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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
Commission file number: 0-12633
TEXOIL, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
NEVADA 88-0177083
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION
OR ORGANIZATION)
110 CYPRESS STATION DRIVE, SUITE 220
HOUSTON, TEXAS 77090-1629
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(281) 537-9920
(ISSUER'S TELEPHONE NUMBER)
SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock, par value $.01 per Boston Stock Exchange
share
Securities registered under section 12(g) of the Exchange Act: Common
Stock, par value $.01 per share.
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. YES [X] NO
[ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $23,704,000.
The aggregate market value of the Common Stock held by non-affiliates of
the registrant was $30,262,235 as of March 15, 2000. On such date, the last
sales price of registrant's Common Stock was $6.6875 per share.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 6,648,920 shares of Common
Stock, $.01 par value, issued and outstanding at March 15, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
None
Transitional Small Business Disclosure Format (check one): YES [X] NO [ ]
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TABLE OF CONTENTS
PART I
PAGE
----
Item 1. Description of Business............................................ 1
Item 2. Description of Property............................................ 7
Glossary........................................................... 11
Item 3. Legal Proceedings.................................................. 13
Item 4. Submission of Matters to a Vote of Security Holders................ 14
PART II
Item 5. Market for Common Equity and Related Stockholder Matters........... 15
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................ 16
Item 7. Financial Statements............................................... 23
Item 8. Changes in Registrant's Accountants................................ 23
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act................ 24
Item 10. Executive Compensation............................................. 25
Item 11. Security Ownership of Certain Beneficial Owners and Management..... 26
Item 12. Certain Relationships and Related Transactions..................... 28
Item 13. Exhibits and Reports on Form 8-K................................... 29
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Texoil, Inc. ("Texoil" or the "Company"), is an independent oil and gas
company engaged in the acquisition and development of oil and gas reserves
through a diversified program which includes purchases of reserves,
re-engineering, development and exploration activities currently focused in
Texas and Louisiana. On December 31, 1997, the Company acquired Cliffwood Oil &
Gas Corp. ("Cliffwood"), a privately-owned independent oil and gas company, in
a reverse merger transaction ("Merger") that shifted stockholder control of
the Company to the former stockholders of Cliffwood, changed the composition of
the Company's Board of Directors and completely replaced the executive officers
and employees of the Company with those of Cliffwood. The Merger resulted in a
significant change in the Company's business strategy and improved the Company's
overall financial position and capital resources. The Company's address is 110
Cypress Station Drive, Suite 220, Houston, Texas, 77090 and the telephone number
is (281) 537-9920.
RECENT DEVELOPMENTS DURING 1999
As more fully discussed below and throughout this Annual Report, during
1999, the Company:
1) Acquired two proved producing fields;
2) Acquired controlling interests in certain previously owned properties;
3) Implemented re-engineering and development projects;
4) Expanded its exploration capabilities;
5) Completed a $22.0 million preferred stock offering;
6) Repaid convertible subordinated notes; and
7) Reduced bank indebtedness.
In addition, the Company realized increases in proved oil and gas reserve
quantities, production, revenues, cash flow and earnings.
ACQUISITIONS AND DEVELOPMENT
During 1999, the Company made a series of acquisitions, implemented
development programs, and expanded its exploration capabilities. The Company
financed its activities through internally generated cash flow, bank debt and
the proceeds from the issuance of preferred stock. In July 1999, the Company
acquired the Hagist Ranch field, located in Duval County, Texas, for
approximately $5.4 million and in November 1999 Texoil acquired the Eloi Bay
field located in St. Bernard Parish, Louisiana for approximately $6.4 million.
In late 1998, Texoil closed a significant acquisition including nine proved oil
and gas fields for $17.1 million. In addition, during 1999, the Company made
several smaller acquisitions which resulted in increased ownership and operating
control in certain previously owned fields. The properties are all located in
South Texas and Louisiana. These acquisitions and related remedial operations,
re-engineering and development activities have produced substantial production
increases in 1999, with resultant increases in proved reserve quantities,
revenues, cash flows and earnings. Refer to "Item 2 -- Description of
Property", for additional information. The properties were acquired as proved
producing reserves with development and exploration potential. Accordingly,
management believes that these properties, along with others in the Company's
portfolio, may provide further opportunities to develop and discover commercial
quantities of oil and gas reserves which will lead to further production
increases.
CONVERTIBLE PREFERRED STOCK OFFERING
In November 1999, the Company closed a private placement of Series A
Convertible Preferred Stock ("Preferred Stock"). Texoil issued 2,750,000
shares of Preferred Stock at $8.00 per share. Each share of Preferred Stock is
convertible into two (2) shares of common stock. Net proceeds have been used to
reduce
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bank indebtedness, repay convertible subordinated notes and for general
corporate purposes. The dividend rate is 9% per annum, payable quarterly. In
accordance with the terms of the Preferred Stock Agreement, at funding, holders
were entitled to elect to receive dividends in additional preferred shares or in
cash. Approximately 82% of such holders elected dividends payable in additional
preferred shares. After December 31, 2001, the Company, in its sole discretion,
may elect to pay dividends in cash rather than in additional preferred shares.
The Preferred Stock may be converted into common stock, at any time at the
election of the holder, but is mandatorily convertible into Class B Common
Stock, after December 31, 2002, based on the achievement of certain net asset
and per share values. There is no difference in the rights of common
stockholders versus Class B Common stockholders, other than the right of Class B
stockholders to elect certain directors. Conversion rates are subject to
anti-dilution adjustments and investors have been granted certain registration
rights and protective convenants. Quantum Energy Partners, L.P. ("Quantum")
was the lead investor and acquired 1,875,000 shares. Quantum was not previously
affiliated with the Company. Other investors include current officers, directors
and shareholders of the Company, who participated on the same basis as
non-affiliated investors.
BANK CREDIT AGREEMENT
During 1999, the Company amended its revolving credit agreement ("Credit
Agreement") with Comerica Bank-Texas and First Union National Bank, which is
available to finance property acquisitions, development activities and temporary
working capital requirements. The Credit Agreement, as amended, provides up to
$50 million in available borrowings limited by a borrowing base (as defined in
the Credit Agreement), which was $45 million and $28 million at December 31,
1999 and 1998, respectively. Outstanding debt under the Credit Agreement
amounted to $22.0 million and $25.5 at December 31, 1999 and 1998, respectively.
The borrowing base is redetermined annually (or more frequently at the option of
the Company) and is reduced over a five-year period. The Credit Agreement
provides for a facility fee of 3/4% of the initial borrowing base and on any
increase thereto; a commitment fee of 1/4% on the available commitment; and
monthly interest payments at the lender's prime rate plus 1/2%. As an
alternative to prime rate based interest, the Company arranged a London
Interbank Offering Rate ("LIBOR") option at 1 3/4% to 2 1/4% over the LIBOR
rate, at differing borrowing levels. The Company has granted first mortgages,
assignments of production, security agreements and other encumbrances on its oil
and gas properties to the lenders, as collateral, for the debt. The Credit
Agreement restricts the payment of dividends, limits the amount of consolidated
debt, limits the Company's ability to make certain loans and investments and
requires that the Company remain in compliance with other covenants. In
connection with the issuance of Preferred Stock, the Company obtained a waiver
of the covenant restricting dividend payments for the fourth quarter of 1999,
and for the year 2000. The Company was in compliance with all other covenants at
December 31, 1999. Management intends to renegotiate the Credit Agreement in
2000, and expects amendments to include an extension of the maturity date, an
increase in the total facility, changes in interest rates and fees, and changes
to dividend payment restrictions, among other amendments.
BUSINESS STRATEGY
The Company's business strategy is to achieve profitable growth through a
program which includes the purchase, re-engineering and development of proved
oil and gas properties as core business activities, along with its exploration
and drilling program. Typically the Company has been able to acquire producing
fields from major and larger independent oil and gas companies and to enhance
production and lower recurring operating costs from such fields through
efficient operating practices and development activities. In addition, the
Company conducts an exploration program on acquired properties and separately
generated prospects in Texas and Louisiana.
During 2000, management intends to place emphasis on purchases of producing
fields, as the industry consolidates and larger companies divest non-core
assets. Management has set a goal of $50.0 million for acquisition and
development activities over the next two years. If management is successful
toward its goal, approximately 65% of its budget will be for purchases of
producing properties, with the remainder allocated to re-engineering and
development activities, pre-drilling exploration costs, and exploratory
drilling.
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Management believes its strategy will result in continued growth and a
significant inventory of development and exploratory projects. The proportion of
the Company's capital expenditure budget expended for each of these activities
could change substantially, depending upon acquisition opportunities available
to the Company and management's assessment of the risk, cost and potential
return. The Company will continue to direct a portion of its capital budget and
personnel to exploration activities by means of retaining direct interests and
selling interests in its prospects to industry participants on a promoted basis.
In addition to its fundamental business strategy, the Company intends to
actively pursue corporate acquisitions or mergers as a means of continued
growth, increasing share value or creating liquidity for its shareholders.
Management believes that the industry will consolidate and that opportunities
may become available to acquire corporate entities, effect business
combinations, or merge with or be acquired by a larger corporation. Management
intends to consider any opportunities which may become available and are
beneficial to shareholders.
CONTROLLING INTERESTS
Texoil's strategy focuses on properties it can operate and control.
Consequently, its working interest ownership of such fields is usually more than
50%. While the conduct of operations and development are governed by joint
operating agreements with non-operating owners, Texoil believes that large
working interests and operating control gives it the ability to directly affect
field performance and development activities. In addition, as operator, Texoil
receives a fee from non-operating partners. The Company also owns interests in
some non-operated properties.
ACQUISITION OF PRODUCING PROPERTIES
As mentioned above, in the near term, management plans to further diversify
the Company's operations by emphasizing the acquisition of proved properties.
Particular emphasis will be placed on currently producing properties where
production can be increased through re-engineering, development and exploration
activities. The successful acquisition of such properties requires an assessment
of recoverable reserves, future oil and natural gas prices, operating costs,
potential environmental liabilities and other factors which are beyond the
Company's direct control.
RE-ENGINEERING ACTIVITIES
A significant part of the Company's capital expenditures are directed
toward re-engineering projects designed to enhance current production, lower
operating costs and potentially increase the economic life and returns
associated with acquired properties. Re-engineering activities may include
recompletions of existing or non-producing horizons in existing well bores,
restoring shut-in or temporarily abandoned wells to production, installation of
artificial lift equipment, revamping production facilities, drilling and
installing salt water disposal facilities and the implementation or improvement
of waterflood or other secondary recovery techniques.
DRILLING ACTIVITIES
The Company expects that it will continue to engage in both development and
exploratory drilling operations. These activities were limited since the Merger,
due to industry conditions. However, the Company has maintained a diversified
inventory of exploratory and development prospects. The current portfolio
includes lower-risk development and exploratory prospects, as well as
exploratory prospects with higher risk, but significantly greater reserve
potential. In the near term, the Company plans to retain a 10% to 25% direct
working interest in each exploration prospect, plus a carried or reversionary
interest, retained as part of prospect sales to industry partners. Direct
participation in exploratory drilling prospects may increase in the future with
increases in available cash flow and capital resources. For development drilling
activities, Texoil's direct participation may be larger and in some cases as
much as 100%. Drilling prospects may result from the technical evaluation of
purchased properties or separate prospects generated internally or through the
Company's joint venture with Bechtel Exploration Company.
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TECHNOLOGY
The Company uses sophisticated engineering, geological and geophysical
technology, including three-dimensional ("3-D") seismic technology, in its
development and exploration activities. Such technology involves the application
of computer workstations and software to gather and process large amounts of
data, which can be used to generate sub-surface interpretations of productive or
prospective reservoirs. Texoil's internal technical staff uses seismic
technology, along with the comprehensive integration of subsurface control,
production and other engineering data, in the conduct of comprehensive field
studies intended to define development and exploration potential. Management
believes such technology is particularly suited to exploration and development
activities in geologically complex areas of Texas and Louisiana.
RESERVE REPLACEMENT AND GROWTH
The Company's future performance depends upon its ability to acquire and
develop or discover additional oil and gas reserves that are economically
recoverable. The Company intends to continue its acquisition, development and
drilling activities and expects to close additional acquisitions and drill or
participate in six to eight new wells in 2000. Without successful acquisition,
development and exploration activities, the Company's reserves will decline.
EMPLOYEES
As of December 31, 1999, the Company had 48 full time employees, of which
23 are management, technical and administrative personnel and 25 are field
employees. Contract personnel operate some of the Company's producing fields
under the direct supervision of Company employees.
FACILITIES
The principal offices are located at 110 Cypress Station Dr., Suite 220,
Houston, Texas 77090, where the Company occupies approximately 12,333 square
feet. The lease provides for gross rent of $180,614 per year and expires on
August 31, 2000. The Company currently expects to renew its office lease upon
expiration.
RISKS RELATING TO THE BUSINESS OF TEXOIL
VOLATILITY OF OIL AND GAS PRICES
The Company's financial condition, operating results, future growth, and
the carrying value of its oil and gas properties are substantially dependent on
prevailing prices of oil and gas. The Company's ability to maintain or increase
its borrowing capacity and to obtain additional capital on attractive terms may
also be significantly influenced by oil and gas prices. Prices for oil and gas
are subject to wide fluctuations in response to the supply of and demand for oil
and gas, market uncertainty and a variety of additional factors beyond the
control of the Company. These factors include:
o The supply and price of foreign oil and gas;
o The actions of the Petroleum Exporting Countries;
o The condition of the United States and world economy;
o Political stability in the Middle East and elsewhere;
o Weather conditions in the United States; and
o Governmental regulation.
Fluctuations in oil and gas prices can also significantly impact the
Company's ability to replace and increase its oil and gas reserves. Volatile oil
and gas prices make it difficult to estimate the value of producing properties
and predict future economic performance. Price volatility can also affect the
carrying value of oil and gas properties in the Company's financial statements.
Refer to "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Oil and Gas Properties", and the "Notes to Consolidated
Financial Statements", for additional discussion related to the impact of oil
and gas prices on such carrying value.
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RECOVERY OF INVESTMENTS
While the acquisition and development of oil and gas properties is based on
engineering, geological and geophysical assessments, such data and analysis is
inexact and inherently uncertain. There can be no assurance that any properties
acquired by the Company will be economically produced or developed. Re-
engineering operations pose the risk that anticipated benefits, which may
include reserve additions, production rate improvements or lower recurring
operating expenses, may not be achieved, or that actual results obtained may not
be sufficient to recover investments. Drilling activities, whether exploratory
or developmental, are subject to mechanical and geological risks, including the
risk that no commercially productive reservoirs will be encountered.
Unsuccessful acquisitions, re-engineering or drilling activities could have a
material adverse effect on the Company.
FINANCING
Texoil has historically used debt financing for acquisitions and certain
development activities. Subsequently, such debt has been reduced by cash flow
and equity financing, including preferred and common equity. To date, the
Company has been able to generate sufficient cash flow to service its debt and
has completed equity fundings, as the Company deemed necessary. Texoil intends
to finance future acquisition and development activities through cash flow,
debt, divestitures of non-strategic assets, various forms of project financing
and additional equity financings. Management believes adequate capital will be
available to facilitate future growth. However, at present the public equity
markets are limited for small oil and gas companies. Private equity, project and
debt financing is available, but is very selective. In addition, management
believes the costs of such capital could increase in the future. The Company
believes that it can service its current levels of debt and preferred equity,
even if commodity prices decrease. However, to the extent that the Company uses
debt financing for future acquisition and development activities, there can be
no assurance that resultant cash flows will be sufficient to service and repay
such debt or that the Company will be able to refinance debt through the
placement of equity securities.
COMPETITION
The Company encounters strong competition from major and independent
companies in acquiring properties for production, operations, exploration and
development. The principal competitive factors in the acquisition of such oil
and gas properties include the staff and data necessary to identify, investigate
and purchase such properties, and the financial resources necessary to acquire
and develop such properties. Many of the Company's competitors have
substantially greater resources than those of the Company.
HEDGING ACTIVITIES
Beginning in early 1999, Texoil entered into certain hedging transactions.
The Company intends to continue such activities through price swaps, cost-less
collars and other similar market-risk sensitive instruments. The Company uses
such instruments for the purpose of reducing its exposure to the volatility of
oil and gas prices, particularly in connection with new acquisitions, and not
for speculative investment purposes. While intended to reduce the effects of oil
and gas price volatility, hedging transactions may limit potential gains earned
by the Company from oil and gas price increases and may expose the Company to
the risk of financial loss in certain circumstances. In a typical hedge
transaction, it is expected that the Company will receive, from the counterparty
to the hedge, payment of the excess of the fixed price specified in the hedge
contract over a floating price based on a market index, multiplied by the volume
of production hedged. Conversely, if the floating price exceeds the fixed price,
the Company would be required to pay the counterparty such price difference
multiplied by the volume of production hedged. Unanticipated reductions in
production could require the Company to make payments even when such payments
are not offset by proceeds from sales of production.
JOINT OPERATIONS WITH OTHERS
The Company owns less than 100% of the working interest in many of its oil
and gas properties. Operations on such properties are likely to be conducted
jointly with other working interest owners, pursuant to a joint operating
agreement, whereby a single working interest owner is designated the operator.
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The Company is the operator of more than 90% of its oil and gas properties. For
properties where the Company owns less than 50% of the working interest,
drilling and operating decisions may not be entirely within the Company's
control. If the Company disagrees with the decision of a majority of working
interest owners, it may be required, among other things, to postpone the
proposed activity, relinquish or farm-out its interest or it may be subject to
certain non-consent penalties, as provided in the applicable operating
agreement.
Under most operating agreements, the operator is given direct and full
control over all operations on the property and is obligated to conduct
operations in a workman-like manner; however, the operator is usually not liable
to the working interest owners for losses sustained or for liabilities incurred,
except those resulting from its own gross negligence or willful misconduct. Each
working interest owner is generally liable for its share of the costs of
development and operation of jointly owned properties. The operator is required
to pay the expenses of development and operation of the property and will
invoice working interest owners for their proportionate share of such costs. In
instances where the Company is a non-operating working interest owner, it may
have a limited ability to exercise control over operations and the associated
costs of such operations.
MARKETING OF PRODUCTION
The Company's oil and gas production is marketed to third parties
consistent with industry practices. Typically, oil is sold at the wellhead at
field posted prices or market indices, plus or minus adjustments for quality and
transportation. Natural gas is usually sold under a contract at a negotiated
price based upon factors normally considered in the industry, such as gas
quality, distance from the well to the pipeline and liquid hydrocarbon content.
CONTINUED GROWTH
Cliffwood, which is the dominant wholly owned subsidiary, commenced
operations in 1996. Cliffwood's rapid growth and that of Texoil since the Merger
may not be indicative of future results. There can be no assurance that the
Company will continue to experience growth in revenues, oil and gas reserves or
production. The Company's rapid growth has placed significant demands on its
management, personnel, operations and financial resources. Any future growth in
oil and gas reserves, production and operations will place significant further
demands on the Company. Texoil's future performance and profitability will
depend in part on its ability to successfully integrate acquired properties into
its operations, develop such properties, hire additional personnel and implement
necessary enhancements to its management systems. Although management has
substantive and successful prior experience, there can be no assurance that
Texoil will continue to be successful in these efforts.
DEPENDENCE ON KEY PERSONNEL
The Company's performance has been and will continue to be highly dependent
on Frank A. Lodzinski, Texoil's Chairman of the Board and Chief Executive
Officer and on certain members of senior management including Jerry M. Crews,
Francis M. Mury and Peggy C. Simpson; all being the founders of Cliffwood and
shareholders of the Company. Loss of the services of any of these individuals,
or other key personnel, could have an adverse effect on the Company's
operations. Texoil does not maintain key-person life insurance on any of its
personnel. In addition, with continued growth, Texoil will face additional
competition for talented personnel. There can be no assurance that Texoil will
be successful in hiring or retaining key personnel.
REGULATION
Operations of the Company are governed by and subject to numerous Federal,
state and local laws and regulations related to drilling, production and
transportation of oil and gas, environmental protection and occupational and
safety matters.
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ENVIRONMENTAL REGULATION
Environmental laws and regulations may: (1) require the acquisition of a
permit before drilling commences; (2) restrict or prohibit the types, quantities
and concentration of substances that can be released into the environment in
connection with drilling and production activities; (3) prohibit or limit
drilling activities on certain lands lying within wetlands or other protected
areas; and (4) impose substantial liabilities for pollution resulting from past
or present drilling and production operations. Moreover, changes in Federal and
state environmental laws and regulations could occur and may result in more
stringent and costly requirements which could have a significant impact on the
operating costs of the Company. The state authorities regulating oil and gas
activities have primary regulatory authority over environmental matters. In
general, under various applicable environmental programs, the Company may be
subject to enforcement action in the form of injunctions, cease and desist
orders and administrative, civil and criminal penalties for violations of
environmental laws. The Company may also be subject to liability from third
parties for civil claims by affected neighbors arising out of a pollution event.
Laws and regulations protecting the environment may, in certain circumstances,
impose strict liability rendering a person liable for environmental damage
without regard to negligence or fault on the part of such person. Such laws and
regulations may expose the Company to liability for the conduct of or conditions
caused by others, or for acts of the Company which were in compliance with all
applicable laws at the time such acts were performed. Management believes that
the Company is in substantial compliance with current applicable environmental
laws and regulations and that continued compliance with existing requirements
will not have a material adverse impact on the Company. Insofar as such laws and
regulations are expanded, amended or reinterpreted, the Company is unable to
predict the future cost or impact of compliance.
OPERATIONAL HAZARDS AND INSURANCE
The Company's operations are subject to all of the risks normally incident
to the production of oil and gas, including blowouts, mechanical failure, oil
spills and fires, each of which could result in severe damage to or destruction
of oil and gas wells, production facilities or other property, or injury to
persons. The energy business is also subject to environmental hazards, such as
oil spills, gas leaks, and ruptures and discharge of toxic substances or gases
that could expose the Company to substantial liability due to pollution and
other environmental damage. The Company maintains insurance coverage considered
to be customary in the industry, either directly or through third party
operators who are contractually obligated to provide insurance coverage. The
Company may not, however, be fully insured against certain of these risks,
either because such insurance is not available or because of high premium costs.
The occurrence of a significant event that is not fully insured against could
have a material adverse effect on the Company's financial position.
ITEM 2. DESCRIPTION OF PROPERTY
Since the Merger, management and the Company's technical staff has
continued to pursue acquisitions of proved properties and development and
exploration activities consistent with its business strategy.
PRODUCING PROPERTIES
From the commencement of significant operations in 1996, the Company has
acquired producing properties with the intent of enhancing production and
lowering operating costs through re-engineering and development. Management
believes further development opportunities and exploration potential exists in
several of the fields. The following table lists fields acquired by the Company,
their location, and approximate working and net revenue interest. All fields are
operated by the Company, unless otherwise indicated.
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OPERATED PROPERTIES
<TABLE>
<CAPTION>
NET
WORKING REVENUE
1996 ACQUISITIONS COUNTY INTEREST INTEREST
--------------- ---------- -----------
<S> <C> <C> <C>
TEXAS
Day Dome................................ Madison 47% 38%
N. E. Madisonville...................... Madison 50% 43%
Fort Stockton........................... Pecos 40% 32%
Goldsmith-Landreth...................... Ector 34% 30%
New Diana............................... Upshur 100% 82%
1997 ACQUISITIONS
TEXAS
Huff-McFaddin........................... Victoria 60% 45%
Magnet Withers.......................... Wharton 60% 50%
Fort Stockton(1)........................ Pecos 20% 16%
Goldsmith-Landreth(1)................... Ector 16% 14%
Loma Alta............................... McMullen 57% 43%
N. E. Madisonville...................... Madison 71% 57%
Fall City............................... Karnes 100% 89%
1998 ACQUISITIONS
TEXAS
Guerra Field............................ Webb & Duvall 51%-99% 39%-69%
Goldsmith-Landreth(1)................... Ector 33% 29%
Fort Stockton(1)........................ Pecos 40% 32%
Huff-McFaddin(1)........................ Victoria 40% 30%
Magnet Withers(1)....................... Wharton 40% 33%
Loma Alta(1)............................ McMullen 38% 30%
DCRC(2)................................. Duval 100% 71%-75%
Laredo.................................. Webb & Zapata 96%-100% 68%-80%
Vaquillas Ranch......................... Webb 39%-40% 31%-32%
Yorktown................................ Dewitt 100% 71%
N. Chocolate Bayou(4)................... Brazoria 49% 35%
S. Picoso............................... Webb 100% 73%
S. Kasper............................... Dewitt 65% 51%
LOUISIANA
Garrison Gas Unit....................... Cameron 75% 50%
North Crowley........................... Acadia 41%-60% 35%-54%
Neale................................... Beauregard 100% 83%
1999 ACQUISITIONS
TEXAS
Hagist Ranch............................ Duvall 100% 75%-87%
Vaquillas Ranch(1)...................... Webb 36%-60% 29%-48%
LOUISIANA
Eloi Bay................................ St. Bernard 100% 71%-88%
Eloi Bay (S.L. 4039).................... St. Bernard 24% 18%
Garrison Gas Unit(1).................... Cameron 25% 16%
</TABLE>
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(1) Incremental interests in previous acquisitions.
(2) Majority of wells are 100%, however, one at 30% W.I., 22.5% NRI.
(3) Table does not include subsequent divestitures.
(4) Non-operated.
In addition to the operated fields listed above, the Company has acquired
interests in non-operated properties located primarily in Texas, Oklahoma and
Louisiana and in small operated properties located in Oklahoma and Mississippi.
