 1998 AGREEMENT
IN RESPECT OF
AGREEMENT OF LIMITED PARTNERSHIP
CLIFFWOOD ACQUISITION - 1996 LIMITED PARTNERSHIP
THIS MAY AGREEMENT IN RESPECT OF AGREEMENT OF LIMITED PARTNERSHIP is
made and entered into this 4th day of May, 1998, by and among Cliffwood Oil &
Gas Corp., a Texas corporation, EnCap Equity 1996 Limited Partnership, a Texas
limited partnership, and Energy Capital Investment Company PLC, an English
investment company.
RECITALS:
A. Cliffwood Energy Company, a California corporation ("CEG"),
and the Limited Partners have heretofore executed and delivered that certain
Agreement of Limited Partnership dated as of September 27, 1996, establishing
Cliffwood Acquisition - 1996 Limited Partnership the " PARTNERSHIP AGREEMENT").
B. CEG has heretofore assigned its interest as a general partner
in the Partnership to the General Partner and the General Partner has been
admitted to the Partnership as a substitute general partner in place of CEG.
C. The General Partner, on behalf of the Partnership, proposes to
execute and deliver that certain Acquisition and Distribution Agreement dated
as of even date herewith (the "A&D AGREEMENT"), by and between the Partnership,
Texoil, Inc. ("TEXOIL"), and the General Partner (in its separate corporate
capacity). Under the terms of the A&D Agreement, the Partnership would (x)
make an in-kind distribution to the General Partner of the General Partner's
interest in the Properties (which, for purposes hereof, shall constitute 10% of
the Partnership's interest in the Properties) and (y) sell to Texoil the
Partnership's entire interest in the Properties less the interest described in
clause (x) above (with the Partnership being directed by Texoil to transfer and
assign the interest described in this clause (y) to the General Partner).
D. The parties hereto desire to enter into this Agreement for the
purpose of (i) authorizing the execution and delivery by the General Partner of
the Purchase Agreement on behalf of the Partnership and authorizing the
consummation by the Partnership of the Transaction and (ii) setting forth
their agreement with respect to (x) the manner in which the cash and shares of
stock received by the Partnership under the A&D Agreement will be shared by the
parties and (iii) the conduct of the Partnership's affairs after the
consummation of the Transaction and (y) certain other matters affecting the
Partnership.
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<PAGE> 2
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing Recitals and the
mutual covenants and agreements contained herein and in the Partnership
Agreement, the parties hereto do hereby agree as follows:
SECTION 1. DEFINED TERMS, REFERENCES AND CONSTRUCTION.
(a) When used in this Agreement, the following terms shall have
the respective meanings assigned to them below in this subsection (a) or in the
sections, subsections or other subdivisions referred to below in this
subsection (a):
"A&D AGREEMENT" shall have the meaning assigned to it in
Paragraph B of the Recitals.
"AGREEMENT" shall mean this May 1998 Agreement in Respect of
Agreement of Limited Partnership.
"CASH PORTION" shall have the meaning assigned to it in the
A&D Agreement.
"CLOSING" shall have the meaning assigned to it in the A&D
Agreement.
"CONVEYANCING DOCUMENTS" shall mean (i) the Assignment and
Bill of Sale, substantially in the form attached to the A&D Agreement
in all material respects, and (ii) the other documents and instruments
to executed and delivered at the Closing in connection with the sale,
assignment and transfer of the Properties and related obligations,
substantially in the form previously furnished to the Limited Partners
and its counsel in all material respects.
"PARTNERSHIP AGREEMENT" shall have the meaning assigned to it
in Paragraph A of the Recitals.
"PURCHASE SHARES" shall have the meaning assigned to it in the
A&D Agreement.
"PURCHASED PORTION" shall have the meaning assigned to it in
the A&D Agreement.
"TEXOIL" shall have the meaning assigned to it in Paragraph B
of the Recitals.
"TRANSACTION" shall mean the transaction contemplated under
the A&D Agreement.
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<PAGE> 3
(b) All other terms not otherwise defined herein shall have the
respective meanings assigned to them in the Partnership Agreement.
(c) All references in this Agreement to sections, subsections and
other subdivisions refer to corresponding sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any of such subdivisions are for convenience only
and shall not constitute part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions. The words "this
Agreement", "this instrument", "herein", "hereof", "hereby", "hereunder" and
words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. Words in the singular form
shall be construed to include the plural and vice versa, unless the context
otherwise requires. The word "includes" and its derivatives means "includes,
but is not limited to" and corresponding derivative expressions.