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EXPLORATION AND DEVELOPMENT PROSPECTS
The Company's domestic drilling is conducted primarily on prospects located
in South Louisiana, South Texas and along the Texas Gulf Coast. The Company
generates its exploratory and development drilling prospects internally (through
acquisitions or separately) or through a joint venture ("Joint Venture") with
Bechtel Exploration Company ("Bechtel"). Some of the Company's drilling
prospects are not fully leased or optioned but are in various stages of
development and leasing. The Company classifies individual prospects based on
their risk profile. A drilling prospect may be classified as "proved
undeveloped" in accordance with rules of the Society of Petroleum Evaluation
Engineers ("SPEE") and the Securities and Exchange Commission ("SEC"). Such
prospects are referred to as "development prospects" and reserves may be
included in "Oil & Gas Reserves" discussed below. All other drilling prospects
are classified as exploratory prospects. Risks associated with exploratory
drilling range from high risk "wildcat" type activities where little data
exists other than seismic data indicating a structure or trap, to lower risk
prospects where well control, engineering, production and other data exists,
along with seismic data, to indicate the possible presence of hydrocarbons. No
assurances can be given that any drilling prospect will result in commercial
production.
DRILLING ACTIVITIES, RESERVES AND PRODUCTION
The information set forth below reflects the Company's drilling activities,
oil and gas reserves and production as of and for the periods indicated.
DRILLING ACTIVITIES
During 1999 the Company participated in the drilling of one exploratory
well which resulted in a dry hole. The Company did not drill nor participate in
the drilling of any development wells in 1999.
OIL AND GAS RESERVES
Presented below is information related to proved reserves as of December
31, 1999 and 1998. The Company's oil and gas reserves, estimated pre-tax future
net cash flows and related discounted present value at 10% ("PV-10 Value")
were independently estimated by W. D. Von Gonten & Co. in 1999 and by T. J.
Smith & Company, Inc., and W. D. Von Gonten & Co., in 1998.
YEAR ENDED
DECEMBER 31,
---------------------
1999 1998
---------- ---------
Proved developed:
Crude oil (MBbls)............... 11,811 7,341
Natural gas (MMcf).............. 48,337 28,643
Proved undeveloped:
Crude oil (MBbls)............... 1,823 1,872
Natural gas (MMcf).............. 14,617 8,916
Total proved:
Crude oil (MBbls)............... 13,634 9,213
Natural gas (MMcf).............. 62,954 37,559
Estimated pre-tax future net cash
flows ($000's)..................... $ 256,526 $ 77,756
PV-10 Value ($000's)................. $ 152,130 $ 46,191
The net reserve information listed above is an estimate, as of the dates
indicated. Numerous uncertainties are inherent in estimating quantities of
proved reserves. Reserve engineering is a process of estimating underground
accumulations of crude oil and natural gas that cannot be measured in an exact
manner. The accuracy of any reserve estimate is a function of the quality of
available data and of engineering and geological interpretation and subjective
judgment. The quantities of oil and gas that are ultimately recovered,
production rates, realized sales prices, operating costs and the amount and
timing of future development expenditures may all differ from those assumed in
these estimates. Estimates of proved reserves may be modified as a result of
ongoing field studies and are also subject to upward or downward
9
<PAGE>
revision based on future performance, drilling and mechanical considerations,
among numerous other factors. Finally, reserve estimates shown above do not
include certain quantities of proved undeveloped reserves associated with
possible waterflood expansions, because the Company does not presently intend to
commit the requisite capital to such projects.
In accordance with SEC guidelines, estimates of future net revenues from
the Company's properties and the present value thereof are made using oil and
gas sales prices prevailing as of the dates of such estimates. Such prices are
held constant throughout the life of the properties, except where such
guidelines permit alternate treatment, including, in the case of gas contracts,
the use of fixed and determinable contractual price escalations. The average
year-end market prices used in these estimates as of December 31, 1999, were
$23.95 per barrel of oil and $2.28 per thousand cubic feet of gas, which
compares to December 31, 1998 prices of $9.51 per barrel of oil and $2.14 per
thousand cubic feet of gas.
PRODUCTION AND SALES
The following table presents certain information related to oil and gas
production from the Company's interest in its properties, average sales prices
received and average production costs incurred during the two years ended
December 31, 1999 and 1998.
YEAR ENDED
DECEMBER 31,
--------------------
1999 1998
--------- ---------
Production:
Oil (MBbls)..................... 762 518
Gas (MMcf)...................... 4,219 1,468
Total (MBOE).................... 1,465 763
Average Sales Price(1):
Oil (Bbls)...................... $ 16.32 $ 12.29
Gas (Mcf)....................... $ 2.39 $ 1.90
Per BOE......................... $ 15.38 $ 12.04
Production costs per BOE............. $ 4.64 $ 5.71
- ------------
(1) Net of effects of hedging
The Company's production is sold primarily to large petroleum purchasers.
Due to the quality and location of its crude oil production, the Company may
receive a discount or premium from index prices or "posted" prices in the
area. Texoil's gas production is sold primarily to pipelines and/or gas
marketers under short-term contracts at prices which are tied to the "spot"
market for gas sold in the area.
Revenues received (or receivables) from companies comprising more than 10%
of the Company's total sales in each of the last two years are as follows:
YEAR ENDED
DECEMBER 31,
--------------------
1999 1998
--------- ---------
EOTT Energy.......................... 27% 10%
Calumet Lubricants Co................ 14% --
PG&E Texas Industrial................ 10% --
Phillips............................. -- 18%
10
<PAGE>
PRODUCTIVE WELLS AND ACREAGE
The following table summarizes the producing oil and gas wells in which the
Company had a working interest as of December 31, 1999:
<TABLE>
<CAPTION>
OIL WELLS GAS WELLS TOTAL
-------------------- -------------------- --------------------
GROSS(1) NET(2) GROSS(1) NET(2) GROSS NET
--------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Texas................................ 144 138 118 113 262 251
Louisiana............................ 99 79 3 2 102 81
Other................................ 39 36 2 -- 41 36
--- ------- --- ------- --- -------
Total........................... 282 253 123 115 405 368
=== ======= === ======= === =======
</TABLE>
- ------------
(1) Gross wells are the total number of wells in which the Company has a working
interest.
(2) Net wells are the sum of the Company's fractional working interests in the
gross wells.
The following table shows the Company's developed and undeveloped acreage,
as of December 31, 1999.
GROSS NET
--------- ---------
Developed Acreage(1)................. 66,461 51,074
Undeveloped Acreage(2)............... 11,836 6,837
--------- ---------
78,297 57,911
========= =========
- ------------
(1) Developed acreage is comprised of acres pooled with, unitized from, or
assigned to productive wells.
(2) Undeveloped acres are acres on which wells have not been drilled or have not
been completed to a point that could permit the production of commercial
quantities of oil and gas, regardless of whether or not such acreage
contains proved reserves.
TITLE TO PROPERTIES
It is customary in the oil and gas industry to make a limited review of
title to undeveloped oil and gas leases at the time they are acquired. It is
also customary to obtain more extensive title examinations prior to the
commencement of drilling operations on undeveloped leases or prior to the
acquisition of producing oil and gas properties. With respect to the future
acquisition of both undeveloped and proved properties, the Company plans to
conduct title examinations on such properties in a manner consistent with
industry and banking practices. The Company has obtained title opinions, title
reports or otherwise conducted title investigations covering substantially all
of its producing properties and believes it has satisfactory title to such
properties in accordance with standards generally accepted in the oil and gas
industry. The Company's properties are subject to customary royalty interests,
overriding royalty interests, and other burdens which the Company believes do
not materially interfere with the use or affect the value of such properties.
Substantially all of the Company's oil and gas properties are and may continue
to be mortgaged to secure borrowings under bank credit facilities (see Item 6.
"Management's Discussion and Analysis of Financial Condition and Results of
Operation" -- Liquidity and Capital Resources).
GLOSSARY
The terms defined in this section are used throughout this Annual Report or
are specific to the oil and gas industry.
"BARREL OR BBL" refers to 42 U. S. gallons liquid volume and represents
the basic unit for measuring crude oil or other liquid hydrocarbons.
"BOE" refers to one barrel of oil equivalent, which is determined using
the ratio of one barrel of crude oil, condensate or natural gas liquids to six
Mcf (see below) of natural gas so that six thousand cubic feet of natural gas is
referred to as equivalent to one barrel of crude oil, condensate or natural gas
liquids.
"CARRIED INTEREST" or "CARRIED WORKING INTEREST" is a fractional
interest in a lease which is free of all costs of drilling and completing a well
up to a certain point, such as to casing point, through the tanks, or during the
life of the well. The carried party's expenses are paid by the other parties who
own the working
11
<PAGE>
interest in the well. After the point is reached, the carried interest usually
becomes a working interest and shares in the costs.
"DEVELOPMENT WELL" means a well drilled within the proved area of an oil
or gas reservoir to the depth of a stratigraphic horizon indicated to be
productive in an attempt to recover proved undeveloped reserves.
"DRY HOLE" refers to a well that is found to be incapable of producing
either oil or gas in sufficient quantities to justify completion as an oil or
gas well.
"EXPLORATORY WELL" means a well drilled to find and produce oil or gas in
an unproved area, to find a new reservoir in a field previously found to be
productive of oil or gas in another reservoir, or to extend a known reservoir.
"FARM-OUTS" means an agreement whereby the owner of an oil and gas lease
who does not desire to drill agrees to assign the lease, or an interest therein,
to another who does desire to drill on the prospect of which the lease is a
part. The obligation of the lease owner to assign the lease or interest therein
is usually conditioned upon the drilling of one or more wells by the farmee and
the lease owner generally retains some interest in the lease such as an
overriding royalty interest, working interest, production payment, offset
acreage or other type of interest.
"GROSS ACRE" refers to an acre in which a working interest is owned.
"GROSS WELL" refers to a well in which a working interest is owned.
"MCF" refers to one thousand cubic feet of natural gas, expressed, where
gas sales contracts are in effect, in terms of contractual temperature and
pressure bases and, where contracts are nonexistent, at 60F and 14.65 psi.
"MBBLS" means one thousand barrels.
"MBOE" means one thousand barrels of oil equivalent.
"MMCF" means one million cubic feet of natural gas, expressed on the same
basis as a Mcf of gas.
"NET ACRES OR NET WELLS" means the sum of the fractional working
interests owned in gross acres or gross wells.
"NET REVENUE INTEREST" means the percentage of production to which the
owner of a working interest is entitled. For example, the owner of a 100%
working interest in a well burdened only by a landowner's royalty of 20% would
have an 80% net revenue interest in that well.
"OIL" refers to crude oil and condensate.
"OVERRIDING ROYALTY INTEREST" refers to a royalty or percentage of the
gross income from production deducted from the working interest.
"PRODUCTION COSTS" means lease operating expenses and taxes on oil and
natural gas production.
"PROSPECT" means a geographic area believed by the Company to encompass
one or more subsurface features which the Company believes may be productive of
oil or natural gas if drilled. In order for a prospect to be drilled, it is
typically necessary for the operator of the prospect to obtain oil and gas
leases covering the prospect from multiple owners of the mineral interests
underlying the prospect. References in this Annual Report to "prospects" mean
geographic areas of exploratory interest that may be entirely unleased or in
various stages of leasing and should not be understood to imply that all oil and
gas leases necessary for drilling of the prospects are owned by the operator of
the prospect or the Company, as the case may be.
"PROVED DEVELOPED RESERVES" means oil or gas reserves that are expected
to be recovered from the existing wells (including reserves behind pipe).
Improved recovery reserves are considered developed only after the necessary
equipment has been installed, or when the costs to do so are relatively minor.
Proved developed reserves may be subcategorized as producing or non-producing.
"PROVED RESERVES" means oil or gas reserves that can be estimated with
reasonable certainty to be recoverable under current economic conditions.
Current economic conditions include prices and costs
12
<PAGE>
prevailing at the time of the estimate. Proved reserves may be developed or
undeveloped. In general, reserves are considered proved if commercial
producability of the reservoir is supported by actual production, formation
tests and/or other reservoir engineering data.
"PROVED UNDEVELOPED RESERVES" means oil or gas reserves that are expected
to be recovered: (i) from new wells on undrilled acreage, (ii) from deepening
existing wells to a different reservoir, or (iii) where a relatively large
expenditure is required to (a) recomplete an existing well or (b) install
production or transportation facilities for primary or improved recovery
projects.
"RECOMPLETION" refers to the completion of an existing well for
production to a formation that exists behind the casing of the well or certain
procedures which stimulate an existing formation to produce additional
quantities of oil or gas.
"RETAINED INTEREST" is typically an overriding royalty interest or a
working interest that is retained by the party originating a prospect or
project. The working interest may take several forms such as a carried working
interest or other sharing arrangements whereby the originator earns an interest
in production greater than its proportionate cost.
"REVERSIONARY INTEREST" is a retained interest in a well which becomes a
regular working interest at a specific time or event such as that point in time
when the parties who paid for the drilling and completion of the well have
recovered such costs from net production revenues.
"SUBSURFACE CONTROL" refers to the data provided by wells previously
drilled in the area of an exploratory or development prospect. Such existing
subsurface data in the form of logs and cores provide a geologist with a
valuable starting point in generating a prospect and serve to "control" or
limit the geologist's interpretation of the subsurface strata by providing a
factual starting point.
"3-D SEISMIC" means the application of powerful computer workstations and
sophisticated software applied to seismic data acquired from a dense pattern of
shot points to create three-dimensional displays of sub-surface formations.
Extensive arrays of listening devices gather thousands of times more detail than
regular seismic surveys.
"UNDEVELOPED ACREAGE" means lease acreage on which wells have not been
drilled or completed to a point that would permit the production of commercial
quantities of oil and gas regardless of whether such acreage contains proved
reserves.
"WORKING INTEREST" means the operating interest under an oil and gas
lease which gives the owner the right to drill, produce and conduct operating
activities on the property and a share of production, subject to all royalties,
overriding royalties and other burdens and also subject to all costs of
exploration, development and operations and risks associated therewith.
ITEM 3. LEGAL PROCEEDINGS
Texoil is involved in litigation incidental to the conduct of its business,
none of which management believes is, individually or in the aggregate, material
to the Company's consolidated financial condition of results of operations. A
summary of such legal proceedings is as follows:
(1) Cause No. 94-7447-278-06; Earnest H. Cannon, et al v. J. R. Parten, et
al in the 278th Judicial District Court of Madison County, Texas. The
Plaintiffs sued certain former mineral Lessees and an affiliated
pipeline company and subsequently included Cliffwood Production Co.
for breach and cancellation of certain mineral leases, mineral
trespass, surface trespass, trespass damage to the mineral estate,
trespass injury to the surface estate, non-payment of royalty, and to
relinquish rights-of-way. Plaintiff and Cliffwood Production Co.,
which is a wholly-owned subsidiary of Cliffwood Oil & Gas Corp.,
entered into a settlement agreement; however, Plaintiff has not caused
the suit to be dismissed.
There can be no assurance that legal proceedings will be resolved in a
manner favorable to the Company.
13
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company was held on November 8,
1999. The items of business noticed and transacted at the meeting were: (i) to
elect six Directors in three separate groups for staggered terms, or until their
successors are duly elected and qualified; (ii) to consider and vote upon the
issuance of 2,750,000 shares of Series A Convertible Preferred Stock; (iii) to
consider and vote upon Amended and Restated Articles of Incorporation restating
the existing articles and providing amendments to classify the Board of
Directors into Class A Directors and Class B Directors, to amend the
indemnification provisions and to provide for certain other changes to the
Amended and Restated Articles of Incorporation necessary as a result of the
proposed issuance of Series A Convertible Preferred Stock; (iv) to approve the
appointment of Arthur Andersen LLP as independent auditors of the Company for
the year-ending December 31, 1999, and (v) to consider and act upon such other
business as may properly be presented to the meeting or any adjournment thereof.
A total of 6,555,126 shares of the Company's Common Stock, par value $.01 per
share, were issued and outstanding as of October 1, 1999, the record date for
determining the stockholders entitled to notice of, and the number of shares
entitled to vote at the Meeting as a Class. The holders of 6,121,387 shares of
common stock were represented at the Meeting in person or by proxy. These shares
were voted as follows:
<TABLE>
<CAPTION>
TERM WITHHELD/
ENDING FOR AGAINST ABSTAIN
------ ----------- ------- ---------
<S> <C> <C> <C> <C>
ELECTION OF DIRECTORS:
Frank A. Lodzinski................... 2002 6,121,173 -- 214
Jerry M. Crews....................... 2002 6,121,173 -- 214
Michael A. Vlasic.................... 2001 6,121,173 -- 214
T. W. Hoehn, III..................... 2001 6,121,173 -- 214
Robert E. LaJoie..................... 2000 6,121,173 -- 214
Thomas A. Reiser..................... 2000 6,121,173 -- 214
Issuance of Preferred Stock.......... 5,303,908 12,348 805,131
Amendment of Articles of Incorporation 5,259,924 56,499 804,964
Appointment of Auditors.............. 6,120,113 417 857
</TABLE>
14
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The following table lists high and low sales prices for the years 1998,
1999 and for the first quarter of 2000 (through March 15, 2000). Historical
amounts have been adjusted for a reverse stock split, effective June 25, 1999.
The common stock trades publicly in the NASDAQ Small-Cap Market under the symbol
"TXLI" and on the Boston Stock Exchange under the symbol "TXL".
TXLI
-----------
HIGH LOW
---- ---
1998
First Quarter...................... 8 1/4 5 5/8
Second Quarter..................... 7 1/2 5 5/8
Third Quarter...................... 7 1/2 2 7/16
Fourth Quarter..................... 7 7/8 3
1999
First Quarter...................... 6 9/16 3 3/16
Second Quarter..................... 5 1/4 3 3/16
Third Quarter...................... 5 1/2 2 1/2
Fourth Quarter..................... 6 3 7/8
2000
First Quarter...................... 7 1/2 4 1/4
During 1999 the Company's Board of Directors approved certain changes to
the Company's outstanding common shares which resulted in a 1-for-6 reverse
stock split effective on June 25, 1999. In order to reduce the number of
outstanding odd-lots, the reverse split occurred in a two-step process whereby a
1-for-600 reverse split was followed by a 100-for-1 forward split. These
procedures were undertaken to enable the Company to adjust or redeem odd-lots,
which will result in substantial annual administrative cost savings to the
Company. The Company is now authorized to issue 25,000,000 shares of Common
Stock, par value $.01, 10,000,000 shares of Preferred Stock, $.01 par value and
10,000,000 shares of Class B Common Stock, $.01 par value. All share and per
share data reflected throughout this 10-KSB and in the accompanying Consolidated
Financial Statements and Notes to Consolidated Financial Statements have been
retroactively restated to reflect the impact of the reverse stock split. As of
March 15, 2000, the Company's Common Stock was held by approximately 416 holders
of record.
DIVIDEND POLICY
The Company has never paid dividends on its common stock and does not
intend to pay a dividend in the foreseeable future. The payment of future
dividends on common stock, if any, will be reviewed periodically by the
Company's Board of Directors and will depend upon, among other things, the
Company's financial condition, funds available from operations, the amount of
anticipated capital and other expenditures, the Company's future business
prospects and any restrictions imposed by the Company's present or future bank
credit arrangements, subordinated notes or any series of preferred stock.
RECENT SALES OF UNREGISTERED SECURITIES
On November 10, 1999, the Company closed the private placement of Series A
Convertible Preferred Stock with Quantum Energy Partners, L.P. ("Quantum"),
affiliates of EnCap Investments L.L.C. ("EnCap"), the V&C Energy Limited
Partnership ("V&C") and certain other individual investors. Pursuant to the
Stock Purchase Agreement, Texoil issued 2,750,000 shares of Series A Convertible
Preferred Stock ("Preferred Stock") at $8.00 per share, initially convertible
into two (2) shares of common stock. Net proceeds have been used to repay
convertible subordinated notes, reduce bank indebtedness and for other corporate
purposes. The dividend rate is 9% per annum payable in additional shares of
Preferred Stock or in cash. The Preferred Stock may be converted at any time at
the election of the holder and is
15
<PAGE>
automatically convertible, at any time after December 31, 2002, based on the
achievement of certain net asset and per share values. Conversion rates are
subject to anti-dilution adjustments. In addition, investors have been granted
certain registration rights and protective covenants. Quantum was the lead
investor and acquired 1,875,000 shares for $15.0 million. Quantum was not
previously affiliated with the Company. Certain other investors include current
officers, directors or shareholders of the Company, who participated on the same
basis as non-affiliated investors.
Pursuant to the terms of the Merger, the Company issued 4,270,027 shares of
common stock to former Cliffwood shareholders and warrants and options to issue
up 1,533,912 shares of common stock to former Cliffwood warrant and option
holders in exchange for all of the outstanding shares, warrants and options of
Cliffwood. This issuance was made in reliance on Section 4(2) of the Securities
Act of 1933, as amended (the "Securities Act") and Regulations D of the
Securities and Exchange Commission. Such securities were registered for transfer
pursuant to Form S-3, which became effective on July 27, 1999.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements and related Notes thereto, reflected in the
Index to Consolidated Financial Statements commencing on page F-1.
FORWARD-LOOKING INFORMATION
This entire Annual Report on Form 10-KSB, and in particular this "Item 6.
Management's Discussion and Analysis of Financial Condition and Results of
Operations", contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical facts included in this Annual Report and this section
of this report, including, without limitation, statements regarding the
Company's business strategy, plans, objectives, expectations, intent, and
beliefs of management, related to current or future operations are
forward-looking statements. Such statements are based on certain assumptions and
analyses made by management of the Company in light of its experience and its
perception of historical trends, current conditions, expected future
developments and other factors it believes to be appropriate. The
forward-looking statements included in this Annual Report are subject to a
number of material risks and uncertainties including assumptions about the
pricing of oil and gas, assumptions about operating costs, operations continuing
as in the past or as projected by independent or Company engineers, the ability
to generate and take advantage of acquisition opportunities and numerous other
factors. A discussion of important factors that could cause actual results to
differ materially from the Company's expectations are discussed herein under the
captions "Item 1. Description of Business", "Item 2. Description of
Property", and "Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations". Forward-looking statements are not
guarantees of future performance and actual results, developments and business
decisions may differ materially from those envisioned by such forward-looking
statements.
MERGER -- CHANGE IN MANAGEMENT, CONTROL AND BUSINESS STRATEGY
As mentioned elsewhere in this Annual Report, the Company underwent a
substantial change in ownership, management, voting control, assets and business
strategy, as a result of a recapitalization and Merger with Cliffwood in 1997.
For financial reporting purposes, the Merger was accounted for as a reverse
acquisition of Texoil by Cliffwood.
GENERAL
Texoil is an independent oil and gas company engaged in the acquisition and
development of oil and gas reserves through an active and diversified program
which includes purchases of reserves, re-engineering, development and
exploration activities, currently focused in Texas and Louisiana. As further
discussed herein, future growth in assets, earnings, cash flows and share values
are dependent upon the Company's ability to acquire, discover and develop
commercial quantities of oil and gas reserves that can be produced
16
<PAGE>
at a profit and assemble an oil and gas reserve base with a market value
exceeding its acquisition, development and production costs. The price of crude
oil was significantly depressed in 1998 and early 1999. Low prices adversely
affected revenues and net cash flows of most companies in the industry,
particularly those whose assets were concentrated in oil reserves. Furthermore,
reduced cash flows adversely affected the capital budgets of major oil companies
and independents. Texoil reacted promptly to these industry conditions by
concentrating on operating and administrative cost reductions, acquiring
additional producing assets, focusing on prospects which were readily marketable
to industry and undertaking certain other corporate actions intended to offset
the severe effects of such price reductions. Most of these actions already were
an integral part of the Company's fundamental business strategy. As a result of
its business strategy and pro-active reaction to the low price environment, the
Company emerged from the low-price period with significantly increased reserves
and production levels, which have led to increased revenues, cash flows and
earnings. While commodity prices have rebounded, no assurance can be given that
current price levels will be sustained or that such prices will continue to
increase.
Management believes that Texoil's growth during the low-price environment
has improved its standing in the industry relative to its competitors, enhanced
its credibility with sellers and financial institutions, favorably impacted its
access to potential acquisitions, and enhanced its ability to solicit industry
partners for drilling activities. Management further believes that Texoil will
benefit from opportunities to acquire and develop additional reserves. The
Company has identified numerous development and exploratory projects in its
existing property portfolio and has further undertaken detailed field studies
intended to define additional potential, if any. In addition, management
believes the acquisitions market will expand as larger companies divest of
"non-core" properties and smaller companies, which were over-leveraged or not
positioned to withstand the significant price declines, sell assets, are
liquidated or consolidate to satisfy creditors or improve shareholder value.
Finally, with the expansion of corporate budgets, the Company expects to solicit
industry partners for certain high-potential exploratory projects, which had
previously been deferred.
Texoil continues to implement its business strategy and to focus on capital
expenditures that can result in increased production and operating cost
reductions, on a per-unit basis. The current corporate strategy is merely an
expansion and adaptation of the business plan which was conceived and
implemented in 1996, and has resulted in significant growth to date. Following
is a brief outline of management's current plans.
1) Acquire oil and gas properties with significant producing reserves
and development and exploration potential.
2) Undertake comprehensive field studies and implement capital
development programs.
3) Continue the Company's exploration program; solicit industry
partners on a promoted basis.
4) Continue activities directed toward reducing per-unit operating and
general and administrative costs on a long-term sustained basis.
5) Actively pursue corporate acquisitions or mergers as a means of
growth, increasing common share value and liquidity.
6) Increase equity and long-term financing, as necessary, through
available means, whether through direct placement of securities or
in connection with corporate acquisition or merger activities.
Due to Texoil's growth, financial resources and industry conditions, the
Company intends to emphasize acquisition and development activities in the near
term. Acquisition activities will continue to be directed toward proved
properties with development and exploratory potential, particularly those where
seismic data and prospective acreage can be acquired as part of the acquisition.
Management believes the current market is conducive to the acquisition of proved
properties, with seismic data and exploratory acreage, at little or no
incremental cost over proved reserves. The Company will focus on exploratory
projects currently in inventory, and those developed in connection with
acquisitions.
17
<PAGE>
While the impact and success of corporate plans cannot be predicted with
accuracy, management's goal is to replace production and further increase its
reserve base at an acquisition or finding cost that will yield attractive rates
of return and common share appreciation.
In addition to its fundamental business strategy, the Company intends to
actively pursue corporate acquisitions or mergers as a means of continued
growth, increasing share value or creating liquidity for its shareholders.
Management believes that the industry will consolidate and that opportunities
may become available to acquire corporate entities, effect business
combinations, or merge with or be acquired by, a larger corporation. Management
intends to consider any such opportunities which may become available and are
beneficial to shareholders. The primary financial considerations in the
evaluation of any such potential transaction include, but are not limited to:
(1) the ability of small cap oil and gas companies to gain recognition and favor
in the public markets, (2) share appreciation potential, (3) shareholder
liquidity, and (4) capital formation and cost of capital to effect growth.
OIL & GAS PROPERTIES
The Company uses the full-cost method of accounting for its investment in
oil and gas properties. Under the full-cost method, all costs of acquisition,
exploration and development of oil and gas reserves are capitalized separately
for each cost center (generally defined as a country). Capitalized balances are
referred to as the "Full-Cost Pool" and are further classified as evaluated or
unevaluated. Evaluated costs are those where proved reserves have been
determined or where the property has been impaired or abandoned. Such costs are
subject to depletion, depreciation and amortization expense ("DD&A").
Unevaluated costs are not subject to DD&A and generally require additional
geological, geophysical and/or engineering evaluation prior to management's
decision to drill, develop or abandon such properties. When such properties are
evaluated, capitalized costs will be transferred to an evaluated status and
included in the calculation of DD&A. Depletion expense is calculated using the
units of production method based on the ratio of current production to total
proved recoverable oil and natural gas reserves. The units of production are
applied to a cost base which includes net capitalized evaluated costs plus
estimated future development and net projected abandonment costs. Under the
full-cost method, a write-down of oil and gas properties must be charged to
operations if net capitalized costs at the end of each quarterly reporting
period exceed the estimated discounted future net revenues of proved oil and
natural gas reserves, using current oil and gas prices and costs, held constant
over the life of the properties, plus the lower of cost or fair value of
unevaluated properties, both on an after-tax basis (the "full cost ceiling").
Capitalized costs include payroll and related costs of technical personnel
which are directly attributable to the Company's oil and gas acquisition,
exploration and development activities. Amounts capitalized for the years ended
December 31, 1999 and 1998 were $636,000 and $640,000, respectively. The Company
capitalizes interest attributable to oil and natural gas properties which are
not subject to amortization and are in the process of being evaluated. Included
in unevaluated capitalized costs for the years ended December 31, 1999 and 1998,
are interest costs of $421,200 and $395,000, respectively.
At the end of 1999, the Company's full cost ceiling significantly exceeded
its net capitalized costs. Net capitalized costs could exceed the full cost
ceiling in future periods due to downward revisions to estimates of proved
reserve quantities, declines in oil and gas prices, increases in operating
costs, unsuccessful exploration and development activities, impairment of
unevaluated properties or other factors which cannot be reasonably predicted by
the Company. Once recorded, a write-down of oil and gas properties cannot be
reversed at a later date, even if estimated reserve quantities or oil and gas
prices subsequently increase. Management believes that independent reserve
estimates, which represent the basis for calculating limitations on capital
costs, using SEC prescribed guidelines are reasonable, under present operating
conditions and circumstances. However, reserve estimates and forecasts are
inherently imprecise and, therefore, subject to significant future changes.
RECENT PROPERTY ACQUISITIONS
During 1999 the Company purchased two significant proved oil and gas
fields, as well as incremental working interests in previously acquired
properties. Such incremental acquisitions resulted in gaining
18
<PAGE>
operating control in two additional fields. In addition, in late 1998 the
Company purchased nine proved oil and gas fields. The properties were all
acquired as proved producing properties with anticipated future development and
drilling potential. These acquisitions substantially increased production
volumes and estimated quantities of proved gas and oil reserves.
RESULTS OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 1999, COMPARED TO TWELVE MONTHS ENDED
DECEMBER 31, 1998.
The Company recorded a net income of $3,152,000 and net loss of $886,000
for twelve months ended December 31, 1999 and 1998, respectively. The $4.0
million increase in the Company's comparative net income results primarily from
the following factors:
NET AMOUNT CONTRIBUTING
TO INCREASE (DECREASE)
IN NET INCOME
-------------------------
(000'S)
Oil and gas sales.................... $13,343
Lease operating and workover
expenses........................... (2,555)
Production taxes..................... (1,286)
General and administrative
expenses -- net.................... (566)
Depletion, depreciation and
amortization expense ("DD&A")...... (2,017)
Writedown of oil & gas properties.... 1,208
Interest expense -- net.............. (1,500)
Other income -- net.................. 5
Provision for income taxes........... (2,594)
----------
$ 4,038
==========
The following discussion applies to the changes shown above.
The $13.3 million or 145% increase in net oil and gas sales is due to the
increase in production volumes resulting from the acquisition and development of
properties during late 1998 and 1999 and an increase in average realized prices,
as shown in the table presented immediately below.
YEAR ENDED
PERCENT DECEMBER 31,
INCREASE --------------------
(DECREASE) 1999 1998
---------- --------- ---------
Gas Production (MMcf)................ 187% 4,219 1,468
Oil Production (MBbls)............... 47% 762 518
Barrel of oil equivalent (MBOE)...... 92% 1,465 763
Average Price Gas (per Mcf).......... 26% $ 2.39 $ 1.90
Average Price Oil (per Bbl).......... 33% $ 16.32 $ 12.29
Average Price per BOE................ 28% $ 15.38 $ 12.04
Lease operating expenses and workover costs increased $2.6 million or 49%.
On a unit-of-production, barrel of oil equivalent ("BOE") basis, costs were
actually reduced 23%. The dollar increase is a result of the acquisition and
development of oil and gas properties in 1999. On a BOE basis, production
volumes increased 92% over the prior year. Accordingly, lease operating expenses
increased primarily as a result of additional production volumes. Production
taxes increased by $1,286,000 or 240% due to increased production volumes and
revenues.
General and administrative costs increased $566,000 or 39%. The percentage
increase in general and administrative expenses was considerably less than the
increases in production and revenues as a result of both rigorous
cost-containment efforts and production increases. On a BOE basis, general and
administrative expenses actually were reduced by 27% in 1999 over 1998 levels.
The dollar increase is comprised primarily of increases in management, operating
and administrative staffing associated with the Company's
19
<PAGE>
growth. The Company must attract and retain competent management, technical and
administrative personnel to pursue its business strategy and fulfill its
contractual obligations.
The $2.0 million or 71% increase in DD&A expenses is due to the increase in
oil and gas production volumes and capitalized balances subject to DD&A, offset
by increases in estimated recoverable reserves, resulting from the acquisition
and development of gas and oil properties. Gross capitalized costs included in
the Full-Cost Pool and subject to DD&A were $61.4 million and $42.9 million at
December 31, 1999 and 1998, respectively. In addition, estimated future
development and abandonment costs associated with proved undeveloped reserves
totaling $22.7 million and $14.6 million at December 31, 1999 and 1998,
respectively, were included in the DD&A calculations. The ratio of current year
production to total estimated proved reserves (unit of production rate) was 5.8%
in 1999 as compared to 4.9% in the prior year.
No writedown of oil and gas properties was required in 1999 because the
Company's full cost ceiling exceeded net capitalized costs during the entire
year. In the second quarter of 1998 the Company recorded a $1.2 million
write-down of oil and gas properties, pursuant to SEC rules. Although the
full-cost ceiling exceeded net capitalized costs by year-end 1998, this non-cash
charge to expense could not be reversed.
Interest expense increased by $1.5 million primarily due to higher levels
of long-term debt being outstanding for the majority of 1999. Interest expense
was approximately $2.5 million in 1999 and is expected to be approximately $1.7
million in 2000, as the Company has replaced some debt with preferred equity.
The provision for income taxes increased by $2.6 million due to increased
pre-tax income. The Company recorded a net deferred tax asset in 1998 of
$788,000 and a net deferred tax liability of $802,000 in 1999, due to the
recording of additional deferred tax liability and the usage of part of the
Company's net operating loss carryovers during 1999.
IMPACT OF PROPERTY ACQUISITIONS AND DEVELOPMENT
Management presently estimates that production volumes for the year 2000
will approximate 1.1 million Bbls and 4.5 Bcf, representing an increase of 44%
and 7%, respectively, over 1999, exclusive of new acquisitions. These estimates
are predicated on the results of operations for 1999, and reserve reports
prepared by independent third parties. These projected increases are a direct
result of acquisition and development activities. In connection with its
acquisitions, the Company generally implements a capital expenditures program,
which it refers to as "re-engineering activities," designed to increase
production or arrest natural or mechanical production declines, as well as lower
recurring expenses. Thereafter, the Company conducts detailed field studies
designed to isolate development and exploration opportunities, if any. The
Company has identified numerous projects in its existing property portfolio
related to proved behind-pipe and undeveloped reserves and expects to define
additional development and exploratory potential. Net future cash flows could be
favorably affected by additional development and exploratory potential and also
by further price improvement and/or reductions to per-unit operating costs. No
assurance can be given, however, that the Company will be able to successfully
and economically develop additional reserves.
IMPACT OF CHANGING PRICES AND COSTS
Texoil's revenues and the carrying value of its oil and gas properties are
subject to significant change due to changes in oil and gas prices. As
demonstrated historically, prices are volatile and unpredictable. Oil prices
declined appreciably during 1998 and early 1999, but have recently rebounded.
Average realized oil prices of $16.32 per Bbl for the year-ended December 31,
1999, were 33% higher than the comparable period in 1998. Such average realized
prices for the year ended December 31, 1999, were affected by low market prices
in early 1999, and by certain hedging activities (see below). Average prices are
expected to increase in 2000, however, should prices decrease or fail to remain
at levels which will facilitate repayment of debt and reinvestment of cash flow
to replace current production, the Company could experience difficulty in
developing its assets and continuing its growth.
20
<PAGE>
HEDGING ACTIVITIES
The Company implemented a hedging strategy in May of 1999, in direct
response to market conditions. The intent of the hedging strategy was to
"lock-in" profits and cash flows greater than realized during 1998. Management
expects to continue to hedge some portion of production. Management believes its
hedging strategy will result in greater predictability of internally generated
funds, which can be dedicated to capital development projects and corporate
obligations. In general, the Company has entered into fixed price swaps for
portions of its gas production through October 2000, at prices ranging from
$2.16 to $2.63 per MMBtu. Monthly quantities of natural gas hedged range from
120,000 to 150,000 MMBtu. Monthly quantities of oil hedged range from 25,000 to
55,000 Bbls over the period from January 2000 through December 2000, at prices
ranging from $19.23 per Bbl to $23.10 per Bbl. In addition, on March 1, 2000,
the Company entered into a crude oil hedge structured on a costless collar for
25,000 barrels of oil per month for the period from March 2000 through December
2000 with a floor price of $20.50 per barrel and a ceiling price of $30.55 per
barrel. Texoil does not engage in speculative trading activities and does not
hedge all available or anticipated quantities. Texoil's strategy involves the
following factors:
1) Effectively manage cash flow to minimize price volatility and generate
internal funds available for capital development projects and
additional acquisitions.
2) Ensure the Company's ability to fully support its exploration
activities and administrative and debt service obligations.
3) "Lock-in" growth in revenues, cash flows and profits for financial
reporting purposes.
4) Allow certain quantities to float, particularly in months with high
price potential.
Management believes that speculation and trading activities are
inappropriate for the Company, but further believes appropriate management of
realized prices is an integral part of managing its business strategy.
Furthermore, as a growth Company actively pursuing additional acquisitions and
development activities, the Company expects to realize additional production
that may expose the Company to pricing upside.
ADMINISTRATIVE AND OPERATING COSTS
Early in 1998, in an effort to mitigate the adverse effect of low oil
prices, the Company accelerated its efforts to reduce operating and
administrative costs and enhance cash flows. Rather than reduce technical and
other personnel, the Company chose to implement a salary-reduction program and
defer salary increases. With continued growth and price recovery, salaries have
been restored to prior levels and the Company has expanded its office space to
accommodate the personnel needed for additional acquisitions and development
activities. The Company continues to focus clearly on cost-containment measures
that can lower per-unit operating and administrative costs, but still result in
continued growth.
LIQUIDITY AND CAPITAL RESOURCES
The Company expects to finance its future acquisition, development and
exploration activities through cash flow from operating activities, its bank
credit facility, sale of non-strategic assets, various means of corporate and
project finance and possibly through the issuance of additional securities. In
addition, the Company intends to continue to subsidize drilling activities
through the sale of participations to industry partners on a promoted basis,
whereby the Company will earn working interests in reserves and production
21
<PAGE>
greater than its proportionate capital cost. Financing activities in 1999
resulted in a net reduction of debt in the amount of $13.5 million as follows:
DECEMBER 31,
--------------------
1999 1998
--------- ---------
(MILLIONS)
Balances outstanding:
Current portion of long-term
debt........................... $ -- $ 2.6
Long-term debt.................. 22.0 22.9
Convertible subordinated debt... -- 10.0
--------- ---------
$ 22.0 $ 35.5
========= =========
The Company has set a goal of $50.0 million of capital expenditures over
the next two years. Accordingly, it is likely that the Company will incur
additional debt in connection with acquisition activities or corporate
acquisitions or mergers, if any.
CONVERTIBLE PREFERRED STOCK OFFERING
In November 1999, Texoil issued 2,750,000 shares of Series A Convertible
Preferred Stock at $8.00 per share, convertible into two (2) shares of common
stock. Preferred shareholders may elect to convert to common at any time.
Alternatively, such shares are mandatorily convertible, after December 31, 2002,
based on the Company achieving certain net asset and per share values. Net cash
proceeds have been used to reduce bank indebtedness, repay convertible
subordinated notes and for other corporate purposes. The dividend rate is 9% per
annum, payable quarterly. In accordance with the terms of the Preferred Stock
Agreement, at funding, holders were entitled to elect to receive dividends in
additional preferred stock or in cash. Approximately 82% of such holders elected
dividends payable in additional preferred shares. After December 31, 2001, the
Company, in its sole discretion, may elect to pay dividends in cash rather than
in additional preferred shares. In 2000 and 2001, the Company expects to issue
approximately 205,000 and 224,000 shares of preferred stock, respectively. The
cash dividend component is expected to be approximately $356,000 in both 2000
and 2001.
CREDIT FACILITY
At December 31, 1999, the Company had a $45 million borrowing base, with
available borrowing capacity of $23.0 million, in accordance with its revolving
Credit Agreement with its banks. The borrowing base is redetermined at least
annually.
REPAYMENT OF CONVERTIBLE SUBORDINATED NOTES
On December 16, 1999, the Company repaid $10.0 million of Convertible
Subordinated Notes, at their face value, plus accrued interest. No shares of
common stock were issued and no future rights to acquire shares remain
outstanding from such notes.
CASH FLOW FROM OPERATING ACTIVITIES
For the year ended December 31, 1999, the Company's net cash provided by
operating activities was $10.6 million, up $11.1 million from the prior year.
These increases are directly attributable to the increases in production
resulting from acquisitions in late 1998 and 1999, development activities and
the recent increases in oil and gas prices. The Company expects 1999
acquisitions and development activities to significantly increase cash provided
by operating activities in 2000.
CAPITAL EXPENDITURES
The Company's oil and gas capital expenditures net of divestitures, for the
years ended December 31, 1999 and 1998, were $18.5 million and $28.4 million,
respectively. The Company expects that it will incur at least $50 million of
capital expenditures within the next two years.
Capital expenditures for 1999 were financed principally with additional
bank borrowings and the proceeds of the preferred stock offering. In 1999, the
Company closed two acquisitions totaling $11.8 million. In late 1998, the
Company closed an acquisition of nine oil and gas fields for approximately $17.1
million. Other capital expenditures include the acquisition of incremental
interests in fields previously
22
<PAGE>
acquired by the Company, re-engineering and development expenditures, and costs
associated with the acquisition of undeveloped leases.
As a result of the Company's growth and performance, management believes
the Company has emerged from the industry downturn with stronger financial
capabilities and enhanced credibility in the industry. Therefore, management
believes the Company can compete successfully for new acquisition opportunities.
Accordingly, the Company has directed a greater portion of its current efforts
toward corporate and asset acquisitions, which are expected to include both
proved and exploratory assets. Certain exploration and development projects have
been deferred in favor of anticipated industry opportunities. In particular, the
Company has deferred projects which are "held-by-production" in favor of
projects with definitive lease expirations. The Company's business strategy has
always been to shift its emphasis among acquisitions, development and
exploratory activities, consistent with changes in the marketplace.
During 2000, Texoil will incur certain capital expenditures related to its
existing portfolio of properties for re-engineering facilities (surface and
down-hole), restoring shut-in wells to production and recompletions. In
addition, the Company expects to drill certain development wells in existing
fields. The Company also expects to make additional capital expenditures during
2000 to maintain leases and complete the interpretation of 3-D seismic data
associated with certain exploratory and development projects. Texoil will
continue its practice of soliciting partners, on a promoted basis, for higher
risk projects.
Based solely on its existing portfolio of properties and projects, the
Company presently expects to incur the following capital expenditures during
2000 and 2001:
2000 2001
--------- ---------
(MILLIONS)
Development of proved properties:
Re-engineering (1).............. $ 1.7 $ 1.0
Well recompletions.............. 1.0 1.3
Drilling........................ 2.0 5.7
Exploration:
Land, geological &
geophysical.................... .6 .5
Drilling........................ 1.2 1.5
--------- ---------
$ 6.5 $ 10.0
========= =========
- ------------
(1) Includes expenditures associated with facilities, equipment, compression
saltwater disposal and restoring shut-in wells to production.
Management believes projected expenditures will result in increased
production, cash flows and reserve value and will further expose the Company to
potentially significant upside from exploration. Management further believes the
deferral of certain projects will not result in any material losses. Should the
Company be unable to acquire new properties, capital expenditures associated
with existing properties could be increased.
YEAR 2000 COMPLIANCE
The Company reviewed its computer systems and made inquiries with its
financial institutions, suppliers and customers prior to year-end. As of the
date of this report, there have been no business interruptions or disruptions of
financial transactions or information exchanged as a result of the year 2000
rollover.
ITEM 7. FINANCIAL STATEMENTS
See Page F-1 for Index to Consolidated Financial Statements.
ITEM 8. CHANGES IN REGISTRANT'S ACCOUNTANTS
None
23
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below are the names, ages (as of December 31, 1999) and positions
of the directors and executive officers of the Company. At the last annual
meeting, six directors were elected, in three groups of two directors each, for
staggered terms ending in 2000, 2001 and 2002. Such directors serve until their
successors are elected and qualified. In accordance with the terms of the
Preferred Stock Agreement three directors were elected by Preferred
Stockholders. Such directors serve until their successors are elected and
qualified. All executive officers hold office until their successors are elected
and qualified.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- --------------------------------------- --- ----------------------------------------
<S> <C> <C>
Frank A. Lodzinski (1)................. 50 Chairman of the Board, President, Chief
Executive Officer and Director
Jerry M. Crews (1)..................... 49 Executive Vice President, Secretary and
Director
T. W. Hoehn, III (2)................... 49 Director
Robert E. LaJoie (1), (2), (3)......... 74 Director
Thomas Reiser (3)...................... 48 Director
Michael A. Vlasic (1).................. 39 Director
S. Wil VanLoh, Jr. (1), (2), (3) (4)... 29 Director
Toby R. Neugebauer (4)................. 28 Director
Jeffrey A. Jones (4)................... 44 Director
</TABLE>
- ------------
(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Compensation Committee
(4) Elected by Preferred Shareholders
FRANK A. LODZINSKI has been Chairman of the Board, President, Chief
Executive Officer and a Director of the Company since December 31, 1997. He has
been President and a Director of Cliffwood since he founded a predecessor entity
and commenced operations in 1996. From January 1992 to February 1995 he served
as President and a Director of Hampton Resources Corporation, a public
corporation which he co-founded. From February 1995, when Hampton was sold to
Bellwether Exploration Company, to February 1996, he was self-employed and was a
consultant to Bellwether Exploration Company. From 1984 to 1992, Mr. Lodzinski
was engaged in the oil and natural gas business through Energy Resource
Associates, Inc., a closely held Texas corporation which he owned and
controlled. Prior to 1984, he was employed in public accounting with Arthur
Andersen LLP and in various capacities with independent oil and gas companies.
He is a Certified Public Accountant and holds a BSBA degree from Wayne State
University.
JERRY M. CREWS has been an Officer and Director of the Company since
December 31, 1997, and was an Officer and Director of Cliffwood since April
1996. For the preceding 12 years he was an Officer of Citation Oil & Gas Corp.
and was responsible for all production operations. His experience includes
acquisitions, drilling and development operations in most of the producing
basins of the United States. Prior experience was with Conoco and Lear
Petroleum. He is a registered Professional Engineer in the state of Texas and
holds a B.S. in Petroleum Engineering from Texas A&M University.
T. W. HOEHN, III has been a Director of the Company since 1984. He is
President and General Manager of Hoehn Motors, Inc., a multi-line automobile
agency located in Carlsbad, California, where he has been employed since 1975.
He is a graduate of Stanford University.
ROBERT E. LAJOIE has been a Director of the Company since December 31,
1997, and was a Director of Cliffwood since July 1996. Mr. LaJoie retired in
1977 and is a private investor with more than forty years
24
<PAGE>
experience in the oil and natural gas, real estate and food services industries.
He is a graduate of the University of Michigan.
THOMAS A. REISER has been a Director of the Company since December 31,
1997, and was a Director of Cliffwood since April 1996. For more than the past
five years he has served as Chairman and President of Technical Risks, Inc., a
private insurance brokerage firm which he founded. He is a graduate of the
College of William and Mary.
MICHAEL A. VLASIC has been a Director of the Company since December 31,
1997, and was a Director of Cliffwood since July 1996. For more than the past
five years, he has been a principal with Vlasic Investments, L.L.C. He is a
graduate of Brown University.
S. WIL VANLOH, JR. has been a Director of the Company since November 1999.
He is a co-founder and principal of Quantum Energy Partners, L.P. a
Houston-based private equity fund focused on making corporate equity investments
in North American exploration, acquisition and exploitation companies. Mr.
VanLoh is also a director of Windrock Capital, Ltd., an energy investment
banking firm he co-founded in 1994. He is a former investment banker with
Kidder, Peabody & Co. and NCNB/NationsBank. Mr. VanLoh also currently serves on
the board of directors of several private companies engaged in various oil and
gas activities. He is a graduate of Texas Christian University with a degree in
Finance.
TOBY R. NEUGEBAUER has been a Director of the Company since November 1999.
He is a co-founder and principal of Quantum Energy Partners, L.P., and is also a
co-founder and director of Windrock Capital, Ltd. Mr. Neugebauer is a former
investment banker with Kidder, Peabody & Co. and also currently serves on the
board of directors of several private companies engaged in various oil and gas
activities. He holds a Finance degree from New York University.
JEFFREY A. JONES has been a Director of the Company since November 1999. He
is a co-founder and principal of Quantum Energy Partners, L.P., and has been the
lead geologist/geophysicist of the West Texas based energy companies Jones
Company Ltd. and JHJ Exploration, Ltd. since 1978. Mr. Jones is a graduate of
West Texas State University with a degree in Geology.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company under Rule 16a-3(d) during 1999, and Forms 5 and
amendments thereto furnished to the Company with respect to 1998, the Company is
not aware of any director, officer, or beneficial owner of more than 10% of any
class of equity securities of the Company registered pursuant to Section 12 of
the Securities Exchange Act of 1934 that failed to file on a timely basis, as
disclosed in the above forms, reports required by Section 16(a) of the Exchange
Act during such year, except for the following: Robert E. LaJoie, Michael A.
Vlasic and Thomas A. Reiser, all of whom had a late filing.
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table reflects all forms of compensation for the years ended
December 31, 1999 and 1998 for Messrs. Frank A. Lodzinski, Jerry M. Crews and
Francis M. Mury.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------------------
ANNUAL COMPENSATION AWARDS SECURITIES PAYOUTS
---------------------------------------------- ------------ UNDERLYING -------
OTHER ANNUAL RESTRICTED OPTIONS/ LTIP
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION STOCK AWARDS SARS(#) PAYOUTS
- ------------------------------------- --------- --------- --------- ------------ ------------ ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Frank A. Lodzinski................... 1999 $ 94,000 $ 35,000 -- -- -- --
Chairman of the 1998 $ 58,500 -- -- -- -- --
Board and Chief Executive Officer
(1)
Jerry M. Crews....................... 1999 $ 85,500 $ 32,500 -- -- -- --
Executive Vice 1998 $ 77,700 -- -- -- --
President (2)
Francis M. Mury...................... 1999 $ 87,500 $ 27,500 -- -- -- --
Executive Vice 1998 $ 82,950 -- -- -- -- --
President (2)
</TABLE>
ALL OTHER
NAME AND PRINCIPAL POSITION COMPENSATION
- ------------------------------------- ------------
Frank A. Lodzinski................... --
Chairman of the --
Board and Chief Executive Officer
(1)
Jerry M. Crews....................... --
Executive Vice --
President (2)
Francis M. Mury...................... --
Executive Vice --
President (2)
25
<PAGE>
- ------------
(1) As a result of the Merger, Mr. Lodzinski became Chairman of the Board,
President, Chief Executive Officer and Director on December 31, 1997.