SECTION 2. AUTHORIZATION OF THE EXECUTION AND DELIVERY OF THE
A&D AGREEMENT; AUTHORIZATION OF THE CONSUMMATION OF THE TRANSACTION UNDER THE
A&D AGREEMENT.
(a) Notwithstanding Section 6.2(d) or anything else in the
Partnership Agreement to the contrary (and in reliance on the representation
and warranty of the General Partner set forth in Section 9(a)(vii)), the
Limited Partners hereby consent to and approve the execution and delivery of
the A&D Agreement by the General Partner on behalf of the Partnership.
(b) Subject to the terms hereof, the Limited Partners hereby
consent to and approve the consummation by the Partnership of the Transaction
and agree that the General Partner shall have the power and authority to cause
the Partnership to consummate the Transaction (including the power and
authority to execute and deliver the Conveyancing Documents).
(c) The Limited Partners agree to transfer and assign to Texoil
the instruments described in Section 9.14(c) of the A&D Agreement (provided
that Texoil performs its obligations under the A&D Agreement, including Section
9.13 thereof).
(d) Pursuant to Section 9.13 of the A&D Agreement, the General
Partner agrees that it will request that Texoil issue stock certificates
representing the Purchase Shares in the names of the Limited Partners, with
each Limited Partner receiving the number of Purchase Shares set forth opposite
its name in Section 3.
(e) Promptly after the Closing, the General Partner agrees to
provide the Limited Partners with a complete set of all the documents and other
instruments executed by the General Partner and Texoil at the Closing.
SECTION 3. ALLOCATIONS AND DISTRIBUTIONS ATTRIBUTABLE TO THE
PURCHASED PORTION. Notwithstanding anything in the Partnership Agreement to
the contrary (including Article IV thereof), (a) all revenues of the
Partnership relating to the Purchased Portion (including for this purpose the
Purchase Shares), as well as all related items of Partnership income, gain and
amount realized for Federal income tax purposes shall be allocated 100% to the
Limited
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<PAGE> 4
Partners (and, as between the Limited Partners, in the percentages set forth in
Section 4.5 of the Partnership Agreement) and (b) immediately (i) after the
Closing, the Partnership will distribute solely to the Limited Partners the
Cash Portion, and (ii) after the issuance to the Partnership of the Purchase
Shares under the A&D Agreement, the Partnership will solely distribute to the
Limited Partners such Purchase Shares, as follows:
<TABLE>
<CAPTION>
Limited Partner Cash Purchase Shares
--------------- ---------- ---------------
<S> <C> <C>
EnCap LP $3,348,750 673,500
Energy PLC $1,116,250 224,500
</TABLE>
SECTION 4. CERTAIN RESTRICTIONS. Without limiting Section
6.2(d) or any other provision of the Partnership Agreement or this Agreement,
it is hereby agreed that the General Partner shall not do, perform or authorize
any of the following without the prior written consent of the Limited Partners:
(a) alter, supplement, modify or amend the A&D Agreement in any
material respect, waive any of the Partnership's rights or any of Texoil's or
the General Partner's duties and obligations thereunder in any material
respect, or make any material election, determination or agreement thereunder;
or
(b) alter, supplement, modify or amend any Conveyance Document in
any material respect, waive any of the Partnership's rights or any of Texoil's
or the General Partner's duties and obligations thereunder in any material
respect, or make any material election, determination or agreement thereunder.
SECTION 5. AGREEMENT REGARDING THE CONTINUED EXISTENCE OF THE
PARTNERSHIP.
(a) Notwithstanding Section 10.1(d) of the Partnership Agreement
or anything else therein or in the Act to the contrary, the parties hereto
agree that the Partnership shall not dissolve upon the consummation of the
Transaction and that the Partnership shall continue to exist and conduct
business.
(b) Without limiting subsection (a) above, the parties hereto
agree that immediately after the consummation of the Transaction, the parties
hereto shall execute and deliver an amended and restated agreement of limited
partnership to govern the Partnership in a form mutually acceptable to them,
which shall be conclusively evidenced by their execution and delivery thereof;
provided, that the terms and provisions of this Agreement shall not be
superseded by the execution and delivery by the parties of any such agreement.
SECTION 6. EFFECTIVENESS OF AGREEMENT; APPROVALS. This
Agreement shall be expressly conditioned upon and effective if, and only if,
the Transaction is consummated.