(2) As a result of the Merger, Messrs. Crews and Mury became Executive Vice
Presidents on December 31, 1997.
OPTION GRANTS
Prior to the Merger, Cliffwood Oil & Gas Corp., granted options to purchase
shares of Cliffwood Class A Common Stock issued under its 1997 Stock Option Plan
and Non-Employee Director Stock Option Plan. Pursuant to the terms of the
Merger, these options were canceled and replaced by options to purchase Texoil
Common Stock. Therefore, following the Merger, Texoil issued options to purchase
643,670 shares of common stock to former Cliffwood option holders. The following
table sets forth information regarding certain options.
<TABLE>
<CAPTION>
PERCENT OF
TOTAL NUMBER OF
OPTIONS/SARS TEXOIL
GRANTED TO SHARES EXERCISE
EMPLOYEES IN UNDERLYING OR BASE
FISCAL YEAR OPTIONS PRICE
NAME 1999 GRANTED ($/SHARE) EXPIRATION DATE
- ------------------------------------- ------------- ---------- --------- ---------------
<S> <C> <C> <C> <C>
Frank A. Lodzinski................... -- 112,333 $3.12 August 12, 2007
Francis M. Mury...................... -- 101,100 $3.12 August 12, 2007
Jerry M. Crews....................... -- 101,100 $3.12 August 12, 2007
</TABLE>
OPTIONS EXERCISED AND YEAR-END VALUES
The following table sets forth information regarding certain outstanding
options.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/SARS AT OPTIONS/SARS AT
DECEMBER 31, 1999 DECEMBER 31, 1999
-------------------------------- --------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
Frank A. Lodzinski................... 112,333 -- $204,446 $ 0.00
Francis M. Mury...................... 101,100 -- $184,002 $ 0.00
Jerry M. Crews....................... 101,100 -- $184,002 $ 0.00
</TABLE>
EMPLOYMENT AGREEMENT
In connection with the issuance of Series A Convertible Preferred Stock,
Messrs. Lodzinski, Crews, Mury and one other officer entered into employment
agreements with Texoil that generally provide for a competitive base salary and
certain benefits and expense reimbursements consistent with established policies
of the Company. The term of the agreements is to the earliest of (a) the first
date the holders of preferred stock cease to own preferred or conversion shares,
(b) the effective date of any sale transaction (as defined by the preferred
stock agreement) or (c) the resignation or termination of the employee. Should
the employee resign or be terminated, such employee is contractually restricted
from certain activities as provided by non-compete provisions of the employment
agreement.
DIRECTOR COMPENSATION
The Company's policy is to reimburse each director for his actual and
necessary expenses reasonably incurred in connection with attending meetings of
the Board and its committees. All directors have waived expense reimbursements
in 1998 and 1999.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 15, 2000, the number of shares
of the Company's equity securities owned by (i) each person known by the Company
(based on publicly-available filings with the Commission) to be the holder of
more than five percent of its voting securities, (ii) each director and each
executive officer of the Company, whose total annual salary and bonus exceeded
$100,000, and (iii) all of
26
<PAGE>
the Company's directors and executive officers as a group. Unless otherwise
indicated, each holder has sole voting and investment power with respect to the
shares of capital stock owned by such holder.
<TABLE>
<CAPTION>
AMOUNT AND AMOUNT AND
NAME OF BENEFICIAL OWNER NATURE OF PERCENT NATURE OF PERCENT
(ADDRESS INDICATED IF NOT A DIRECTOR BENEFICIAL OF BENEFICIAL OF
OR AN OFFICER) OWNERSHIP CLASS OWNERSHIP CLASS
- ------------------------------------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C>
Frank A. Lodzinski, Director,
President and Chief Executive
Officer............................ 2,442,883(1) 31.60% 456,250 16.13%
Michael A. Vlasic, Director.......... 2,318,633(2) 30.33% 456,250 16.13%
Jerry M. Crews, Director, Executive
Vice President and Secretary....... 393,503(3) 5.82% 6,250 .22%
Robert E. LaJoie, Director........... 174,117(4) 2.61% -- --
T. W. Hoehn, III, Director........... 103,906 1.56% -- --
Thomas A. Reiser, Director........... 89,329(5) 1.34% 6,471 .23%
S. Wil VanLoh, Jr., Director......... 3,882,188(6) 36.86% 1,941,094 68.60%
Toby R. Neugebauer, Director......... 3,882,188(7) 36.86% 1,941,094 68.60%
Jeffrey A. Jones, Director........... 3,882,188(8) 36.86% 1,941,094 68.60%
Francis M. Mury, Executive Vice
President.......................... 211,682(17) 3.14% -- --
All Directors and Executive Officers
as a group (9 persons)............. 7,325,691(18) 61.41% 2,410,065 85.18%
Quantum Energy Partners, L.P. ....... 3,882,188(9) 36.86% 1,941,094 68.60%
777 Walker
2530 Two Shell Plaza
Houston, Texas 77002
RIMCO................................ 804,330(10) 12.10% -- --
200 East Berry Street
Ft. Wayne, Indiana 46802
The Lincoln National Life Insurance
Company............................ 880,413(11) 12.68% -- --
200 East Berry Street
Ft. Wayne, Indiana 46802
First Union Capital Partners,
Inc. .............................. 562,604(12) 8.23% -- --
1001 Fannin, Suite 2255
Houston, Texas 77002
V&C Energy Limited Partnership....... 2,290,550(13) 30.07% 456,250 16.13%
710 Woodward
Bloomfield Hills, Michigan 45304
Vlasic Investments, L.L.C. .......... 2,318,633(14) 30.33% -- --
710 Woodward
Bloomfield Hills, Michigan 45304
Encap Investments, Inc............... 1,204,308(15) 16.26% 388,218 13.72%
1100 Louisiana, Suite No. 3150
Houston, Texas 77002
</TABLE>
- ------------
(1) Includes 1,321,883 shares of Common Stock, 56,167 shares of Common Stock
underlying presently exercisable warrants and 456,250 purchased shares of
Series A Convertible Preferred Stock beneficially owned through V&C Energy
Limited Partnership ("V&C"), of which Energy Resource Associates, Inc.
("ERA"), a Texas corporation owned and controlled by Mr. Lodzinski, is a
general partner. Includes 112,333 shares of Common Stock underlying
presently exercisable options owned by Mr. Lodzinski. Mr. Lodzinski,
through ERA, has sole voting power for all matters associated with
securities held by V&C, except in connection with the disposition of all or
substantially all such securities, which requires the approval of the
limited partner. Mr. Lodzinski has an economic interest in a portion of
such securities.
(2) Includes 1,321,883 shares of Common Stock, 56,167 shares of Common Stock
underlying presently exercisable warrants and 456,250 purchased shares of
Series A Convertible Preferred Stock beneficially owned through V&C Energy
Limited Partnership, of which Vlasic Investments L.L.C. ("Vlasic
Investments") is the limited partner. Mr. Vlasic is the Chief Executive
Manager of Vlasic Investments. Includes 28,083 shares of Common Stock
underlying presently exercisable options assigned by Mr. Vlasic to Vlasic
Investments. Mr. Vlasic, in his capacity as Chief Executive Manager of
Vlasic Investments, has an economic interest in Texoil securities held by
V&C. Mr. Vlasic does not have voting rights associated with such
securities, but has certain approval rights related to the disposition of
such securities.
(3) Includes 101,100 shares of Common Stock owned by Mr. Crews, underlying
presently exercisable options and 6,250 purchased shares of Series A
Convertible Preferred Stock.
(4) Includes 140,417 shares of Common Stock held by Mr. LaJoie, as General
Partner to a family limited partnership, and 33,700 shares of Common Stock
underlying presently exercisable options owned by Mr. LaJoie.
(5) Includes 28,083 shares of Common Stock owned by Mr. Reiser, underlying
presently exercisable options, 6,250 purchased shares of Series A
Convertible Preferred Stock and 221 shares of Series A Convertible
Preferred Stock paid in dividends.
(6) Includes 1,875,000 purchased shares of Series A Convertible Preferred Stock
and 66,094 shares of Series A Convertible Preferred Stock paid in
dividends, beneficially owned through Quantum Energy Partners, L.P. of
which Mr. VanLoh is a co-founder and principal.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
27
<PAGE>
(7) Includes 1,875,000 purchased shares of Series A Convertible Preferred Stock
and 66,094 shares of Series A Convertible Preferred Stock paid in
dividends, beneficially owned through Quantum Energy Partners, L.P. of
which Mr. Neugebauer is a co-founder and principal.
(8) Includes 1,875,000 purchased shares of Series A Convertible Preferred Stock
and 66,094 shares of Series A Convertible Preferred Stock paid in
dividends, beneficially owned through Quantum Energy Partners, L.P. of
which Mr. Jones is a co-founder and principal.
(9) Includes 1,875,000 purchased shares of Series A Convertible Preferred Stock
and 66,094 shares of Series A Convertible Preferred Stock paid in
dividends.
(10) Includes 225,215 shares of Common Stock beneficially owned through RIMCO
Partners, LP; 225,215 shares of Common Stock beneficially owned through
RIMCO Partners, LP II; 96,521 shares of Common Stock beneficially owned
through RIMCO Partners, LP III; and 257,388 shares of Common Stock
beneficially owned through RIMCO Partners, LP IV.
(11) Includes 293,471 shares of Common Stock underlying presently exercisable
warrants.
(12) Includes 188,158 shares of Common Stock, underlying presently exercisable
warrants.
(13) Includes 1,321,883 shares of Common Stock, 56,167 shares of Common Stock
underlying presently exercisable warrants and 456,250 purchased shares of
Series A Convertible Preferred Stock beneficially owned through V&C Energy
Limited Partnership, of which Energy Resource Associates, Inc. ("ERA"), a
Texas corporation owned and controlled by Mr. Lodzinski, is a general
partner. Mr. Vlasic, in his capacity as Chief Executive Manager of Vlasic
Investments, has an economic interest in Texoil securities held by V&C. Mr.
Vlasic does not have voting rights associated with such securities, but has
certain approval rights related to the disposition of such securities.
(14) Includes 1,321,883 shares of Common Stock, 56,167 shares of Common Stock
underlying presently exercisable warrants and 456,250 purchased shares of
Series A Convertible Preferred Stock beneficially owned through V&C Energy
Limited Partnership, of which Vlasic Investments L.L.C. ("Vlasic
Investments") is the limited partner. Mr. Vlasic is the Chief Executive
Manager of Vlasic Investments. Includes 28,083 shares of Common Stock
underlying presently exercisable options assigned by Mr. Vlasic to Vlasic
Investments. Mr. Vlasic, in his capacity as Chief Executive Manager of
Vlasic Investments, has an economic interest in Texoil securities held by
V&C. Mr. Vlasic does not have voting rights associated with such
securities, but has certain approval rights related to the disposition of
such securities.
(15) Includes 320,904 shares of Common Stock and 143,682 purchased shares of
Series A Convertible Preferred Stock and 5,065 shares of Series A
Convertible Preferred Stock paid in dividends, beneficially owned through
EnCap Equity 1996 Limited Partnership, of which EnCap Investments, L.L.C.,
is the general partner. Also includes 106,968 shares of Common Stock and
93,750 purchased shares of Series A Convertible Preferred Stock and 3,304
shares of Series A Convertible Preferred Stock paid in dividends,
beneficially owned through Energy Capital Investment Company PLC, for which
EnCap Investments L.L.C. serves as investment advisor. In addition,
includes 137,568 purchased shares of Series A Convertible Preferred Stock
and 4,849 shares of Series A Convertible Preferred Stock paid in dividends,
beneficially owned through El Paso Capital Investment Company, LLC.
(16) The Series A Preferred Stock is immediately convertible into Common Stock
on a 2-for-1 basis. At any time after December 31, 2002, the Series A
Convertible Preferred Stock is mandatorily convertible into Class B Common
Stock, based on the Company's achievement of certain net asset and per
share values, on a 2-for-1 basis, subject to anti-dilution adjustments.
(17) Includes 101,100 shares of Common Stock owned by Mr. Mury, underlying
presently exercisable options.
(18) Includes only the number of shares held by each executive officer and
director so that shares are not double counted.
The holders of Series A Preferred Stock have certain approval rights
related to: (a) a consolidation or merger of the Corporation with or into any
other business entity in which the holders of the voting securities of the
Corporation outstanding immediately prior to such transaction do not continue to
hold more than fifty percent (50%) of the total voting securities of the
surviving entity outstanding immediately after such transaction, (b) the sale or
other transfer of all or substantially all of the assets of the Corporation, or
(c) the liquidation, dissolution, winding-up or reorganization of the
Corporation.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
As more fully discussed elsewhere in this Annual Report, in November 1999
the Company closed a private placement of Series A Convertible Preferred Stock.
Certain officers, directors and shareholders participated in the offering as
follows:
1) The V&C Energy Limited Partnership ("V&C") purchased 456,250 shares
of the Series A Convertible Preferred Stock. Mr. Frank A. Lodzinski, a
director and Chief Executive Officer of Texoil, is the general partner
of V&C through a wholly-owned Texas corporation. Mr. Michael A. Vlasic,
a director, has interests in V&C through Vlasic Investments, L.L.C.
28
<PAGE>
2) Certain affiliates of EnCap Investments, L.L.C. who are shareholders of
Texoil purchased 375,000 shares of the Series A Convertible Preferred
Stock.
3) Mr. Jerry M. Crews, a director and Executive Vice President, purchased
6,250 shares of the Series A Convertible Preferred Stock.
4) Mr. Thomas A Reiser, a director, purchased 6,250 shares of the Series A
Convertible Preferred Stock.
All investments by related parties were made on the same terms and
conditions as third-party non-affiliated investors.
In May 1998 the Company acquired certain properties from the Cliffwood
Acquisition 1996 Limited Partnership, an affiliated partnership, in which the
Company owned a 10% interest. Proceeds to Limited Partners were $4.5 million
cash and 149,667 shares of common stock.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
3.1 -- Amended and Restated Articles of
Incorporation of Texoil, Inc.
(incorporated by reference to Exhibit
3.1 of Form 8-K/A dated November 15,
1999).
3.2 -- Amended and Restated Bylaws of Texoil,
Inc. (incorporated by reference to
Exhibit 3.2 of Form 8-K/A dated November
15, 1999).
4.1 -- Specimen certificate for shares of
Common Stock, par value $.01 per share
(filed herewith).
4.2 -- Stock Purchase Warrant for 225,000
shares of Cliffwood Common Stock to
EnCap Equity 1996 Limited Partnership
(incorporated by reference to Exhibit
10.26 to Item 13 of Form 10-KSB dated
December 31, 1997).
4.3 -- Stock Purchase Warrant for 75,000 shares
of Cliffwood Common Stock to Energy
Capital Investment Company (incorporated
by reference to Exhibit 10.27 to Item 13
of Form 10-KSB dated December 31, 1997).
4.4 -- Stock Purchase Warrant for 50,000 shares
of Cliffwood Class A Common Stock to V&C
Energy Limited (incorporated by
reference to Exhibit 10.29 to Item 13 of
Form 10-KSB dated December 31, 1997).
4.5 -- Common stock and Warrant Purchase
Agreement between Cliffwood Oil & Gas
Corp., and First Union Capital Partners,
Inc., dated as of May 30, 1997
(incorporated by reference to Exhibit
10.30 to Item 13 of Form 10-KSB dated
December 31, 1997).
4.6 -- Stock Purchase Warrant for 167,500
shares of Cliffwood Class B Common Stock
to First Union Capital Partners, Inc.,
(incorporated by reference to Exhibit
10.31 to Item 13 of Form 10-KSB dated
December 31, 1997).
4.7 -- Registration Rights Agreement dated May
4, 1998, by and among Texoil, Inc.,
EnCap Equity 1996 Limited Partnership
and Energy Capital Investment Company
PLC (incorporated by reference to
Exhibit 2.3 filed with Form 8-K on May
12, 1998).
4.8 -- Common stock and Warrant Purchase
Agreement between Cliffwood Oil & Gas
Corp., and Belleview 1992 Income Fund
L.P. dated as of August 4, 1997 (in-
corporated by reference to Exhibit 10.20
with Form 10-KSB filed on April 8,
1998).
4.9 -- Common stock and Warrant Purchase
Agreement between Cliffwood Oil & Gas
Corp., and First Union Capital Partners,
Inc., dated as of May 30, 1997
(incorporated by reference to Exhibit
10.30 with Form 10-KSB filed on April 8,
1998).
4.10 -- 1994 Stock Option Plan, dated July 25,
1994 (incorporated by reference to
Exhibit 10.5 to Item 13 of Form 10-KSB
dated December 31, 1997).
4.11 -- Non-Qualified Stock Option Agreement,
dated July 26, 1994, between Texoil,
Inc. and Ruben Medrano (incorporated by
reference to Exhibit 10.7 to Item 13 of
Form 10-KSB dated December 31, 1997).
29
<PAGE>
4.12 -- Non-Qualified Stock Option Agreement
dated May 2, 1996, between Texoil, Inc.
and Ruben Medrano (incorporated by
reference to Exhibit 10.20 to Form
10-KSB filed on March 31, 1997).
4.13 -- Non-Qualified Stock Option Agreement
dated June 20, 1996, between Texoil,
Inc. and William F. Seagle (incorporated
by reference to Exhibit 10.21 to Form
10-KSB filed on March 31, 1997).
4.14 -- Stock Purchase Warrant for 13,750 shares
of Cliffwood Class A Common Stock to
Michael J. Foy (incorporated by
reference to Exhibit 10.21 to Item 13 of
Form 10-KSB dated December 31, 1997).
4.15 -- Stock Purchase Warrant for 261,250
shares of Cliffwood Class A Common Stock
to Lincoln National Life Insurance
Company (incorporated by reference to
Exhibit 10.22 to Item 13 of Form 10-KSB
dated December 31, 1997).
4.16 -- Cliffwood Oil & Gas Corp., 1997 Stock
Option Plan (incorporated by reference
to Exhibit 10.34 to Item 13 of Form
10-KSB dated December 31, 1997).
4.17 -- Form of Incentive Stock Option Plan
Agreement (incorporated by reference to
Exhibit 10.35 to Item 13 of Form 10-KSB
dated December 31, 1997).
4.18 -- Cliffwood Oil & Gas Corp., 1997
Non-Employee Director Stock Option Plan
(incorporated by reference to Exhibit
10.36 to Item 13 of Form 10-KSB dated
December 31, 1997).
4.19 -- Form of Non-Employee Director Stock
Option Agreements (incorporated by
reference to Exhibit 10.37 to Item 13 of
Form 10-KSB dated December 31, 1997).
10.1 -- May 1998 Agreement in Respect of
Agreement of Limited Partnership dated
May 4, 1998, by and among Cliffwood Oil
& Gas Corp., EnCap Equity 1996 Limited
Partnership and Energy Capital
Investment Company PLC (incorporated by
reference to Exhibit 2.2 filed with Form
8-K on May 12, 1998).
10.2 -- First Amended and Restated Agreement of
Limited Partnership dated May 4, 1998,
by and among Cliffwood Oil & Gas Corp.,
EnCap Equity 1996 Limited Partnership
and Energy Capital Investment Company
PLC (incorporated by reference to
Exhibit 2.5 filed with Form 8-K on May
12, 1998).
10.3 -- Standard Office Building Lease
Agreement, dated January 14, 1997,
between Radler Enterprises Texas, Inc.,
and Cliffwood Oil & Gas Corp.
(incorporated by reference to Exhibit
10.17 to Item 13 of Form 10-KSB dated
December 31, 1997).
10.4 -- First Amendment of Standard Office
Building Lease Agreement, dated January
14, 1997, between Radler Enterprises
Texas, Inc., and Cliffwood Oil & Gas
Corp. (incorporated by reference to
Exhibit 10.18 to Item 13 of Form 10-KSB
dated December 31, 1997).
10.5 -- Second Amendment to Standard Office
Building Lease Agreement dated January
14, 1997, between Cliffwood Oil & Gas
Corp., and Radler Enterprises (filed
herewith).
10.6 -- Third Amendment to Standard Office
Building Lease Agreement dated January
14, 1997, between Cliffwood Oil & Gas
Corp., and Radler Enterprises Texas,
Inc. (filed herewith).
10.7 -- Fourth Amendment to Standard Office
Building Lease Agreement dated January
14, 1997, between Cliffwood Oil & Gas
Corp., and Radler Enterprises Texas,
Inc. (filed herewith).
10.8 -- Co-Sale Agreement dated May 4, 1998, by
and among Cliffwood Oil & Gas Corp.,
Cliffwood Acquisition 1998 Limited
Partnership, EnCap Equity 1996 Limited
Partnership and Energy Capital
Investment Company PLC (incorporated by
reference to Exhibit 2.6 within Form 8-KP
on May 12, 1998).
10.9 -- Agreement of Limited Partnership for
Cliffwood Acquisition -- 1996 Limited
Partnership, dated September 27, 1996
(incorporated by reference to Exhibit
10.23 to Item 13 of Form 10-KSB dated
December 31, 1997).
10.10 -- Letter Agreement, dated July 21, 1997,
between Cliffwood Oil & Gas Corp., and
Energy Resource Associates, Inc., as
general partner of V&C Energy Limited
Partnership (incorporated by reference
to Exhibit 10.28 to Item 13 of Form
10-KSB dated December 31, 1997).
30
<PAGE>
10.11 -- Agreement by and among Cliffwood
Exploration Company, Cliffwood
Production Co., Bechtel Exploration
Company and Blue Moon Exploration
Company, dated as of June 30, 1997
(incorporated by reference to Exhibit
10.32 to Item 13 of Form 10-KSB dated
December 31, 1997).
10.12 -- Executive Employment Agreement, dated as
of November 10, 1999, by and among
Texoil, Inc. and Frank A. Lodzinski
(filed herewith).
10.13 -- Executive Employment Agreement, dated as
of November 10, 1999, by and among
Texoil, Inc. and Jerry M. Crews (filed
herewith).
10.14 -- Executive Employment Agreement, dated as
of November 10, 1999, by and among
Texoil, Inc. and Francis M. Mury (filed
herewith).
10.15 -- Executive Employment Agreement, dated as
of November 10, 1999, by and among
Texoil, Inc. and Peggy C. Simpson (filed
herewith).
10.16 -- Seventh Amendment to Amended and
Restated Credit Agreement dated as of
June 30, 1999, by and among Cliffwood
Oil & Gas Corp., Cliffwood Energy
Company, Cliffwood Production Co.,
Comerica Bank-Texas, or Agent, et al
(filed herewith).
10.17 -- Eighth Amendment to Amended and Restated
Credit Agreement dated as of July 30,
1999, by and among Cliffwood Oil & Gas
Corp., Cliffwood Energy Company,
Cliffwood Production Co., Comerica
Bank-Texas, or Agent, et al (filed
herewith).
10.18 -- Ninth Amendment to Amended and Restated
Credit Agreement dated as of October 29,
1999, by and among Cliffwood Oil & Gas
Corp., Cliffwood Energy Company,
Cliffwood Production Co., Comerica
Bank-Texas, or Agent, et al (filed
herewith).
10.19 -- Tenth Amendment to Amended and Restated
Credit Agreement dated as of December
29, 1999, by and among Cliffwood Oil &
Gas Corp., Cliffwood Energy Company,
Cliffwood Production Co., Comerica
Bank-Texas, or Agent, et al (filed
herewith).
21.1 -- Following are the Company subsidiaries:
<TABLE>
<CAPTION>
OTHER NAME UNDER WHICH JURISDICTION OF
NAME OF SUBSIDIARY SUBSIDIARY CONDUCTS BUSINESS INCORPORATION/ORGANIZATION
- ------------------------------------- ---------------------------- --------------------------
<S> <C> <C>
Cliffwood Oil & Gas Corp............. None Texas
Cliffwood Production Co.............. None Texas
Cliffwood Exploration
Company............................ None Texas
Cliffwood Acquisition -- 1998 Limited
Partnership........................ None Texas
Cliffwood-Blue Moon Joint Venture,
Inc................................ None Texas
Texoil Company....................... None Tennessee
</TABLE>
27.1 -- Financial Data Schedule (filed
herewith).
(B) REPORTS ON FORM 8-K
-- A report on Form 8-K reporting on the Preferred Stock Purchase
Agreement relating to the issuance of Series A Convertible Stock filed
October 13, 1999.
-- A report on Form 8-K reporting on the revision of certain documents
associated with the Preferred Stock Purchase Agreement filed October
22, 1999.
-- A report on Form 8-K reporting Amended and Restated Articles of
Incorporation and Amended and Restated Bylaws was filed on November 12,
1999.
-- A report on Form 8-K/A reporting Amended and Restated Articles of
Incorporation and Amended and Restated Bylaws was filed on November 15,
1999.
-- A report on Form 8-K reporting the acquisition of producing properties
was filed on November 15, 1999.
31
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TEXOIL, INC.
/s/ FRANK A. LODZINSKI
FRANK A. LODZINSKI
Date: March 27, 2000 PRESIDENT
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
<TABLE>
<C> <S> <C>
SIGNATURE TITLE(S) DATE
- ------------------------------------------------------ ------------------------------------- ---------------
/s/FRANK A. LODZINSKI President, Chief Executive March 27, 2000
FRANK A. LODZINSKI Officer, Chairman of The Board
and Director
/s/JERRY M. CREWS Executive Vice President, March 27, 2000
JERRY M. CREWS Secretary and Director
/s/T. W. HOEHN, III Director March 27, 2000
T. W. HOEHN, III
/s/ROBERT E. LAJOIE Director March 27, 2000
ROBERT E. LAJOIE
/s/THOMAS A. REISER Director March 27, 2000
THOMAS A. REISER
/s/MICHAEL A. VLASIC Director March 27, 2000
MICHAEL A. VLASIC
/s/S. WIL VANLOH, JR. Director March 27, 2000
S. WIL VANLOH, JR.
/s/TOBY R. NEUGEBAUER Director March 27, 2000
TOBY R. NEUGEBAUER
/s/JEFFREY A. JONES Director March 27, 2000
JEFFREY A. JONES
</TABLE>
32
<PAGE>
TEXOIL, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
-----
Report of Independent Public Accountants................................... F-2
Consolidated Balance Sheets as of December 31, 1999 and December 31, 1998.. F-3
Consolidated Statements of Income for the years ended December 31, 1999
and 1998................................................................. F-4
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1999 and 1998............................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1999
and 1998................................................................. F-6
Notes to Consolidated Financial Statements................................. F-7
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Texoil, Inc.:
We have audited the accompanying consolidated balance sheets of Texoil,
Inc. (a Nevada corporation) and subsidiaries as of December 31, 1999 and 1998,
and the related consolidated statements of income, stockholders' equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Texoil,
Inc., and subsidiaries as of December 31, 1999 and 1998, and the results of
their operations and their cash flows for the years then ended, in conformity
with accounting principles generally accepted in the United States.
Arthur Andersen LLP
Houston, Texas
March 3, 2000
F-2
<PAGE>
TEXOIL, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1999 1998
--------- ---------
Assets
Current Assets
Cash and cash equivalents....... $ 1,223 $ 423
Accounts receivable and other... 6,252 4,045
Drilling advances............... -- 368
Other current assets............ 367 74
--------- ---------
Total current assets....... 7,842 4,910
--------- ---------
Property, plant and equipment, at
cost:
Oil and natural gas properties
(full-cost method)
Evaluated properties....... 61,441 43,209
Unevaluated properties..... 5,021 6,479
Office and other equipment...... 883 637
--------- ---------
67,345 50,325
Less -- accumulated depreciation,
depletion and amortization......... (10,119) (5,382)
--------- ---------
Net property, plant and equipment.... 57,226 44,943
--------- ---------
Other assets, net.................... 191 449
Deferred tax asset................... -- 788
--------- ---------
Total assets............... $ 65,259 $ 51,090
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued
liabilities.................... $ 4,967 $ 2,791
Current portion -- long-term
debt........................... -- 2,633
Revenue royalties payable....... 2,798 1,497
--------- ---------
Total current liabilities.. 7,765 6,921
--------- ---------
Long-term debt....................... 22,000 22,867
Convertible subordinated notes....... -- 10,000
Deferred tax liability............... 802 --
Commitments and contingencies (Note
10)................................ -- --
Stockholders' equity:
Series A Preferred Stock -- 9%
cumulative, $.01 par value and
liquidation preference of $8.00
per share, 10,000,000 shares
authorized; 2,778,687
and none issued and
outstanding at December 31,
1999 and 1998, respectively.... 28 --
Common Stock -- $.01 par value;
25,000,000 shares authorized;
6,555,126 issued and
outstanding at December 31,
1999 and 1998, respectively.... 66 66
Class B Common Stock -- $.01 par
value, 10,000,000 shares
authorized and none issued and
outstanding at December 31,
1999 and 1998, respectively.... -- --
Additional paid-in capital........... 31,606 11,116
Retained earnings.................... 2,992 120
--------- ---------
Total stockholders' equity...... 34,692 11,302
--------- ---------
Total liabilities and
stockholders' equity........... $ 65,259 $ 51,090
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
TEXOIL, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1999 1998
------------ ------------
Revenues
Oil and gas sales............... $ 22,533 $ 9,190
Operator and management fees.... 995 890
Interest and other.............. 176 276
------------ ------------
Total revenues............. 23,704 10,356
------------ ------------
Costs and Expenses
Lease operating................. 7,624 5,118
Workover........................ 178 129
Production taxes................ 1,821 535
General and administrative...... 2,000 1,434
Depreciation, depletion and
amortization................... 4,856 2,839
Writedown of oil and gas
properties..................... -- 1,208
Interest, net................... 2,482 982
------------ ------------
Total costs and expenses... 18,961 12,245
------------ ------------
Income (loss) before income taxes.... 4,743 (1,889)
Deferred income tax benefit
(provision)........................ (1,591) 1,003
------------ ------------
Net income (loss).................... 3,152 (886)
Preferred stock dividends............ (280) --
------------ ------------
Net income (loss) available to common
shareholders....................... $ 2,872 $ (886)
============ ============
Basic net income (loss) per share.... $ .44 $ (.14)
============ ============
Basic weighted average shares........ 6,555,126 6,402,162
============ ============
Diluted net income (loss) per
share.............................. $ .41 $ (.14)
============ ============
Diluted weighted average shares...... 7,754,866 6,402,162
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
TEXOIL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
CLASS A SERIES A ADDITIONAL
COMMON STOCK PREFERRED STOCK PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------ ------ ------ ---------- --------- -------
Balance at December 31, 1997......... 6,098 $ 61 -- $-- $ 10,350 $ 1,006 $11,417
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of Shares................... 457 5 -- 766 771
Net Income (loss).................... -- -- -- -- -- (886) (886)
------ ------ ------ ------ ---------- --------- -------
Balance at December 31, 1998......... 6,555 $ 66 -- $-- $ 11,116 120 $11,302
Issuance of Shares................... -- -- 2,750 28 20,260 -- 20,288
Stock Dividends...................... -- -- 29 -- 230 (230) --
Cash Dividends....................... -- -- -- -- -- (50) (50)
Net Income (loss).................... -- -- -- -- -- 3,152 3,152
------ ------ ------ ------ ---------- --------- -------
Balance at December 31, 1999......... 6,555 $ 66 2,779 $ 28 $ 31,606 $ 2,992 $34,692
====== ====== ====== ====== ========== ========= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
TEXOIL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
(IN THOUSANDS)
1999 1998
---------- ----------
Cash flows from operating activities:
Net income (loss).................... $ 3,152 $ (886)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation, depletion and
amortization................... 4,856 2,839
Writedown of oil and gas
properties..................... -- 1,208
Deferred income tax provision
(benefit)...................... 1,591 (1,003)
Accounts receivable and other... (2,207) (601)
Accounts receivable -- related
party.......................... -- 60
Other assets, net............... (155) (307)
Accounts payable and accrued
liabilities.................... 2,068 (1,416)
Revenue royalties payable....... 1,301 (390)
---------- ----------
Net cash provided (used in)
by operating
activities.............. 10,606 (496)
---------- ----------
Cash flows from investing activities:
Additions to oil and gas
properties..................... (18,507) (28,369)
Sales of oil and gas
properties..................... 2,159 --
Office and other equipment...... (246) (213)
---------- ----------
Net cash used in investing
activities.............. (16,594) (28,582)
---------- ----------
Cash flows from financing activities:
Proceeds from issuance of
preferred stock................ 20,288 --
Proceeds from long-term debt and
other.......................... 5,400 25,450
Repayments of long-term debt.... (8,900) (8)
Repayment of subordinated
notes.......................... (10,000) --
---------- ----------
Net cash provided by
financing activities.... 6,788 25,442
---------- ----------
Net increase (decrease) in cash and
cash equivalents................... 800 (3,636)
Cash and cash equivalents --
beginning of period................ 423 4,059
---------- ----------
Cash and cash equivalents -- end of
period............................. $ 1,223 $ 423
========== ==========
Supplemental disclosure of cash flow
information:
Interest paid in cash........... $ 2,920 $ 1,084
========== ==========
Oil and gas properties purchased
by issuance of Common Stock.... $ -- $ 771
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
TEXOIL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
BUSINESS COMBINATION
On December 31, 1997, pursuant to the terms of a definitive plan of merger
("Merger Agreement" or "Merger") and a new financing arrangement, Texoil,
Inc. ("Texoil" or the "Company"), a Nevada corporation, formed a wholly
owned subsidiary, Texoil Acquisition, Inc., which acquired all of the
outstanding common shares of Cliffwood Oil & Gas Corp. ("Cliffwood"), a Texas
corporation. As a result of the Merger, the former stockholders of Cliffwood
acquired 70% of Texoil's outstanding Common Stock and thus voting control.
Accordingly, for financial reporting purposes, the Merger was accounted for as a
reverse acquisition of Texoil by Cliffwood. Because the former Cliffwood
stockholders controlled 70% of the outstanding common stock of Texoil, Cliffwood
is treated as the accounting acquiror, while Texoil is the legal acquiror. The
acquired Texoil assets ("Texoil Net Assets") were recorded at fair value using
the purchase method of accounting, as required by generally accepted accounting
principles. Such assets consisted of cash, oil and gas properties, certain
mineral leases, options and three-dimensional ("3-D") seismic data with a fair
value of approximately $3.1 million.
BASIS OF PRESENTATION
ORGANIZATION: Texoil operates a single business segment involved in the
acquisition, development and production of, and exploration for, crude oil,
natural gas and related products primarily in Texas, Louisiana and Oklahoma. The
accompanying consolidated financial statements include the historical accounts
of Texoil and its wholly-owned subsidiaries, Cliffwood, Cliffwood Production
Co., Cliffwood Exploration Company and Texoil Company as of and for the years
ended December 31, 1999 and 1998.
REVERSE STOCK SPLIT
In June 1999, the Company's Board of Directors approved certain changes to
the Company's outstanding common shares intended to result in approximately a
1-for-6 reverse stock split. In order to reduce the number of outstanding odd
lots, the reverse split occurred in a two-step process whereby a 1-for-600
reverse split was followed by a 100-for-1 forward split. Management believed the
process allowed the Company to: (1) more favorably position its stock price and
number of outstanding shares in the marketplace in relation to its peer group,
(2) adjust or redeem odd-lots, resulting in an administrative cost savings, and
(3) comply with listing requirements. The time period to redeem fractional
shares expired on December 31,1999. The Company is now authorized to issue
25,000,000 shares of common stock, par value $.01, 10,000,000 shares of
preferred stock, $.01 par value and 10,000,000 shares of Class B Common stock,
par value $.01. As of December 31, 1999, 6,555,126 shares of common stock are
issued and outstanding. All issued and outstanding shares and per share data
reflected in the accompanying Consolidated Financial Statements and Notes to
Consolidated Financial Statements have been retroactively restated to reflect
the reverse stock split.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. Intercompany accounts and transactions have
been eliminated.
PRIOR YEAR RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the
current presentation.
F-7
<PAGE>
TEXOIL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consists of all demand deposits and funds
invested in highly liquid instruments with an original maturity of three months
or less.
OIL AND NATURAL GAS PROPERTIES
The Company follows the full-cost method of accounting whereby all costs
associated with property acquisition, exploration and development activities are
capitalized. Included in capitalized costs for 1999 and 1998 are $636,000 and
$640,000, respectively, of payroll and related costs of technical personnel,
which are directly attributable to exploration and development activities. Costs
associated with evaluated properties and estimated future development and
abandonment costs are amortized using the units-of-production method based on
petroleum engineers' estimates of unrecovered proved oil and natural gas
reserves. The costs of unevaluated properties are excluded from amortization
until they are evaluated. Interest is capitalized on oil and natural gas
properties which are not subject to amortization and are in the process of being
evaluated. Included in capitalized costs for 1999 and 1998 are interest costs of
$421,200 and $395,000, respectively. Proceeds from the sale of properties are
accounted for as reductions to capitalized costs unless such sales result in a
significant change in the relationship between capitalized costs and proved
reserves, in which case gain or loss is recognized.
Impairment of capitalized costs of oil and gas properties is assessed for
each cost center, determined on a country-by-country basis. The Company's only
active cost center since inception has been the United States of America. To the
extent that capitalized costs of oil and gas properties, net of accumulated
depletion, depreciation, and amortization and related deferred income taxes,
exceed the discounted future net revenues of estimated proved oil and gas
reserves plus the lower of cost or fair value of unevaluated properties, net of
income tax effects, such excess is charged to operations as an impairment of oil
and gas properties. A write-down of $1.2 million was recorded in the second
quarter of 1998 and is reflected in the 1998 consolidated statement of income.
OFFICE AND OTHER PROPERTY
Acquisitions and improvements of office and other property are capitalized;
maintenance and repairs are expensed. Depreciation deductions are calculated
using the straight-line method over the assets' estimated useful lives of five
years.
F-8
<PAGE>
TEXOIL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NET INCOME (LOSS) PER COMMON SHARE
Basic net income (loss) per common share is computed based on the weighted
average shares of common stock outstanding. Net income (loss) per share
computations to reconcile basic and diluted net income (loss) for the years 1999
and 1998 consist of the following (in thousands except per share data):
YEAR ENDED
DECEMBER 31,
--------------------
1999 1998
--------- ---------
Net income (loss) available for
common................................ $ 2,872 $ (886)
Basic weighted average shares........... 6,555 6,402
Effect of dilutive securities(1):
Warrants........................... 74 --
Options............................ 200 --
Convertible preferred stock........ 926 --
Diluted weighted average shares......... 7,755 6,402
Per common share net income (loss):
Basic.............................. $ .44 $ (.14)
Diluted............................ $ .41 $ (.14)
- ------------
(1) A weighted average year-to-date number of options to purchase 58,332 shares
of common stock were outstanding during 1999 but were not included in the
computation of the diluted per share income from continuing operations
because the options' exercise prices were greater than the average market
price of the common shares. Warrants to purchase 300,000 shares of common
stock expired in May of 1999. A weighted average year-to-date number of
options to purchase 766,631 shares of common stock and warrants to purchase
853,242 shares of common stock were outstanding during 1998, but were not
included in the computation of diluted per share income (loss) from
continuing operations because these options and warrants would result in an
anti-dilutive per share amount.
STOCK-BASED COMPENSATION
The Company accounts for employee stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board (APB) Opinion
No. 25, "Accounting for Stock Issued to Employees." Reference is made to Note
6, "Stock Options, Performance Awards and Stock Warrants", for a summary of
the pro forma effects of SFAS No. 123, "Accounting for Stock Based
Compensation" on the Company's results of operations for 1999 and 1998.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, accounts receivable and
payable and revenue royalties payable are estimated to approximate their fair
values due to the short maturities of these instruments. The Company's long-term
debt obligations bear interest at floating market rates, so carrying amounts and
fair values are approximately the same.
INCOME TAXES
The Company provides for deferred income taxes using the asset and
liability method, under which a deferred income tax liability or asset is
recognized by applying the enacted statutory rates to differences between the
financial reporting basis and the tax basis of assets and liabilities. The
effect on deferred income taxes of a change in tax laws or tax rates is
recognized during the period of enactment.
OTHER COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 130 during 1998, but did not incur any items of other comprehensive income
in 1999 or 1998.
F-9
<PAGE>
TEXOIL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities, if any, at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. Oil and
gas reserve estimates, which are the basis for units-of-production depletion and
limitations on capitalized costs, are inherently imprecise and are expected to
change as future information becomes available.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities." The statement establishes accounting and reporting standards
requiring that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair value. The statement requires
that changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows the gains and losses on derivatives to offset related
results on the hedged item either in the income statement or in the statement of
stockholders' equity, and requires that a company must formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting. The statement is effective for fiscal years beginning after June 15,
2000. The Company is currently evaluating the new standard but has not yet
determined the impact it will have on its financial position and results of
operations.
NOTE 2: UNAUDITED PRO FORMA FINANCIAL INFORMATION
THE SONAT ACQUISITION
On October 30, 1998, the Company closed on a significant acquisition of oil
and gas properties in South Texas and Louisiana from Sonat Exploration Company
("Sonat") at a purchase price of approximately $17.1 million, net of
post-closing adjustments. The acquisition was accounted for using the purchase
method of accounting, with substantially all of the costs being allocated to oil
and gas properties. The activities of the acquired Sonat properties were
included in results of operations beginning November 1, 1998.
Selected unaudited results of operations on a pro forma basis giving effect
to the acquisition as if it took place on January 1, 1998, are as follows (in
thousands, except per share data):
YEAR ENDED
DECEMBER 31, 1998
-----------------
Revenues............................. $20,093
=================
Net income........................... $ 871
=================
Basic income per share............... $ .14
=================
Basic weighted average shares
outstanding........................ $ 6,402
=================
Diluted income per share............. $ .12
=================
Diluted weighted average shares
outstanding........................ 7,006
=================
Adjustments reflected in the historical results to estimate the above pro
forma results of operations for the year-ended December 31, 1998, include
adjustments to (1) increase operator fees pursuant to operating agreements
associated with acquired properties, (2) recalculate depreciation, depletion and
amortization based upon combined historical production, reserves and cost basis,
(3) reflect interest expense for
F-10
<PAGE>
TEXOIL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
borrowings under the increased and amended credit facility at an estimated
average annual interest rate of 8% and (4) adjust income tax expense as a result
of the acquisition. The unaudited pro forma amounts do not purport to represent
what the results of operations would have been had the acquisition of the Sonat
properties occurred on such date, or to project the Company's results of
operations for any future period.
NOTE 3: CREDIT AGREEMENT
The Company is a party to a revolving credit agreement ("Credit
Agreement") with certain banks to finance property acquisitions and for
temporary working capital requirements. The Credit Agreement, as amended,
provides up to $50 million in available borrowings limited by a borrowing base
(as defined in the Credit Agreement) which was $45 million and $28 million at
December 31, 1999 and 1998, respectively. As of December 31, 1999 and 1998,
borrowings outstanding under the Credit Agreement were $22.0 million and $25.5
million, respectively. The borrowing base is redetermined annually by the bank
pursuant to the Credit Agreement (or more frequently at the option of the
Company) and is reduced over a five-year period on a straight-line basis.
The Credit Agreement provides for a facility fee of 3/4% of the initial
borrowing base and on any increases thereto; a quarterly commitment fee of 1/4%
on the available commitment; and monthly interest payments at the lender's prime
rate plus 1/2%. As part of amendments to the Credit Agreement, the Company
arranged a London Interbank Offering Rate ("LIBOR") option at 1 3/4-2 1/4%
over the LIBOR rate, at differing borrowing levels.
The average interest rate paid to the lender was 7.8% in 1999 and 8.0% in
1998. The Company has granted first mortgages, assignments of production,
security agreements and other encumbrances on its oil and gas properties to the
lender, as collateral, pursuant to the Credit Agreement.
Under the terms of the Credit Agreement, up to $500,000 is available under
the borrowing base for the issuance of letters of credit. At December 31, 1999
and 1998, $47,086 and $115,455, respectively, was reserved for the issuance of
letters of credit. Estimated maturities of long-term debt, assuming the present
borrowing base is unchanged, as of December 31, 1999, are $0 million in 2000 and
$22.0 million in 2001.
The Credit Agreement contains convenants which, among other things,
restrict the payment of dividends, limit the amount of consolidated debt, limit
the Company's ability to make certain loans and investments, and require that
the Company remain in compliance with other convenants of the Credit Agreement.
In connection with the issuance of Preferred Stock, the Company obtained a
waiver of the covenant restricting dividend payments for the fourth quarter of
1999, and for the year 2000. The Company was in compliance with all other
covenants at December 31, 1999. Management intends to renegotiate the Credit
Agreement in 2000 and expects amendments to include an extension of the maturity
date, an increase in the total facility, changes in interest rates and fees, and
changes to dividend payment restrictions, among other adjustments.
NOTE 4: CONVERTIBLE SUBORDINATED NOTES
On December 31, 1997, the Company entered into a Note Purchase Agreement
(the "RIMCO Agreement") with four limited partnerships of which Resource
Investors Management Company ("RIMCO") is the controlling general partner (the
"RIMCO Lenders"). Under the RIMCO Agreement, the RIMCO Lenders agreed to
provide $10 million in financing, and Texoil issued 7.875% Convertible
Subordinated General Obligation Notes due December 31, 1999. The convertible
notes plus accrued interest were repaid in full on December 16, 1999.
NOTE 5: ISSUANCE OF PREFERRED STOCK
In November 1999, Quantum Energy Partners L.P., V&C Energy Limited
Partnership ("V&C"), EnCap Equity 1996 Limited Partnership ("EnCap"), Energy
Capital Investment Company PLC ("Energy
F-11
<PAGE>
TEXOIL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Capital"), and certain other individuals (all collectively referred to as
"Investors") entered into a Preferred Stock Purchase Agreement ("Agreement")
with Texoil to purchase 2,750,000 shares of Series A Convertible Preferred Stock
("Series A Preferred Stock") at a purchase price of $8.00 per share. Net
proceeds from the issuance were $20.3 million. The transaction was approved by
Texoil shareholders at the Company's Annual Meeting on November 8, 1999, and the
financing closed shortly thereafter. The Series A Preferred Stock is convertible
into Common Stock on a two-for-one basis at any time at the Investor's option.
Furthermore, the Series A Preferred Stock is mandatorily convertible into Class
B Common Stock on a two-for-one basis, after December 31, 2002, if the Company
exceeds certain net asset and per share values. Common Stock and Class B Common
Stock are identical in all rights, except that Class B Common stockholders have
the right to elect certain directors. The Series A Preferred Stock votes as a
separate class on all matters as required by Nevada law and on certain matters
as set forth in the Certificate of Designation, and will vote according to the
number of shares of Common Stock into which it will convert. The net proceeds
from the sale of the Series A Preferred Stock have been applied to the repayment
of outstanding indebtedness of the Company, including the redemption of the
$10,000,000 convertible notes held by RIMCO.
Holders of the Series A Preferred Stock are entitled to receive dividends,
at a rate of 9% per annum, payable quarterly. In accordance with the terms of
the Preferred Stock Agreement, at funding, holders were entitled to elect to
receive dividends in additional preferred shares or in cash. Approximately 82%
of such holders elected dividends payable in additional preferred shares. After
December 31, 2001, the Company, in its sole discretion, may elect to pay
dividends in cash rather than in additional preferred shares. Preferred Stock
issued as dividends will be computed as the number of shares required to achieve
a 9% per annum dividend, based on a contractually specified price of $8.00 per
share. Such Preferred Stock dividends will be recorded at their fair value when
issued, which could vary from the contractually specified price of $8.00 per
share. In 2000 and 2001, the Company expects to issue approximately 205,000 and
224,000 shares of preferred stock, respectively. The cash dividend component is
expected to be approximately $356,000 in both 2000 and 2001. The Company has
also granted certain registration rights to holders of Series A Preferred Stock.
NOTE 6: STOCK OPTIONS, PERFORMANCE AWARDS AND STOCK WARRANTS
Pursuant to the terms and conditions of the Merger, the Company assumed
obligations associated with Cliffwood's 1997 Stock Option Plan and for
outstanding warrants to purchase common stock, based on the same exchange ratio
as Texoil shares were issued for Cliffwood shares. Accordingly, the disclosures
set forth below for Cliffwood, performance awards, options and warrants are
converted to post-merger amounts outstanding and further adjusted for the net
1-for-6 reverse stock split which occurred in 1999.
F-12
<PAGE>
TEXOIL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STOCK OPTIONS AND PERFORMANCE AWARDS
In 1997, Cliffwood adopted an Incentive Stock Option Plan and a
Non-employee Director Stock Option Plan. During 1997, pursuant to these plans,
the Cliffwood Board granted to certain employees and non-employee directors of
Cliffwood options for 503,253 and 140,417 shares of common stock, respectively.
All such options granted have an exercise price of $3.12 per share. The
following summarizes information with regard to the Cliffwood stock option plan
for the years ended December 31, 1999 and 1998 (shares in thousands):
<TABLE>
<CAPTION>
1999 1998
-------------------- --------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Outstanding at beginning of year........ 644 $ 3.12 644 $ 3.12
Granted................................. -- -- -- --
Exercised............................... -- -- -- --
Forfeited............................... -- -- -- --
-------- -------- -------- --------
Outstanding at end of year.............. 644 $ 3.12 644 $ 3.12
======== ======== ======== ========
</TABLE>
The following table summarizes information for the options outstanding at
December 1999 (shares in thousands):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------- OPTIONS EXERCISABLE
WEIGHTED ----------------------
NUMBER OF AVERAGE WEIGHTED NUMBER OF WEIGHTED
OPTIONS REMAINING AVERAGE OPTIONS AVERAGE
OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
RANGE OF EXERCISE PRICES AT 12/31/99 LIFE IN YEARS PRICE AT 12/31/99 PRICE
- ---------------------------------------- ----------- ------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$3.12................................... 644 6.6 $ 3.12 644 $ 3.12
</TABLE>
During 1997, the Cliffwood Board granted certain employees 30,330 shares of
Class A Common Stock as performance awards to be earned over a three-year period
beginning January 1, 1997. The shares were issued in 1998, subject to agreements
with such employees whereby any unearned shares will be surrendered if the
employee resigns or is terminated on or before January 1, 2000. The Company has
recognized approximately $93,000 of compensation expense related to these
awards, $31,000 of which was recognized in each of 1999 and 1998.
Had compensation costs for the Company's stock-based compensation plans
been determined based on the fair value at the grant dates for awards under
those plans, consistent with the optional accounting method prescribed by SFAS
No. 123, "Accounting for Stock-Based Compensation", the Company's net income
(loss) and earnings (loss) per share would have been reduced to the pro forma
amounts indicated below (in thousands, except per share data):
1999 1998
--------- ---------
Net income (loss)....................... As reported $ 3,152 $ (886)
Pro Forma $ 3,036 $ (1,002)
Basic earnings (loss) per share......... As reported $ .44 $ (.14)
Pro Forma $ .42 $ (.16)
Diluted earnings (loss) per share....... As reported $ .41 $ (.14)
Pro Forma $ .39 $ (.16)
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions for
1997: risk-free interest rates ranging from 5.9% to 6.1%; dividend yield of 0%;
0% stock price volatility due to the non-public status of the Company during
1997;
F-13
<PAGE>
TEXOIL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and an expected option life of three years. The weighted-average fair value of
options granted during 1997 was $3.24 per option, for options granted at fair
market value. Since in 1998 or 1999 no new options were issued, no additional
Black-Scholes model was necessary.