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<PAGE> 5
SECTION 7. REPRESENTATIONS AND WARRANTIES.
(a) The General Partner represents and warrants to the Limited
Partners as follows:
(i) The General Partner is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Texas.
(ii) The General Partner has the requisite power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder.
(iii) The execution, delivery and performance by the
General Partner of this Agreement has been duly and validly authorized
by all requisite corporate action.
(iv) The execution, delivery and performance by the
General Partner of this Agreement is within its corporate powers and
will not (A) be in contravention of or violate any provisions of its
applicable charter or other governing documents, as amended to the
date hereof, or (B) be in contravention of or result in any breach or
constitute a default under any applicable law, rule, regulation,
judgment, license, permit or order or any loan, note or other
agreement or instrument to which the General Partner is a party or by
which it or any of its properties are bound.
(v) When delivered to the Limited Partners, this
Agreement will have been duly and validly executed and will be binding
upon the General Partner and enforceable in accordance with the terms
hereof, except as limited by bankruptcy, insolvency or similar law of
general application relating to the enforcement of creditors' rights.
(vi) No consent, approval, authorization or order of any
court or governmental agency or authority or of any third party which
has not been obtained is required in connection with the execution,
delivery and performance by the General Partner of this Agreement.
(vii) The General Partner has furnished the Limited
Partners with a true, correct and complete copy of the A&D Agreement
and related documents.
(viii) All Partnership debts and liabilities have been paid
in full or adequate provision has been made therefor.
(b) Each Limited Partner represents and warrants to the General
Partner as follows:
(i) It is duly organized and validly existing under the
laws of the jurisdiction of its formation.
(ii) It has all requisite power and authority to execute
and deliver this Agreement and to perform its obligations hereunder.
(iii) The execution, delivery and performance of this
Agreement are within its powers and do not (A) contravene or violate
any provisions of its charter or other
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<PAGE> 6
governing documents, as amended to the date hereof, or (B) contravene
or result in any breach of or constitute a default under any
applicable law, rule or regulation or any loan, note or other
agreement or instrument to which it is a party or by which it or any
of its properties are bound.
(iv) When delivered to the General Partner, this Agreement
will be duly and validly executed by such Limited Partner and will be
binding upon it in accordance with the terms hereof, except as limited
by bankruptcy, insolvency or similar law of general application
relating to the enforcement of creditors' rights.
(c) All representations, warranties and covenants made by the
General Partner or the Limited Partners in this Agreement or any other document
contemplated thereby or hereby shall be considered to have been relied upon by
the other parties hereto and shall survive the execution and delivery of this
Agreement or such other document, regardless of any investigation made by or on
behalf of any such party.
SECTION 8. RATIFICATION. The Partnership Agreement, to the
extent amended by this Agreement, is hereby ratified and confirmed.
SECTION 9. COUNTERPARTS. This Agreement shall be executed in
multiple counterparts, with each such counterpart constituting an original, and
all of such counterparts constituting but one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 7
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the day and year first above written.
GENERAL PARTNER:
CLIFFWOOD OIL & GAS CORP.
By: /s/ Frank A. Lodzinski
------------------------------
Frank A. Lodzinski, President
SIGNATURE PAGE--MAY 1998 AGREEMENT IN RESPECT OF AGREEMENT OF LIMITED
PARTNERSHIP OF CLIFFWOOD ACQUISITION - 1996 LIMITED PARTNERSHIP.
<PAGE> 8
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the day and year first above written.
LIMITED PARTNER:
ENERGY CAPITAL INVESTMENT
COMPANY PLC
By: /s/ Gary R. Petersen
--------------------------
Gary R. Petersen, Director
SIGNATURE PAGE--MAY 1998 AGREEMENT IN RESPECT OF AGREEMENT OF LIMITED
PARTNERSHIP OF CLIFFWOOD ACQUISITION - 1996 LIMITED PARTNERSHIP.
<PAGE> 9
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the day and year first above written.
LIMITED PARTNER:
ENCAP EQUITY 1996 LIMITED
PARTNERSHIP
By: ENCAP INVESTMENTS L.C.
By: /s/ Robert L. Zorich
--------------------------
Robert L. Zorich, Managing
Director
SIGNATURE PAGE--MAY 1998 AGREEMENT IN RESPECT OF AGREEMENT OF LIMITED
PARTNERSHIP OF CLIFFWOOD ACQUISITION - 1996 LIMITED PARTNERSHIP.