STOCK WARRANTS
Cliffwood issued warrants to purchase common stock in connection with
certain financing activities and purchases of assets consummated in 1997. The
table set forth below lists such warrants. All warrants issued and outstanding
expire five years after the date of issuance.
ISSUED EXERCISE DATE OF
WARRANTS PRICE ISSUANCE
-------- -------- ---------
First Union Capital Markets, Inc..... 188,158 $ 3.78 06/01/97
Lincoln National Life Insurance Co... 293,47l $ 3.78 08/04/97
V & C Energy Limited Partnership..... 56,167 $ 4.02 08/05/97
Michael J. Foy....................... 15,446 $ 3.78 08/04/97
NOTE 7: INCOME TAXES
The following table shows the components of the Company's income tax
provision (benefit) (in thousands):
YEAR ENDED
DECEMBER 31,
--------------------
1999 1998
--------- ---------
Deferred:
Federal......................... $ 1,473 $ (929)
State........................... 118 (74)
--------- ---------
$ 1,591 $ (1,003)
========= =========
A reconciliation of taxes computed at the corporate federal income tax rate
to the reported income tax provision (benefit) is as follows (in thousands):
YEAR ENDED
DECEMBER 31,
--------------------
1999 1998
--------- ---------
Statutory Federal income tax
provision (benefit)................ $ 1,660 $ (654)
State income tax provision
(benefit).......................... 133 (54)
Change in deferred tax asset
valuation allowance................ -- (295)
Statutory depletion in excess of tax
basis.............................. (202) --
--------- ---------
Income taxes as reported............. $ 1,591 $ (1,003)
========= =========
F-14
<PAGE>
TEXOIL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table shows the components of the Company's net deferred tax
asset or liability (in thousands):
AS OF
DECEMBER 31,
--------------------
1999 1998
--------- ---------
Deferred tax liabilities:
Net oil and gas property costs
expensed for tax, but
capitalized for financial
statements.................... 4,014 1,385
--------- ---------
Deferred tax liability..... 4,014 1,385
--------- ---------
Deferred tax asset:
Net operating loss
carryforward.................. 5,226 4,389
Credit carryforwards............ 59 59
Statutory depletion
carryforwards................. 1,270 1,068
Valuation allowance............. (3,343) (3,343)
--------- ---------
Deferred tax asset......... 3,212 2,173
--------- ---------
Net deferred tax asset
(liability)................... $ (802) $ 788
========= =========
Section 382 of the Internal Revenue Code of 1986 (Section 382), as amended,
limits the availability of the Net Operating Loss ("NOL") and Investment Tax
Credit ("ITC") carryforwards if there is a change of ownership of more than
50% of the Company within a retroactive three-year period. Due to the Merger
Agreement and change in ownership, the Company will be limited in its future
utilization of certain NOL and ITC carryforwards to an amount equal to the
product of the federal long-term tax-exempt bond rate prescribed by the Internal
Revenue Service and the fair market value of the Company immediately prior to
the time of the ownership change. Therefore, the Company has recorded a
valuation allowance against its deferred tax assets to reflect the estimated
portion which management considers, more likely than not, will not be realized.
The related determination of future income tax benefits associated with
deferred tax assets, for which management believes realization is more likely
than not, included projections of: (1) future taxable income and expense items,
including those whose timing and income tax treatment are within the control of
the Company, (2) cash flows from proved oil and gas properties based on
independently prepared reserve reports (including the effects of the recent
Sonat properties acquisition), (3) expiration periods and the effects of
Internal Revenue Service Section 382 and separate return limitations which apply
to portions of the net operating loss carryforwards acquired in the Merger, (4)
statutory depletion and investment tax credit carryforwards and (5) other
factors deemed by management to be relevant. This determination could be changed
in future periods as economic conditions (primarily oil and gas sales prices)
change, or the Company's financial and income tax basis and carryforward
positions change.
At December 31, 1999, the Company's NOL, statutory depletion, and tax
credit carryforwards were approximately $13.9 million, $3.4 million, and $59,
respectively, of which the NOL's begin to expire in 2000.
NOTE 8: HEDGING ACTIVITIES
OIL AND GAS PRICES
The Company has entered into various oil and gas hedging contracts in an
effort to manage its exposure to product price volatility. Under these
contracts, the Company receives or makes payments based on a differential
between fixed and variable prices for crude oil and natural gas. Such amounts
are reflected in oil and gas sales in the accompanying financial statements.
Amounts received or paid under such hedging
F-15
<PAGE>
TEXOIL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and financial instrument contracts decreased oil and gas sales by $1,429,000 for
the year-ended December 31, 1999. There were no hedging activities in 1998. The
oil and gas hedging contracts in place as of December 31, 1999, had a market
value of ($1,207,776). For the year-ended December 31, 1999, the Company sold
900,000 MMBtu at a fixed price of $2.17 per MMBtu and 380,000 MMBtu at an
average fixed price of $3.158 per MMBtu under two natural gas swap agreements.
In addition to these amounts, the Company has various fixed price swap contracts
for January 2000 through October 2000 covering 1,470,000 MMBtu of natural gas at
a per-unit average price of $2.42 based on Houston Ship Channel index pricing.
For the year-ended December 31, 1999, the Company sold 380,000 Bbls at prices
ranging from $17.02 to $23.73 per barrel. The Company also has fixed price swaps
covering 450,000 Bbls of oil at prices averaging $20.42 per Bbl for the period
of January 2000 through November 2000.
INTEREST RATES
The Company entered into an interest rate swap effective November 5, 1998,
which fixed the floating portion of its interest rate at 5.25% on $12,000,000
notional amount for the period from November 5, 1998 through November 6, 2000.
For the year-ended December 31, 1999, the Company paid $2,006 pursuant to this
swap which has been recorded as additional interest expense. The market value of
the interest rate swap contract in place as of December 31, 1999, was $101,577.
NOTE 9: CONCENTRATIONS OF THE CREDIT RISK
Credit risk represents the accounting loss which the Company would record
if its customers failed to perform pursuant to the contractual terms. The
Company's two largest customers are large multinational companies. In addition,
the Company transacts business with independent oil producers, crude oil trading
companies and a variety of other entities. The Company's credit policy and the
relatively short duration of receivables mitigate the risk of uncollected
receivables.
Accounts receivable for oil and natural gas sales from two and five
customers amounted to 51% and 51% of the outstanding balance at December 31,
1999 and 1998, respectively. Sales to three customers accounted for 51% of oil
and natural gas revenues for 1999, and sales to two customers accounted for 28%
of oil and natural gas revenues for 1998. No other purchaser of the Company's
products accounted for as much as 10% of total sales during 1999 and 1998.
NOTE 10: COMMITMENTS AND CONTINGENCIES
COMMITMENTS
Minimum future lease commitments in connection with office space and
equipment leased by the Company are: $114,838 in 2000 and zero thereafter.
Rental payments made under the terms of current agreements totaled $127,823 and
$72,165 in 1999 and 1998, respectively. The Company has entered into various
commitments and operating agreements related to substantially all of its oil and
natural gas properties. It is management's belief that such commitments will be
met without a significant adverse impact on the Company's financial position or
results of operations.
CONTINGENCIES
No significant legal proceedings are pending which are expected to have a
material adverse effect on the Company. The Company is unaware of any potential
claims or lawsuits involving environmental, operating or corporate matters which
are expected to have a material adverse effect on the Company's financial
position or results of operations.
F-16
<PAGE>
TEXOIL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11: RELATED-PARTY TRANSACTIONS
INVESTMENT IN PREFERRED STOCK
As more fully discussed in Note 5 to the Consolidated Financial Statements,
the Company closed a private placement of Series A Convertible Preferred Stock
during 1999. Certain officers, directors and shareholders participated in the
offering as follows:
1) The V&C Energy Limited Partnership ("V&C") purchased 456,250
shares of Series A convertible Preferred Stock. Mr. Frank A.
Lodzinski, a director and Chief Executive Officer of Texoil, is
the general partner of V&C through a wholly-owned Texas
corporation. Mr. Michael A. Vlasic, a director, has interests in
V&C through Vlasic Investments, L.L.C.
2) Certain affiliates of EnCap Investments, L.L.C. who are
shareholders of Texoil purchased 375,000 shares of the Series A
Convertible Preferred Stock.
3) Mr. Jerry M. Crews, a director and Executive Vice President
purchased 6,250 shares of the Series A Convertible Preferred
Stock.
4) Mr. Thomas A. Reiser, a director, purchased 6,250 shares of the
Series A Convertible Preferred Stock.
All investments by related parties were made on the same terms and
conditions as third-party non-affiliated investors.
NOTE 12: SUBSEQUENT EVENTS
HEDGING TRANSACTIONS
On March 1, 2000, the Company entered into a crude oil hedge structured as
a costless collar for 25,000 barrels of oil per month for the period from March
2000 through December 2000 with a floor price of $20.50 per barrel and a ceiling
price of $30.55 per barrel.
F-17
<PAGE>
TEXOIL, INC.
SUPPLEMENTARY OIL & GAS INFORMATION
COSTS INCURRED IN OIL & GAS PROPERTY ACQUISITION,
EXPLORATION AND DEVELOPMENT ACTIVITIES
YEARS ENDED DECEMBER 31, 1999 AND 1998
(UNAUDITED)
The following two unaudited tables set forth costs incurred during the
years ended December 31, 1999 and 1998, and net capitalized costs as of December
31, 1999 and 1998.
1999 1998
--------- ---------
($000'S)
Acquisition of properties:
Evaluated....................... $ 15,265 $ 23,299
Unevaluated..................... 623 3,069
Exploration costs.................... 635 420
Development costs.................... 1,984 1,581
--------- ---------
Total costs incurred............ $ 18,507 $ 28,369
========= =========
CAPITALIZED COSTS RELATING TO OIL & GAS PRODUCING ACTIVITIES
DECEMBER 31, 1999 AND 1998
(UNAUDITED)
1999 1998
--------- ---------
($000'S)
Evaluated properties................. $ 61,441 $ 43,209
Unevaluated properties............... 5,021 6,479
--------- ---------
$ 66,462 $ 49,688
Accumulated depreciation, depletion
and amortization................... (9,719) (5,190)
--------- ---------
Net capitalized costs........... $ 56,743 $ 44,498
========= =========
The projects included in unevaluated properties are projects which are
undergoing exploration or evaluation activities or for which the Company intends
to commence such activities in the near future. Of the approximately $5.0
million in net unevaluated property costs at December 31, 1999, that are being
excluded from the amortizable base, approximately $623,000 was incurred in 1999,
$3.1 million was incurred in 1998, and $1.3 million in 1997. The Company will
begin to amortize these costs when proved reserves are established or an
impairment is determined. The Company believes the determination will occur in
24 to 36 months.
See accompanying notes to supplementary information.
F-18
<PAGE>
TEXOIL, INC.
SUPPLEMENTARY OIL & GAS INFORMATION
RESERVE QUANTITY INFORMATION
YEARS ENDED DECEMBER 31, 1999 AND 1998
(UNAUDITED)
The following two unaudited tables reflect information related to
quantities of proved reserves and the standardized measure of discounted net
cash flow relating to such proved reserves.
1999 1998
----------------- ----------------
OIL GAS OIL GAS
MBBL MMCF MBBL MMCF
------ ------ ----- ------
Proved reserves:
Beginning of year.................. 9,213 37,559 4,703 11,622
Acquisitions.................... 5,654 16,059 4,539 26,374
Extensions, discoveries and
improved recovery............. -- 1,722 327 1,350
Revisions of previous
estimates..................... (325) 12,482 246 (163)
Production...................... (762) (4,219) (518) (1,468)
Sales of reserves in-place...... (146) (649) (84) (156)
------ ------ ----- ------
End of year........................ 13,634 62,954 9,213 37,559
====== ====== ===== ======
Proved developed reserves:
End of year........................ 11,811 48,337 7,341 28,643
====== ====== ===== ======
STANDARDIZED MEASURE OF DISCOUNTED FUTURE
NET CASH FLOW RELATING TO PROVED OIL & GAS RESERVES
DECEMBER 31, 1999 AND 1998
(UNAUDITED)
1999 1998
---------- ----------
($000'S)
Future cash inflows.................. $ 469,918 $ 168,967
Future production and development
costs
Production costs and taxes...... (189,938) (76,648)
Development and abandonment..... (23,454) (14,563)
Future income tax expenses........... (64,698) (14,778)
---------- ----------
Future net cash flows................ 191,828 62,978
Discount at 10% per annum............ (76,200) (25,632)
---------- ----------
Standardized measure of discounted
future net cash flow............... $ 115,628 $ 37,346
========== ==========
Standardized measure before income
taxes.............................. $ 152,130 $ 46,191
========== ==========
See accompanying notes to supplementary information.
F-19
<PAGE>
TEXOIL, INC.
STANDARDIZED MEASURE OF DISCOUNTED FUTURE
NET CASH FLOWS AND CHANGES THEREIN RELATING
TO PROVED OIL AND GAS RESERVES
YEARS ENDED DECEMBER 31, 1999 AND 1998
(UNAUDITED)
The following are the principal sources of change in the standardized
measure of discounted future net cash flows during 1999 and 1998:
YEAR ENDED
DECEMBER 31,
----------------------
1999 1998
---------- ----------
($000'S)
Standardized measure of discounted
future net cash flows, beginning
of year............................... $ 37,346 $ 20,520
Purchases of reserves................... 49,144 32,682
Extensions, discoveries and improved
recovery ............................. 2,564 3,163
Revisions of previous quantity
estimates............................. 13,072 566
Net changes in prices and production
costs................................. 56,371 (12,279)
Changes in estimated future development
costs................................. (3,842) (2,254)
Development costs incurred during period
that reduced future development
costs................................. 630 536
Sales of oil and gas produced during
period, net of production costs....... (13,088) (3,537)
Net change in income taxes.............. (27,665) (2,370)
Sales of reserves....................... (594) (530)
Accretion of discount................... 4,619 2,712
Other (changes in production rates,
timing and other)..................... (2,929) (1,863)
---------- ----------
Standardized measure of discounted
future net cash flows, end of year.... $ 115,628 $ 37,346
========== ==========
See accompanying notes to supplementary information.
F-20
<PAGE>
TEXOIL, INC.
NOTES TO SUPPLEMENTARY OIL AND GAS INFORMATION
(UNAUDITED)
1. PRESENTATION AND RESERVE DISCLOSURE INFORMATION
Reserve disclosure information is presented in accordance with the
provisions of Statement of Financial Accounting Standards No. 69 ("SFAS 69"),
"Disclosure About Oil and Gas Producing Activities".
2. DETERMINATION OF PROVED RESERVES
The estimate of the Company's proved reserves were determined by
independent petroleum engineers in accordance with the provisions of SFAS 69 and
applicable rules of the Securities and Exchange Commission. The estimates of
proved reserves are inherently imprecise and are subject to continual revision
based on production history, results of additional exploration and development
and numerous other factors. Estimated future cash flows were computed by
applying prices of oil and gas received by the Company at the end of the
indicated periods to estimated future production of proved reserves, less
estimated future development and production costs, which were estimated based on
current costs. Certain quantities of proved undeveloped reserves associated with
waterflood expansion have not been included in the determination of proved
reserves nor disclosures related to the standardized, because the Company does
not presently intent to commit the requisite capital to such development
projects. Such projects could be authorized in the future.
3. STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS AND CHANGES THERE
IN RELATING TO PROVED OIL AND GAS RESERVES
The standardized measure of discounted future net cash flows relating to
proved oil and gas reserves and the changes of standardized measure of
discounted future net cash flows relating to proved oil and gas reserves were
prepared in accordance with the provisions of SFAS 69. Future cash inflows are
computed as described in Note 2 above by applying current prices to year-end
quantities of proved reserves. Future production and development costs are
computed estimating the expenditures to be incurred in developing and producing
the oil and gas reserves at year-end, based on year-end costs and assuming
continuation of existing economic conditions.
Future income tax expenses are calculated by applying the year-end U.S. tax
rate to future pre-tax cash inflows relating to proved oil and gas reserves,
less the tax basis (including any applicable net operating loss carryforwards)
of oil and gas properties involved. Future income tax expenses give effect to
permanent differences and tax credits and allowances relating to the proved oil
and gas reserves.
Future net cash flows are discounted at a rate of 10% annually (pursuant to
SFAS 69) to derive the standardized measure of discounted future net cash flows.
This calculation does not necessarily represent an estimate of fair market value
or the present value of such cash flows since future prices and costs can vary
substantially from year-end and the use of a 10% discount figure is arbitrary.
F-21
EXHIBIT 4.1
(Front of Certificate)
(Texoil logo - red, block lettering "Texoil" outlined in green with
derrick rising above the letter "X")
TEXOIL, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
Stock Certificate is on ivory paper with green/ivory
fancy border - paper is 8" x 12" in size
COMMON STOCK COMMON STOCK
-------------------------- --------------------------
NUMBER
SHARES
C (blank space to insert
certificate Certificate (BLANK SPACE TO
number) INSERT # SHARES)
-------------------------- --------------------------
THIS CERTIFICATE IS
TRANSFERABLE IN NEW CUSIP 882906 50 6
YORK, NY AND RIDGEFIELD
PARK, NJ SEE REVERSE FOR CERTAIN
DEFINITIONS AND
INFORMATION
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
SHARES OF THE COMMON STOCK OF THE PAR VALUE OF ONE CENT ($0.01) PER SHARE OF
TEXOIL, INC.
IN LARGE (APPROXIMATELY 24) FONT, WORDS SUPERIMPOSED OVER SMALL PRINT (OUTLINED
BELOW) - CERTIFICATE OF STOCK
transferable only on the books of the Corporation by the holder hereof
in person or by attorney upon surrender of this certificate properly
endorsed. This certificate is not valid until countersigned by the
Transfer Agent and registered by the Registrar.
IN WITNESS WHEREOF, the Corporation has caused the facsimile
signatures of its duly authorized officers and its facsimile seal to be
fixed hereto.
Dated:
Signature of Frank A. Lodzinski
Word "PRESIDENT" under Lodzinski signature.
CORPORATE SEAL TO CENTER BOTTOM
COUNTERSIGNED AND REGISTERED:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
TRANSFER AGENT AND REGISTRAR
Small signature of J M Crews positioned under the signature of Lodzinski.
Word "SECRETARY" under signature and aligned to the word "President"
BY
AMERICAN BANK NOTE COMPANY AUTHORIZED SIGNATURE
<PAGE>
(Back of Certificate)
(BLACK AND WHITE HEADING)
TEXOIL LOGO TO CENTER OF PAGE
THE ARTICLES OF INCORPORATION OF THIS CORPORATION DENY PREEMPTIVE RIGHTS TO ITS
STOCKHOLDERS. A FULL STATEMENT OF SUCH LIMITATION IS SET FORTH IN THE ARTICLES
OF INCORPORATION ON FILE IN THE OFFICE OF THE SECRETARY OF STATE OF THE STATE OF
NEVADA.
A FULL STATEMENT OF THE VOTING POWERS, DESIGNATIONS, PREFERENCES, LIMITATIONS,
RESTRICTIONS AND RELATIVE RIGHTS OF THE VARIOUS CLASSES OF STOCK OR SERIES
THEREOF WHICH THE ARTICLES OF INCORPORATION OF THIS CORPORATION AUTHORIZE IT TO
ISSUE AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH RIGHTS IS SET
FORTH IN THE ARTICLES OF INCORPORATION ON FILE IN THE OFFICE OF THE SECRETARY OF
STATE OF THE STATE OF NEVADA. THE CORPORATION WILL FURNISH A COPY OF SUCH
STATEMENT TO THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT CHARGE ON REQUEST TO
THE CORPRATION AT ITS PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as through they were written out in full
according to the applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
TEN ENT - as tenants by the --------- ---------
entireties (Cust) (Minor)
JT TEN - as joint tenants
with right of survivorship Under Uniform Gifts to
and not as tenants in common Minors Act
-------------------------
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For Value Received, hereby sell,
----------------------------------------------
assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please print or typewrite name and address including postal zip code and
telephone number of assignee
- --------------------------------------------------------------------------------
Shares
- --------------------------------------------------------------------------
of the Capital Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- --------------------------------------------------------------------------------
Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated
-------------------- -----------------------------------------------
NOTICE: The signature to this assignment must
correspond with the name as written
upon the face of the Certificate, in
every particular, without alteration
or enlargement, or any change
whatever.
Signature Guaranteed
- -----------------------------------
THE SIGNATURE(S) MUST BE GUARANTEED
BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS
WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 14Ad-15.
EXHIBIT 10.5
SECOND AMENDMENT OF STANDARD OFFICE BUILDING
LEASE AGREEMENT
RECITALS:
CLIFFWOOD OIL AND GAS CORPORATION ("Tenant") entered into that certain
Standard Office Building Lease Agreement (the "Lease") dated January 14, 1997,
for certain premises located at 110 Cypress Station Blvd, Suite 220 & 246,
Houston, Texas, with RADLER ENTERPRISES TEXAS, INC. ("Landlord"). The Lease was
modified by First Amendment of Office Lease Agreement (hereinafter "First
Amendment") on March 12, 1997. The purpose of this Second Amendment of Standard
Office Building Lease Agreement (hereinafter "Second Amendment") is to extend
the Term of the Lease and expand the Leased Premises. The effective date
(hereinafter "Effective Date") of this Second Amendment shall be June 1, 1997.
AMENDMENT:
For valuable consideration respectively given, the receipt and sufficiency
of which is hereby acknowledged, Landlord and Tenant do hereby enter this Second
Amendment which amends the Lease as follows:
1. In addition to Tenant's present space Suite 220 & 246 consisting of
approximately 5,092 square feet more particularly described on Exhibit "1",
(hereinafter "Existing Space"). Tenant's space as of the Effective Date shall
also include approximately 1,635 square feet of space, hereinafter referred to
as the "Expansion Space" and is more particularly described on Exhibits "1" and
"2" attached to this Second Amendment. Tenant's net rental area, including the
Expansion Space, is approximately 6,727 square feet.
2. ARTICLE 2. TERM. This Lease shall continue in force for a term of
thirty-six (36) months, beginning on the 1st day of June 1997, and ending on the
31st day of May 2000. In the event the Expansion Space should not be ready for
occupancy by Effective Date for any reason, Landlord shall not be liable or
responsible for any claims, damages or liabilities in connection therewith or by
reason thereof. This First Amendment shall be effective only from the time that
the Expansion is ready for occupancy by Tenant which date shall be the date of
commencement of the term specified in this First Amendment. If the Expansion
Space is ready for occupancy on a date other than the effective Date, Landlord
and Tenant will, at the request of either, execute a declaration specifying the
beginning date of the term of this First Amendment. In such event, Base rental
under this first Amendment shall not commence until said revised commencement
date, and the expiration date of the Lease Term shall be extended so as to give
effect to the full stated term. Also, in such event, Landlord shall give Tenant
written notice of such revised commencement date at least fifteen (15) days in
advance thereof.
<PAGE>
Page 2 of 6
SECOND AMENDMENT OF STANDARD OFFICE BULIDING LEASE AGREEMENT
3. TERMINATION OPTION. All Options to Terminate given to Tenant in Section 25
of the Lease and Section 1 of the First Amendment are deleted with no further
force or effect and the following is substituted in its place.
(A) FIRST OPTION TO TERMINATE. Contingent upon Tenant satisfying all the
following conditions, (the "Conditions") Tenant is hereby granted a First Option
to terminate the Lease Term, as set forth in Section 2 above. The Conditions
being that (i) Tenant shall have fully performed all of its convenants, duties
and obligations hereunder during the term of this lease; and (ii) Tenant shall
have given written notice to Landlord on or before APRIL 1, 1998, that Tenant is
exercising such First Option; and (iii) that such written notice be delivered to
Landlord at Landlord's business office within normal business hours on or before
APRIL 1, 1998; and (iv) Tenant shall reimburse Landlord at the time of written
notification to terminate the Lease for the unamortized portion of up front
costs in the amount of $12,979.00. Time is of the essence in the exercise of
such First Option, and the time period within which such First Option may be
exercised shall not be extended or enlarged by Tenant for any reason, including
inability to exercise such First Option.
In the event that Tenant satisfies all the Conditions and effectively
exercises such First Option to Terminate, this Lease Agreement shall expire on
JUNE 30, 1998. Failure of Tenant to provide notice as specified herein shall
cause the term to continue unabated.
(B) SECOND OPTION TO TERMINATE. Contingent upon Tenant satisfying all the
following conditions, (the "Conditions") Tenant is hereby granted a Second
Option to terminate the Lease Term, as set forth in Section 2 above. The
Conditions being that (i) Tenant shall have fully performed all of its
convenants, duties and obligations hereunder during the term of this lease; and
(ii) Tenant shall have given written notice to Landlord on or before APRIL 1,
1999 that Tenant is exercising such Second Option; and (iii) that such written
noticed be delivered to Landlord at Landlord's business office within normal
business hours on or before APRIL 1, 1999; and (iv) Tenant shall reimburse
Landlord at the time of written notification to terminate the Lease for the
unamortized portion of up front costs in the amount of $6,490.00. Time is of the
essence in the exercise of such Second Option, and the time period within which
such Second Option may be exercised shall not be extended or enlarged by Tenant
for any reason, including inability to exercise such Second Option.
In the event that Tenant satisfies all the Conditions and effectively
exercises such Second Option to Terminate, this Lease Agreement shall expire on
JUNE 30, 1999. Failure of Tenant to provide notice as specified herein shall
cause the lease term to continue unabated.
<PAGE>
Page 3 of 6
SECOND AMENDMENT OF STANDARD OFFICE BULIDING LEASE AGREEMENT
4. ARTICLE 4. BASE RENT, ADJUSTMENTS AND LATE CHARGES. As of June 1, 1997,
the Base Rental rates specified in the Lease or the Rent Schedule contained in
any prior Amendments of the Lease are deleted and the following is substituted
in its place:
RENT SCHEDULE
- --------------------------------------------------------------------------------
MONTHLY NO. OF AGGREGATE
PAYMENT NO. DUE DATES AMOUNT PAYMENTS AMOUNT
- -------------- -------------------- ------------- -------- --------------
6-17 6/1/1977-5/31/1998 $5,786.00 12 $69,432.00
- ------------------------------------- ------------- -------- --------------
18-29 6/1/1998-5/31/1999 $5,786.00 12 $69,432.00
- -------------- -------------------- ------------- -------- --------------
30-41 6/1/1999-5/31/2000 $5,786.00 12 $69,432.00
============== ===================== ============= ======== ==============
5. Landlord at its expense shall furnish and install in the Leased Premises,
all of the following Building Standard improvements limited to quantities
specified herein using Building Standard Materials as selected by Landlord,
which Building Standard Work is more fully described on Exhibit "2" attached
hereto:
(1) Demolition. Demolish walls and doors at position "A" on Exhibit
"2". Install new door at location "C".
(2) Partitions. Install partitions located at position "B" on Exhibit "2".
(3) Electrical. Install building standard duplex electrical outlets to
meet Tenant's reasonable needs.
(4) Decorative (i) Carpet. Install Building Standard, glue-down carpeting
throughout the Expansion space; (ii) Paint entire Expansion Space with
Building Standard Paint.
6. ENTIRE AGREEMENT. This Second Amendment sets forth all the convenants,
promises, assurances, agreements, representations, conditions, warranties,
statements and understandings ("Representations") between the Landlord and
Tenant concerning the Leased Premises, and there are no Representations, either
oral or written, between them other than those in the Lease or this Second
Amendment. This Second Amendment supersedes and revokes all previous
negotiations, arrangements, letters of intent, offers to lease, lease proposals,
brochures, Representations, and information conveyed, whether oral or in
writing, between the parties hereto or their respective representatives or any
other person purporting to represent the Landlord or Tenant.
7. LEASE IN FULL FORCE AND EFFECT. All provisions of said Lease not
inconsistent herewith shall remain in full force and effect. Except as
specifically amended by the provisions hereof, the terms and provisions stated
in the Lease shall continue to govern the rights and obligations of the parties
thereunder; and all provisions and convenants of the Lease shall remain in full
force and effect as stated therein, except to extent specifically amended by the
provisions hereof.
<PAGE>
Page 4 of 6
SECOND AMENDMENT OF STANDARD OFFICE BULIDING LEASE AGREEMENT
8. DEFINED TERMS. Terms defined in the Lease and delineated herein by initial
capital letters shall have the same meanings ascribed thereto in the Lease,
except to the extent that the meanings of any such term is specifically modified
by the provisions hereof. In addition, other terms not defined in the Lease but
defined herein will, when delineated with initial capital letters, have the
meanings ascribed thereto. Terms and phrases which are not delineated by initial
capital letters shall have the meanings commonly ascribed thereto.
9. EXHIBITS. To the extent indicated above, the following exhibits are made a
part hereof and incorporated herein by reference as fully as if set forth herein
in their entirety:
EXHIBIT "1" - Diagram of Existing Space
EXHIBIT "2" - Diagram of Expansion Space
In witness whereof the parties here to have executed this Second Amendment
and affixed their signatures as of the ___ day of May 1997.
LANDLORD
RADLER ENTERPRISES TEXAS, INC.
BY:____________________________________
MISHAEL H. RADOM
PRESIDENT
RADLER ENTERPRISES, TEXAS, INC.
DATE:___________
TENANT
CLIFFWOOD OIL AND GAS CORPORATION
BY:____________________________________
FRANK A. LODZINSKI
PRESIDENT
CLIFFWOOD OIL AND GAS CORPORATION
DATE:___________
EXHIBIT 10.6
THIRD AMENDMENT TO STANDARD OFFICE BUILDING
LEASE AGREEMENT
RECITALS:
CLIFFWOOD OIL AND GAS CORPORATION, a Texas corporation ("Tenant") entered
into that certain Standard Office Building Lease Agreement (the "Lease") dated
January 14, 1997 for certain premises located at 110 Cypress Station Drive,
Suite 220 & 246, Houston, Texas, consisting of approximately 6,727 square feet
of space, with RADLER ENTERPRISES TEXAS, INC., which was subsequently assigned
to K/B FUND IV ("Landlord"). The Lease was modified by First Amendment of
Standard Office Building Lease Agreement (hereinafter "First Amendment") on
March 21, 1997. The Lease was modified by Second Amendment of Standard Office
Building Lease Agreement (hereinafter "Second Agreement") on June 1, 1997. The
purpose of this Third Amendment to Standard Office Building Lease Agreement
(hereinafter "Third Amendment") is to expand the Leased Premises. This Third
Amendment made and entered into on this the 7th day of July 1998.
AMENDMENT:
For valuable consideration respectively given, the receipt and sufficiency
of which is hereby acknowledged, Landlord and Tenant do hereby enter this Third
Amendment which amends the Lease as follows:
1. In addition to Tenant's present space Suite 220 & 246 consisting of
approximately 6,727 square feet of space more particularly described on Exhibit
"1", (hereinafter "Existing Space"), Tenant's space shall also include
approximately 870 square feet of space in the adjacent Suite also known as Suite
247, more particularly described on Exhibit "2" (hereinafter "Expansion Space")
attached hereto. Tenant's net rentable area, including the Expansion Space, is
approximately 7,597 square feet.
2. SECTION 2. TERM. This Lease shall commence on September 1, 1998 and
continue in force for twenty-one (21) months, terminating on May 31, 2000.
3. SECTION 4. BASE RENTAL, ADJUSTMENTS AND LATE CHARGES (A). As of September
1, 1998, the Base Rental rates specified in the Lease or the Rent Schedule
contained in any prior Amendments of the Lease are deleted and the following is
substituted in its place:
RENT SCHEDULE
- -------------------------------------------------------------------------------
Payment MONTHLY NO. OF AGGREGATE
NO. DUE DATES AMOUNT PAYMENTS AMOUNT
- -------------- -------------------- ------------- -------- --------------
1-12 9/1/1998-8/31/1999 $6,743.00 12 $80,916.00
- -------------- -------------------- ------------- -------- --------------
13-22 9/1/1999-5/31/2000 $6,786.50 9 $61,078.50
4. SECTION 4. BASE RENTAL, ADJUSTMENTS AND LATE CHARGES (B) shall be
amended to Base Year 1998.
<PAGE>
Page 2 of 5
THIRD AMENDMENT TO STANDARD OFFICE BUILDING LEASE AGREEMENT
5. PARAGRAPH 3. TERMINATION OPTION (B) SECOND OPTION TO TERMINATE (IV) of
the Second Amendment of Standard Office Building Lease Agreement shall be
amended as follows:
(iv) Tenant shall reimburse Landlord at the time of written notification
to terminate the Lease for the unamortized portion of up front costs in
the amount of $6,490.00 plus any up front costs of commission in the
amount of $268.61. Time is the essence in the exercise of such Second
Option, and the time period within which such Second Option may be
exercised shall not be extended or enlarged by Tenant for any reason,
including inability to exercise such Second Option.
6. Tenant accepts the Premises in its "as is" condition without any further
improvements by Landlord.
7. Landlord shall provide Tenant with one (1) additional covered reserved
parking space, for a total of three (3) spaces, at no additional cost to Tenant.
8. SECTION 24. DELIVERY OF NOTICES. Landlord's address is deleted and the
following is substituted in its place:
CB Richard Ellis, Inc.
3707 FM 1960 West, Suite 550
Houston, Texas 77068
9. ENTIRE AGREEMENT. This Third Amendment sets forth all the convenants,
promises, assurances, agreements, representations, conditions, warranties,
statements, and understandings ("Representations") between the Landlord and
Tenant concerning the Leased Premises, and there are no Representations, either
oral or written, between them other than those in the Lease, First, Second or
this Third Amendment. This Third Amendment supersedes and revokes all previous
negotiations, arrangements, letters of intent, offers to lease, lease proposals,
brochures, Representations, and information conveyed, whether oral or in
writing, between the parties hereto or their respective representatives or any
other person purporting to represent the Landlord or Tenant.
10. LEASE IN FULL FORCE AND EFFECT. All provisions of said Lease not
inconsistent herewith shall remain in full force and effect. Except as
specifically amended by the provisions hereof, the terms and provisions stated
in the Lease shall continue to govern the rights and obligations of the parties
thereunder; and all provisions and covenants of the Lease shall remain in full
force and effect as stated therein, except to the extent specifically amended by
the provisions hereof.
11. DEFINED TERMS. Terms defined in the Lease and delineated herein by initial
capital letters shall have the same meanings ascribed thereto in the Lease,
except to the extent that the
<PAGE>
Page 3 of 5
THIRD AMENDMENT TO STANDARD OFFICE BUILDING LEASE AGREEMENT
meanings of any such term is specifically modified by the provisions hereof. In
addition, other terms not defined in the Lease but defined herein will, when
delineated with initial capital letters, have the meanings ascribed thereto in
this Agreement. Terms and phrases which are not delineated by initial capital
letters shall have the meanings commonly ascribed thereto.
12. EXHIBITS. To the extent indicated above, the following Exhibits are made
part hereto and incorporated herein by reference as fully as if set forth herein
in their entirety:
Exhibit "1" - Diagram of Existing Space
Exhibit "2" - Diagram of Expansion Space
In witness whereof, the parties hereto have executed this Amendment
Agreement as of the date of aforesaid.
LANDLORD
KB FUND IV
BY:____________________________________________________________
Rodney Richerson
Vice President
DATE:___________
TENANT
CLIFFWOOD OIL AND GAS CORPORATION
BY:____________________________________________________________
Frank A. Lodzinski
President
DATE:___________
EXHIBIT 10.7
FOURTH AMENDMENT TO STANDARD OFFICE BUILDING
LEASE AGREEMENT
RECITALS:
CLIFFWOOD OIL AND GAS CORPORATION, a Texas corporation ("Tenant") entered
into that certain Standard Office Building Lease Agreement (the "Lease") dated
January 14, 1997, for certain premises located at 110 Cypress Station Drive,
Suite 220 & 246, Houston, Texas, consisting of approximately 7,597 square feet
of space, with RADLER ENTERPRISES TEXAS, INC., which was subsequently assigned
to K/B FUND IV ("Landlord"). The Lease was modified by First Amendment of
Standard Office Building Lease Agreement (hereinafter "First Amendment") on
March 21, 1997. The Lease was modified by Second Amendment of Standard Office
Building Lease Agreement (hereinafter "Second Amendment") on June 1, 1997. The
Lease was modified by Third Amendment of Standard Office Building Lease
Agreement (hereinafter "Third Amendment") on July 7, 1998. The purpose of this
Fourth Amendment to Standard Office Building Lease Agreement (hereinafter
"Fourth Amendment") is to extend the term of the Lease and expand the Leased
Premises. This Fourth Amendment made and entered into on this 24th day of March
1999.
AMENDMENT:
For valuable consideration respectively given, the receipt and sufficiency
of which is hereby acknowledged, Landlord and Tenant do hereby enter this Fourth
Amendment which amends the Lease as follows:
1. In addition to Tenant's present space Suite 220 & 246 consisting of
approximately 7,597 square feet of space more particularly described on Exhibit
"1", (hereinafter "Existing Space"), Tenant's space shall also include
approximately 4,736 square feet of space, more particularly, described on
Exhibit "2" (hereinafter "Expansion Space") attached hereto. Tenant's net
rentable area, including the Expansion Space, is approximately 12,333 square
feet more particularly described on Exhibit "3" (hereinafter "Total Net Rentable
Area").
2. SECTION 2. TERM. This lease shall continue in force for an additional
three (3) months commencing on June 1, 2000 and terminating on August 31, 2000.
3. SECTION 4. BASE RENTAL, ADJUSTMENTS AND LATE CHARGES (A). As of May 1, 1999,
the Base Rental rates specified in the Lease or the Rent Schedule contained in
any prior Amendments of the Lease are deleted and the following is substituted
in its place:
RENT SCHEDULE
- --------------------------------------------------------------------------------
PAYMENT MONTHLY NO. OF AGGREGATE
NO. DUE DATES AMOUNT PAYMENTS AMOUNT
- -------------- -------------------- ------------- -------- --------------
1 5/1/1999-5/31/1999 $6,356.23 1 $6,356.23
- -------------- -------------------- ------------- -------- --------------
2-4 6/1/1999-8/31/1999 $13,057.67 3 $39,173.01
- -------------- -------------------- ------------- -------- --------------
5-13 9/1/1999-5/31/2000 $13,101.17 9 $117,910.53
- -------------- -------------------- ------------- -------- --------------
14-16 6/1/2000-8/31/2000 $16,444.00 3 $49,332.00
<PAGE>
Page 2 of 7
FOURTH AMENDMENT TO STANDARD OFFICE BUILDING LEASE AGREEMENT
4. Landlord shall provide Tenant with an improvement allowance of $13,402.88
to be applied towards rental as reflected in the above rent schedule.
5. SECTION 4. BASE RENTAL, ADJUSTMENTS AND LATE CHARGES (B) shall be amended
to Base Year 1999.
6. Tenant accepts the Expansion Space in its "As-is" condition without any
further improvements by Landlord, subject to engineering costs necessary to
accommodate Tenant space requirements. Property Manager shall advise Tenant of
such costs as necessary.
7. Landlord shall provide Tenant with one (1) additional covered reserved
parking space, for a total of four (4) spaces, at no additional cost to Tenant.
8. RENEWAL OPTION. Contingent upon Tenant satisfying all of the following
conditions, (the "CONDITIONS") Tenant is hereby granted an option to extend the
Lease Term for an additional term of thirty-six (36) months ("EXTENSION TERM")
commencing on September 1, 2000 and expiring on August 31, 2003, the Conditions
being that: (i) Tenant shall have fully performed all of its convenants, duties
and obligations hereunder during the Lease Term; and (ii) Tenant shall have
given written notice to Landlord of Tenants exercise of such option not less
than one hundred eighty (180) days prior to the expiration of the present Lease
Term.
Time is of the essence in the exercise of this Renewal Option and should
Tenant fail to exercise this option by timely notice or fail to satisfy the
Renewal Conditions, this Renewal Option shall lapse and be of no further force
or effect.
In the event that Tenant satisfies all of the Conditions and effectively
exercises such Option, then Landlord and Tenant shall execute an amendment in a
form and content satisfactory in all respects to both Landlord and Tenant and
the Rental for said Extension Term shall be the Prevailing Market Rate. The
"Prevailing Market Rate" shall mean the then prevailing market rate for base
rental for Leases comparable to this Lease for comparable space. The Prevailing
Market Rate shall be determined by Landlord and Tenant by mutual agreement and,
if Landlord and Tenant cannot agree, the Prevailing Market Rate shall be
established in the manner as specified in the balance of this subparagraph.
Within ten (10) days after receipt of Tenant's exercise of an extension option,
but no earlier than one hundred eighty (180) days prior to the expiration of the
Lease Term, as it may have been extended, Landlord shall advise Tenant of its
determination of the Prevailing Market Rate, on a square foot basis. Within
thirty (30) days after receipt of Landlord's determination of the Prevailing
Market Rate, Tenant shall advise Landlord, in writing, as to whether or not
Tenant accepts or rejects the Prevailing Market Rate specified by Landlord.
Failure to accept or reject the Prevailing Market Rate specified by Landlord
shall be deemed acceptance by Tenant. If Tenant accepts such Prevailing Market
Rate, then such rate shall be charged during the applicable extension period for
Base Rental. If Tenant rejects such Prevailing Market Rate, Tenant shall specify
in such notice its selection of a real estate appraiser, who shall act on
Tenant's behalf in determining the Prevailing Market Rate. Within ten (10) days
after Landlord's receipt of Tenant's rejection of the Landlord's specification
of the Prevailing Market Rate and Tenant's selection of the real estate
appraiser, Landlord, by written notice to Tenant, shall designate a real estate
appraiser, who shall represent Landlord in the determination of the Prevailing
Market Rate. Within ten (10) days of the selection of the
<PAGE>
Page 3 of 7
FOURTH AMENDMENT TO STANDARD OFFICE BUILDING LEASE AGREEMENT
Landlord's appraiser, the two appraisers shall by written report, each render
their respective determinations of the Prevailing Market Rate for the extension
period in question. Each appraiser shall consider in determining the Prevailing
Market Rate, among other factors, what financial inducements are then being
offered to a tenant who is wiling to relocate, such as free rent, tenant
improvement allowances, or moving allowances (if such considerations are
appropriate for the current market conditions). If the determinations of the two
appraisers do not agree, the appraisers shall select a third appraiser who shall
then select the Prevailing Market Rate within twenty (20) days after the
appointment of such third appraiser. Landlord and Tenant agree that they shall
be bound by the determination of the appraiser(s). Landlord shall bear the fee
and expenses of its appraiser; Tenant shall bear the fee and expenses of its
appraiser; and Landlord and Tenant shall each share the fee and expenses of the
third appraiser.
9. ENTIRE AGREEMENT. This Fourth Amendment sets forth all the convenants,
promises, assurances, agreements, representations, conditions, warranties,
statements, and understandings ("Representations") between the Landlord and
Tenant concerning the leased Premises, and there are no Representations, either
oral or written, between them other than those in the Lease, First, Second,
Third or this Fourth Amendment. This Fourth Amendment supersedes and revokes all
previous negotiations, arrangements, letters of intent, offers to lease, lease
proposals, brochures, Representations, and information conveyed, whether oral or
in writing, between the parties hereto or their respective representatives or
any other person purporting to represent the Landlord or Tenant.
10. LEASE IN FULL FORCE AND EFFECT. All provisions of said Lease not
inconsistent herewith shall remain in full force and effect. Except as
specifically amended by the provisions hereof, the terms and provisions stated
in the Lease shall continue to govern the rights and obligations of the parties
thereunder; and all provisions and convenants of the Lease shall remain in full
force and effect as stated therein, except to extent specifically amended by the
provisions hereof.
11. DEFINED TERMS. Terms defined in the Lease and delineated herein by initial
capital letters shall have the same meanings ascribed thereto in the Lease,
except to the extent that the meanings of any such term is specifically modified
by the provisions hereof. In addition, other terms not defined in the Lease but
defined herein will, when delineated with initial capital letters, have the
meanings ascribed thereto in this Agreement. Terms and phrases which are not
delineated by initial capital letters shall have the meanings commonly ascribed
thereto.
12. EXHIBITS. To the extent indicated above, the following Exhibits are
made part hereto and incorporated herein by reference as fully as if set
forth herein in their entirety:
Exhibit "1" - Diagram of Existing Space
Exhibit "2" - Diagram of Expansion Space
Exhibit "3" - Diagram of Total Net Rentable Area
<PAGE>
Page 4 of 7
FOURTH AMENDMENT TO STANDARD OFFICE BULDING LEASE AGREEMENT
In witness whereof, the parties hereto have executed this Amendment
Agreement as of the date of aforesaid.
LANDLORD
KB FUND IV
BY:____________________________________________________________
Rodney Richerson
Vice President
DATE:__________
TENANT
CLIFFWOOD OIL AND GAS CORPORATION
BY:____________________________________________________________
Jerry M. Crews
Executive Vice President
DATE:__________
Exhibit 10.12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of November 10,
1999, is entered into by and between Texoil, Inc., a Nevada corporation (the
"Company"), and Frank A. Lodzinski, an individual residing in Houston, Texas
("Employee").
WHEREAS, the Company proposes to sell certain equity securities to Quantum
Energy Partners, LP, EnCap Equity 1996 Limited Partnership, Energy Capital
Investment Company PLC, V&C Energy Limited Partnership, Arthur L. Smith, Paul B.
David, Thomas A. Reiser and Jerry M. Crews (collectively, the "Investors"), and
the Investors propose to purchase certain equity securities of the Company
pursuant to the terms and conditions of that certain Preferred Stock Purchase
Agreement (the "Purchase Agreement") to be entered into by and among the Company
and the Investors (the "Proposed Transaction");
WHEREAS, as a condition to the consummation of the Proposed Transaction,
the Investors have required that Employee enter into an employment agreement on
the terms and conditions hereinafter set forth;
WHEREAS, Employee is presently employed by the Company and, as a material
inducement for the Investors to consummate the Proposed Transaction, is willing
to commit himself to continue to serve on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
Company and Employee hereby agree as follows:
1. EMPLOYMENT. The Company agrees to continue to employ Employee, and
Employee agrees to remain in the employ of the Company, upon the terms and
subject to conditions herein provided.
2. TERM. The employment of Employee shall be for a period (referred to
herein as the "Employment Term") commencing on the date of this Agreement and
ending on the earliest of (a) the first date on which the Investors cease to own
any Series A Preferred or Conversion Shares (as such terms are defined in the
Purchase Agreement), (b) the effective date of any Sale Transaction (as such
term is defined in the Purchase Agreement), or (c) the date of termination of
Employee's employment pursuant to Section 5 hereof.
3. POSITION AND DUTIES.
(a) POSITION. During the Employment Term, Employee shall serve as Chief
Executive Officer of the Company and in such other capacities as the Board of
Directors of the Company may designate from time to time. In such capacities,
Employee shall have such duties, functions, responsibilities and authority
customarily associated with the position of Chief Executive Officer of a company
comparable to the Company which is engaged in oil and gas exploration and
production; subject, however, to applicable restrictions imposed by the Amended
and Restated Articles of Incorporation, Certificate of Designation or Bylaws of
the Company and the Purchase Agreement and to the directives of the Board of
Directors of the Company.
1
<PAGE>
(b) DUTIES. During the Employment Term, Employee shall devote
substantially all of his time, skill and attention and his best efforts to the
business and affairs of the Company, and in furtherance of the business and
affairs of the Company and its subsidiaries (collectively the "Related
Parties"), except for usual, ordinary and customary periods of vacation and
absence due to illness or other disability; provided, however, that Employee may
devote reasonable periods of time in connection with other activities, if such
activities do not materially interfere with the performance of Employee's duties
and services hereunder and do not consume more than 10% of Employee's working
hours.
4. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. Employee shall be paid a base salary at the rate of
$120,000 per annum, less statutory payroll deductions, payable in accordance
with the payroll practices adopted by the Company. The base salary may be
reviewed periodically and increases in such base salary may be granted at the
sole discretion of the Board of Directors of the Company.
(b) BENEFITS. Employee shall, during the Employment Term, be eligible to
participate in such insurance, medical and other employee benefit plans of the
Company which may be in effect, from time to time, to the extent such plans are
generally available to other executive employees of the Company. Employee may
elect to forego the Company's medical plan in which case he shall be entitled to
reimbursement for the reasonable cost of a separately maintained comparable
medical plan.
(c) VACATIONS. Employee shall be entitled to take such vacations as he
may desire, with pay, provided that such vacations do not interfere with the
performance of his duties and services hereunder.
(d) EXPENSES. Employee will be reimbursed for reasonable expenses
incurred in the performance of his duties and services hereunder and in
furtherance of the business of the Related Parties upon presentation by Employee
of an itemized account, accompanied by appropriate receipts satisfactory to the
Board of Directors of the Company, in substantiation of such expenses.
5. TERMINATION OF EMPLOYMENT.
(a) Employee's employment hereunder:
(i) shall automatically terminate upon the occurrence of any of the
following: (A) the mental or physical incapacity or inability of Employee
to perform his duties for a consecutive period of one hundred twenty (120)
days or a non-consecutive period of one hundred eighty (180) days during
any twelve-month period; (B) the death of Employee; or (C) the voluntary
resignation or retirement of Employee; and
(ii) may be terminated by the Board of Directors of the Company, at
any time, for "cause", which shall mean by reason of any of the following:
(A) Employee's conviction of, or plea of nolo contendere to, any felony or
to any crime or offense causing substantial harm to any of the Related
Parties (whether or not for personal gain) or involving acts of theft,
fraud, embezzlement, moral turpitude or similar conduct; (B) malfeasance
in the conduct of Employee's duties, including, but not limited to, (1)
willful and intentional misuse or diversion of any of the Related Parties'
funds, (2) embezzlement or (3) fraudulent or willful and material
misrepresentations or concealments on any written reports submitted
2
<PAGE>
to any of the Related Parties; (C) material failure by Employee to perform
the duties of Employee's employment or material failure to follow or
comply with the reasonable and lawful written directives of the Board of
Directors of the Company, provided, however, that Employee shall have been
informed, in writing, of such material failure and given a period of not
more than 30 days to remedy the failure if the failure is capable of being
remedied without penalty or damage to the Company; or (D) a material
breach by Employee of the provisions of this Agreement (including, without
limitation, any breach of Section 3(b) of this Agreement); provided,
however, that Employee shall have been informed, in writing, of such
material breach and given a period of not more than 30 days to remedy the
breach if the breach is capable of being remedied without penalty or
damage to the Company; or (E) a material breach by Employee of written
policies of the Company concerning employee discrimination or harassment.
(b) Upon any termination of Employee's employment pursuant to this
Section 5, all obligations of the Company under this Agreement shall terminate.
6. BUSINESS OPPORTUNITIES AND INTELLECTUAL PROPERTY; PERSONAL
INVESTMENTS; CONFIDENTIALITY; COVENANT NOT TO COMPETE. Employee acknowledges
that in the course of his employment hereunder and performance of services on
behalf of the Related Parties he will become privy to various business
opportunities, economic and trade secrets and relationships of the Related
Parties. Therefore, in consideration of this Agreement and the consummation of
the Proposed Transaction, Employee hereby agrees as provided below in this
Section 6.
(a) BUSINESS OPPORTUNITIES AND INTELLECTUAL PROPERTY. Employee hereby
assigns and agrees to assign to the Company and its successors, assigns or
designees, all of Employee's right, title and interest in and to all "Business
Opportunities" and "Intellectual Property" (as defined below), and further
acknowledges and agrees that all Business Opportunities and Intellectual
Property constitute the exclusive property of the Company.
For purposes hereof "Business Opportunities" shall mean all business
ideas, prospects, proposals or other opportunities pertaining to the lease,
acquisition, exploration, production, gathering or marketing of hydrocarbons and
related products and the exploration potential of geographical areas on which
hydrocarbon exploration prospects are located, which are developed by Employee
during the Employment Term, or originated by any third party and brought to the
attention of Employee during the Employment Term, together with information
relating thereto (including, without limitation, geological and seismic data and
interpretations thereof, whether in the form of maps, charts, logs,
seismographs, calculations, summaries, memoranda, opinions or other written or
charted means).
For purposes hereof "Intellectual Property" shall mean all ideas,
inventions, discoveries, processes, designs, methods, substances, articles,
computer programs and improvements (including, without limitation, enhancements
to, or further interpretation or processing of, information that was in the
possession of Employee prior to the date of this Agreement), whether or not
patentable or copyrightable, which do not fall within the definition of Business
Opportunities, which the Employee discovers, conceives, invents, creates or
develops, alone or with others, during the Employment Term, if such discovery,
conception, invention, creation or development (A) occurs in the course of the
Employee's employment with the Company, or (B) occurs with the use of any of the
Related Parties' time, materials or facilities, or (C) in the opinion of the
Board of Directors of the Company, relates or pertains in any way to the Related
Parties' purposes, activities or affairs.
3
<PAGE>
(b) NON-COMPETE OBLIGATIONS DURING EMPLOYMENT TERM. Employee agrees that
during the Employment Term:
(i) Employee will not, other than through the Related Parties,
engage or participate in any manner, whether directly or indirectly, as an
employee, employer, consultant, agent, principal, partner, more than one percent
shareholder, officer, director, licensor, lender, lessor or in any other
individual or representative capacity, in any business or activity which is
engaged in leasing, acquiring, exploring, producing, gathering or marketing
hydrocarbons and related products; and
(ii) all investments made by Employee, directly or indirectly, which
relate to the leasing, acquisition, exploration, production, gathering or
marketing of hydrocarbons and related products shall be made solely through the
Related Parties; and Employee will, not, directly or indirectly, and will not
permit any of his controlled affiliates to: (A) invest or otherwise participate
alongside the Related Parties in any Business Opportunities, or (B) invest or
otherwise participate in any business or activity relating to a Business
Opportunity, regardless of whether any of the Related Parties ultimately
participates in such business or activity; provided that this subsection (b)
shall not preclude Employee from making investments in securities of oil and gas
companies which are publicly traded, if (1) the aggregate owned by Employee and
all affiliates does not exceed 5% of such company's outstanding securities, and
(2) the aggregate amount invested in such investments by Employee and all
affiliates after the date hereof does not exceed $200,000.
(c) CONFIDENTIALITY OBLIGATIONS. Employee hereby acknowledges that all
trade secrets and confidential or proprietary information of the Related Parties
(collectively referred to herein as "Confidential Information") constitute
valuable, special and unique assets of the Related Parties' business and that
access to and knowledge of such Confidential Information is essential to the
performance of Employee's duties hereunder. Employee agrees that during the
Employment Term and during the eighteen month period following the date of
termination of Employee's employment hereunder (the "Termination Date"),
Employee will hold the Confidential Information in strict confidence and will
not publish, disseminate or otherwise disclose, directly or indirectly, to any
person other than the Related Parties and their respective officers, directors
and employees, any Confidential Information or use any Confidential Information
for Employee's own personal benefit or the benefit of anyone other than the
Related Parties.
For purposes of this subsection (c), it is agreed that Confidential
Information includes, without limitation, any information heretofore or
hereafter acquired, developed or used by any of the Related Parties relating to
Business Opportunities or Intellectual Property or other geological,
geophysical, economic, financial or management aspects of the business,
operations, properties or prospects of the Related Parties, whether oral or in
written form in any of "Related Parties' Business Records" (as defined in
Section 7 below), but shall exclude any information which (A) has become part of
common knowledge or understanding in the oil and gas industry or otherwise in
the public domain (other than from disclosure by Employee in violation of this
Agreement), or (B) was rightfully in the possession of Employee, as shown by
Employee's records, prior to the date of the commencement of Employee's
employment with the Company; provided, however, that Employee shall provide to
the Company copies of all information described in clause (B); further provided,
however, that this subsection (c) shall not be applicable to the extent Employee
is required to testify in a judicial or regulatory proceeding pursuant to the
order of a judge or administrative law judge after Employee requests
confidential treatment for such Confidential Information.
4
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(d) POST EMPLOYMENT NON-COMPETE COVENANT. In the event, and only in the
event, that Employee's employment is terminated under the provisions of Sections
5(a)(i)(C) or 5(a)(ii), Employee agrees as follows:
(i) Employee will not engage or participate in any manner, whether
directly or indirectly through any family member or other person or as an
employee, employer, consultant, agent, principal, partner, more than one
percent shareholder, officer, director, licensor, lender, lessor or in any
other individual or representative capacity:
(A) during the one-year period following the Termination Date,
in any business or activity which is engaged in leasing, acquiring,
exploring, producing, gathering or marketing hydrocarbons and
related products within (1) any county or parish in which the
Company owns any oil and gas interests or conducts operations on the
Termination Date or in which the Company has owned any oil and gas
interests or conducted operations at any time during the six months
immediately preceding the Termination Date or (2) any county or
parish adjacent to any county or parish described in clause (1);
(B) during the eighteen month period following the Termination
Date, in any business or activity which is engaged in the leasing,
acquiring, exploring, producing, gathering or marketing of
hydrocarbons and related products within the boundaries of, or
within a two-mile radius of the boundaries of, any mineral property
interest of any of the Related Parties (including, without
limitation, a mineral lease, overriding royalty interest, production
payment, net profits interest, mineral fee interest or option or
right to acquire any of the foregoing, or an area of mutual interest
as designated pursuant to contractual agreements between the Company
and any third party) or any other property on which any of the
Related Parties has an option, right, license or authority to
conduct or direct exploratory activities, such as three-dimensional
seismic acquisition or other seismic, geophysical and geochemical
activities (but not including any preliminary geological mapping),
as of the Termination Date or during the six month period
immediately preceding the Termination Date; provided that, this
subsection (d) shall not preclude Employee from making investments
in securities of oil and gas companies which are publicly traded, if
(1) the aggregate owned by Employee and all affiliates does not
exceed 5% of such company's outstanding securities, and (2) the
aggregate amount invested in such investments by Employee and all
affiliates after the date hereof does not exceed $200,000.
(ii) Employee will not during the eighteen month period following
the Termination Date, attempt to solicit, entice, persuade or induce,
directly or indirectly, any employee (or person who within the preceding
ninety (90) days was an employee) of any of the Related Parties or any
other person who is under contract with or rendering services to any of
the Related Parties, to (i) terminate his or her employment by, or
contractual relationship with, such person, (ii) refrain from extending or
renewing the same (upon the same or new terms), (iii) refrain from
rendering services to or for such person (iv) become employed by or to
enter into contractual relations with any persons other than such person,
or (v) enter into a relationship with a competitor of any of the Related
Parties.
(iii) Employee will promptly notify the Company if employment (or
any consulting relationship) is accepted with any third party engaged in
business activities similar to those conducted by the Company.
5
<PAGE>
(e) The invalidity or non-enforceability of this Section 6 in any
respect shall not affect the validity or enforceability of this Section 6 in any
other respect or of any other provisions of this Agreement. In the event that
any provision of this Section 6 shall be held invalid or unenforceable by a
court of competent jurisdiction by reason of the geographic or business scope or
the duration thereof, such invalidity or unenforceability shall attach only to
the scope or duration of such provision and shall not affect or render invalid
or unenforceable any other provision of this Agreement, and, to the fullest
extent permitted by law, this Agreement shall be construed as if the geographic
or business scope or the duration of such provision had been more narrowly
drafted so as not to be invalid or unenforceable.
(f) Employee acknowledges that the Company's remedy at law for any
breach of the provisions of this Section 6 is and will be insufficient and
inadequate and that the Company shall be entitled to equitable relief, including
by way of temporary and permanent injunction, in addition to any remedies the
Company may have at law. The Company acknowledges that if the Company gives
notice of its intention to terminate Employee's employment pursuant to Section
5(a)(ii)(C) and there exists no justification for termination of Employee
thereunder, that Employee's remedy at law for any such improper termination is
and will be insufficient and inadequate and that Employee shall be entitled to
equitable relief, including by way of temporary and permanent injunction, in
addition to any remedies Employee may have at law.
(g) The provisions of this Section 6 shall survive the termination of
this Agreement and the termination of Employee's employment hereunder.
(h) The representations and covenants contained in this Section 6 on the
part of the Employee will be construed as ancillary to and independent of any
other provision of this Agreement, and the existence of any claim or cause of
action of the Employee against the Company or any of the other Related Parties
or any officer, director or shareholder of the Company or any of the other
Related Parties, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of the covenants of
Employee contained in this Section 6.
(i) The parties to this Agreement agree that the limitations contained in
this Section 6 with respect to time, geographical area and scope of activity are
reasonable. However, if any court shall determine that the time, geographical
area or scope of activity of any restriction contained in this Section 6 is
unenforceable, it is the intention of the parties that such restrictive covenant
set forth herein shall not thereby be terminated but shall be deemed amended to
the extent required to render it valid and enforceable.
7. BUSINESS RECORDS.
(a) Employee agrees to deliver promptly to the Company, upon termination
of his employment hereunder, or at any other time when the Company so requests,
all non-public documents relating to the business of the Related Parties,
including, without limitation: all geological and geophysical reports and
related data such as maps, charts, logs, seismographs, seismic records and other
reports and related data, calculations, summaries, memoranda and opinions
relating to the foregoing, production records, electric logs, core data,
pressure data, lease files, well files and records, land files, abstracts, title
opinions, title or curative matters, contract files, notes, records, drawings,
manuals, correspondence, financial and accounting information, customer lists,
statistical data and compilations, patents, copyrights, trademarks, trade names,
inventions, formulae, methods, processes, agreements, contracts, manuals or any
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documents relating to the business of the Related Parties, (collectively, the
"Related Parties' Business Records") and all copies thereof and therefrom.
(b) Employee confirms that all of the Related Parties' Business Records
(and all copies thereof and therefrom) which are required to be delivered to the
Company pursuant to this Section 7 constitute the exclusive property of the
Company and the other Related Parties.
(c) The obligation of confidentiality set forth in Section 6 shall
continue notwithstanding Employee's delivery of such documents to the Company.
(d) The provisions of this Section 7 shall continue in effect
notwithstanding termination of the Employee's employment hereunder for any
reason.
8. DIVISIBILITY OF AGREEMENT. In the event that any term, condition or
provision of this Agreement is for any reason rendered void, all remaining
terms, conditions and provisions shall remain and continue as valid and
enforceable obligations of the parties hereto.
9. NOTICES. Any notices or other communications required or permitted
to be sent hereunder shall be in writing and shall be duly given if personally
delivered or sent postage pre-paid by certified or registered mail, return
receipt requested, as follows:
(a) If to Employee:
Frank A. Lodzinski
18726 White Candle Drive
Spring, Texas 77388-5856
(b) If to the Company:
Texoil, Inc.
110 Cypress Station Drive, Suite 220
Houston, Texas 77090-1629
Any party may change his or its address for the sending of notice to such party
by written notice to the other parties sent in accordance with the provisions
hereof.
10. COMPLETE AGREEMENT. This Agreement contains the entire understanding
of the parties with respect to the employment of Employee and supersedes all
prior arrangements or understanding with respect thereto and all oral or written
employment agreements or arrangements between the Company (and any its
subsidiaries) and Employee. This Agreement may not be altered or amended except
by a writing, duly executed by the party against whom such alteration or
amendment is sought to be enforced.
11. ASSIGNMENT. This Agreement is personal and non-assignable by
Employee. It may be assigned by the Company to any Related Party or to a
successor created by a reorganization of Related Parties or to any entity with
which the Company may merge or consolidate; provided, however, that immediately
following such merger or consolidation the shareholders of the Company must
retain at least 51% of the combined companies' outstanding securities.
12. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be an original and all of which together shall constitute
one and the same agreement.
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13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without giving effect to
applicable choice of law principles.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
COMPANY:
TEXOIL, INC.
By:______________________________________
Name: Jerry M. Crews
Title: Executive Vice President and Secretary
EMPLOYEE:
_________________________________________
Frank A. Lodzinski
8
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of November 10,
1999, 1999, is entered into by and between Texoil, Inc., a Nevada corporation
(the "Company"), and Jerry M. Crews, an individual residing in Houston, Texas
("Employee").
WHEREAS, the Company proposes to sell certain equity securities to Quantum
Energy Partners, LP, EnCap Equity 1996 Limited Partnership, Energy Capital
Investment Company PLC, V&C Energy Limited Partnership, Arthur L. Smith, Paul B.
David, Thomas A. Reiser and Jerry M. Crews (collectively, the "Investors"), and
the Investors propose to purchase certain equity securities of the Company
pursuant to the terms and conditions of that certain Preferred Stock Purchase
Agreement (the "Purchase Agreement") to be entered into by and among the Company
and the Investors (the "Proposed Transaction");
WHEREAS, as a condition to the consummation of the Proposed Transaction,
the Investors have required that Employee enter into an employment agreement on
the terms and conditions hereinafter set forth;
WHEREAS, Employee is presently employed by the Company and, as a material
inducement for the Investors to consummate the Proposed Transaction, is willing
to commit himself to continue to serve on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
Company and Employee hereby agree as follows:
1. EMPLOYMENT. The Company agrees to continue to employ Employee, and
Employee agrees to remain in the employ of the Company, upon the terms and
subject to conditions herein provided.
2. TERM. The employment of Employee shall be for a period (referred to
herein as the "Employment Term") commencing on the date of this Agreement and
ending on the earliest of (a) the first date on which the Investors cease to own
any Series A Preferred or Conversion Shares (as such terms are defined in the
Purchase Agreement), (b) the effective date of any Sale Transaction (as such
term is defined in the Purchase Agreement), or (c) the date of termination of
Employee's employment pursuant to Section 5 hereof.
3. POSITION AND DUTIES.
(a) POSITION. During the Employment Term, Employee shall serve as
Executive Vice President of the Company and in such other capacities as the
Board of Directors of the Company may designate from time to time. In such
capacities, Employee shall have such duties, functions, responsibilities and
authority customarily associated with the position of Executive Vice President
of a company comparable to the Company which is engaged in oil and gas
exploration and production; subject, however, to applicable restrictions imposed
by the Amended and Restated Articles of Incorporation, Certificate of
Designation or Bylaws of the Company and the Purchase Agreement and to the
directives of the Board of Directors of the Company.
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(b) DUTIES. During the Employment Term, Employee shall devote
substantially all of his time, skill and attention and his best efforts to the
business and affairs of the Company, and in furtherance of the business and
affairs of the Company and its subsidiaries (collectively the "Related
Parties"), except for usual, ordinary and customary periods of vacation and
absence due to illness or other disability; provided, however, that Employee may
devote reasonable periods of time in connection with other activities, if such
activities do not materially interfere with the performance of Employee's duties
and services hereunder and do not consume more than 10% of Employee's working
hours.
4. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. Employee shall be paid a base salary at the rate of
$110,000 per annum, less statutory payroll deductions, payable in accordance
with the payroll practices adopted by the Company. The base salary may be
reviewed periodically and increases in such base salary may be granted at the
sole discretion of the Board of Directors of the Company.
(b) BENEFITS. Employee shall, during the Employment Term, be eligible to
participate in such insurance, medical and other employee benefit plans of the
Company which may be in effect, from time to time, to the extent such plans are
generally available to other executive employees of the Company.
(c) VACATIONS. Employee shall be entitled to take such vacations as he may
desire, with pay, provided that such vacations do not interfere with the
performance of his duties and services hereunder.
(d) EXPENSES. Employee will be reimbursed for reasonable expenses incurred
in the performance of his duties and services hereunder and in furtherance of
the business of the Related Parties upon presentation by Employee of an itemized
account, accompanied by appropriate receipts satisfactory to the Board of
Directors of the Company, in substantiation of such expenses.
5. TERMINATION OF EMPLOYMENT.
(a) Employee's employment hereunder:
(i) shall automatically terminate upon the occurrence of any of the
following: (A) the mental or physical incapacity or inability of Employee
to perform his duties for a consecutive period of one hundred twenty (120)
days or a non-consecutive period of one hundred eighty (180) days during
any twelve-month period; (B) the death of Employee; or (C) the voluntary
resignation or retirement of Employee; and
(ii) may be terminated by the Board of Directors of the Company, at
any time, for "cause", which shall mean by reason of any of the following:
(A) Employee's conviction of, or plea of nolo contendere to, any felony or
to any crime or offense causing substantial harm to any of the Related
Parties (whether or not for personal gain) or involving acts of theft,
fraud, embezzlement, moral turpitude or similar conduct; (B) malfeasance
in the conduct of Employee's duties, including, but not limited to, (1)
willful and intentional misuse or diversion of any of the Related Parties'
funds, (2) embezzlement or (3) fraudulent or willful and material
misrepresentations or concealments on any written reports submitted to any
of the Related Parties; (C) material failure by Employee to perform the
duties of
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Employee's employment or material failure to follow or comply with the
reasonable and lawful written directives of the Board of Directors of the
Company, provided, however, that Employee shall have been informed, in
writing, of such material failure and given a period of not more than 30
days to remedy the failure if the failure is capable of being remedied
without penalty or damage to the Company; or (D) a material breach by
Employee of the provisions of this Agreement (including, without
limitation, any breach of Section 3(b) of this Agreement); provided,
however, that Employee shall have been informed, in writing, of such
material breach and given a period of not more than 30 days to remedy the
breach if the breach is capable of being remedied without penalty or
damage to the Company; or (E) a material breach by Employee of written
policies of the Company concerning employee discrimination or harassment.
(b) Upon any termination of Employee's employment pursuant to this Section
5, all obligations of the Company under this Agreement shall terminate.
6. BUSINESS OPPORTUNITIES AND INTELLECTUAL PROPERTY; PERSONAL INVESTMENTS;
CONFIDENTIALITY; COVENANT NOT TO COMPETE. Employee acknowledges that in the
course of his employment hereunder and performance of services on behalf of the
Related Parties he will become privy to various business opportunities, economic
and trade secrets and relationships of the Related Parties. Therefore, in
consideration of this Agreement and the consummation of the Proposed
Transaction, Employee hereby agrees as provided below in this Section 6.
(a) BUSINESS OPPORTUNITIES AND INTELLECTUAL PROPERTY. Employee hereby
assigns and agrees to assign to the Company and its successors, assigns or
designees, all of Employee's right, title and interest in and to all "Business
Opportunities" and "Intellectual Property" (as defined below), and further
acknowledges and agrees that all Business Opportunities and Intellectual
Property constitute the exclusive property of the Company.
For purposes hereof "Business Opportunities" shall mean all business
ideas, prospects, proposals or other opportunities pertaining to the lease,
acquisition, exploration, production, gathering or marketing of hydrocarbons and
related products and the exploration potential of geographical areas on which
hydrocarbon exploration prospects are located, which are developed by Employee
during the Employment Term, or originated by any third party and brought to the
attention of Employee during the Employment Term, together with information
relating thereto (including, without limitation, geological and seismic data and
interpretations thereof, whether in the form of maps, charts, logs,
seismographs, calculations, summaries, memoranda, opinions or other written or
charted means).
For purposes hereof "Intellectual Property" shall mean all ideas,
inventions, discoveries, processes, designs, methods, substances, articles,
computer programs and improvements (including, without limitation, enhancements
to, or further interpretation or processing of, information that was in the
possession of Employee prior to the date of this Agreement), whether or not
patentable or copyrightable, which do not fall within the definition of Business
Opportunities, which the Employee discovers, conceives, invents, creates or
develops, alone or with others, during the Employment Term, if such discovery,
conception, invention, creation or development (A) occurs in the course of the
Employee's employment with the Company, or (B) occurs with the use of any of the
Related Parties' time, materials or facilities, or (C) in the opinion of the
Board of Directors of the Company, relates or pertains in any way to the Related
Parties' purposes, activities or affairs.
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<PAGE>
(b) NON-COMPETE OBLIGATIONS DURING EMPLOYMENT TERM. Employee agrees
that during the Employment Term:
(i) Employee will not, other than through the Related Parties,
engage or participate in any manner, whether directly or indirectly, as an
employee, employer, consultant, agent, principal, partner, more than one percent
shareholder, officer, director, licensor, lender, lessor or in any other
individual or representative capacity, in any business or activity which is
engaged in leasing, acquiring, exploring, producing, gathering or marketing
hydrocarbons and related products; and
(ii) all investments made by Employee, directly or indirectly, which
relate to the leasing, acquisition, exploration, production, gathering or
marketing of hydrocarbons and related products shall be made solely through the
Related Parties; and Employee will, not, directly or indirectly, and will not
permit any of his controlled affiliates to: (A) invest or otherwise participate
alongside the Related Parties in any Business Opportunities, or (B) invest or
otherwise participate in any business or activity relating to a Business
Opportunity, regardless of whether any of the Related Parties ultimately
participates in such business or activity; provided that this subsection (b)
shall not preclude Employee from making investments in securities of oil and gas
companies which are publicly traded, if (1) the aggregate owned by Employee and
all affiliates does not exceed 5% of such company's outstanding securities, and
(2) the aggregate amount invested in such investments by Employee and all
affiliates after the date hereof does not exceed $200,000.
(c) CONFIDENTIALITY OBLIGATIONS. Employee hereby acknowledges that all
trade secrets and confidential or proprietary information of the Related Parties
(collectively referred to herein as "Confidential Information") constitute
valuable, special and unique assets of the Related Parties' business and that
access to and knowledge of such Confidential Information is essential to the
performance of Employee's duties hereunder. Employee agrees that during the
Employment Term and during the eighteen month period following the date of
termination of Employee's employment hereunder (the "Termination Date"),
Employee will hold the Confidential Information in strict confidence and will
not publish, disseminate or otherwise disclose, directly or indirectly, to any
person other than the Related Parties and their respective officers, directors
and employees, any Confidential Information or use any Confidential Information
for Employee's own personal benefit or the benefit of anyone other than the
Related Parties.
For purposes of this subsection (c), it is agreed that Confidential
Information includes, without limitation, any information heretofore or
hereafter acquired, developed or used by any of the Related Parties relating to
Business Opportunities or Intellectual Property or other geological,
geophysical, economic, financial or management aspects of the business,
operations, properties or prospects of the Related Parties, whether oral or in
written form in any of "Related Parties' Business Records" (as defined in
Section 7 below), but shall exclude any information which (A) has become part of
common knowledge or understanding in the oil and gas industry or otherwise in
the public domain (other than from disclosure by Employee in violation of this
Agreement), or (B) was rightfully in the possession of Employee, as shown by
Employee's records, prior to the date of the commencement of Employee's
employment with the Company; provided, however, that Employee shall provide to
the Company copies of all information described in clause (B); further provided,
however, that this subsection (c) shall not be applicable to the extent Employee
is required to testify in a judicial or regulatory proceeding pursuant to the
order of a judge or administrative law judge after Employee requests
confidential treatment for such Confidential Information.
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(d) POST EMPLOYMENT NON-COMPETE COVENANT. In the event, and only in the
event, that Employee's employment is terminated under the provisions of Sections
5(a)(i)(C) or 5(a)(ii), Employee agrees as follows:
(i) Employee will not engage or participate in any manner, whether
directly or indirectly through any family member or other person or as an
employee, employer, consultant, agent, principal, partner, more than one
percent shareholder, officer, director, licensor, lender, lessor or in any
other individual or representative capacity:
(A) during the one-year period following the Termination Date,
in any business or activity which is engaged in leasing, acquiring,
exploring, producing, gathering or marketing hydrocarbons and
related products within (1) any county or parish in which the
Company owns any oil and gas interests or conducts operations on the
Termination Date or in which the Company has owned any oil and gas
interests or conducted operations at any time during the six months
immediately preceding the Termination Date or (2) any county or
parish adjacent to any county or parish described in clause (1);
(B) during the eighteen month period following the Termination
Date, in any business or activity which is engaged in the leasing,
acquiring, exploring, producing, gathering or marketing of
hydrocarbons and related products within the boundaries of, or
within a two-mile radius of the boundaries of, any mineral property
interest of any of the Related Parties (including, without
limitation, a mineral lease, overriding royalty interest, production
payment, net profits interest, mineral fee interest or option or
right to acquire any of the foregoing, or an area of mutual interest
as designated pursuant to contractual agreements between the Company
and any third party) or any other property on which any of the
Related Parties has an option, right, license or authority to
conduct or direct exploratory activities, such as three-dimensional
seismic acquisition or other seismic, geophysical and geochemical
activities (but not including any preliminary geological mapping),
as of the Termination Date or during the six month period
immediately preceding the Termination Date; provided that, this
subsection (d) shall not preclude Employee from making investments
in securities of oil and gas companies which are publicly traded, if
(1) the aggregate owned by Employee and all affiliates does not
exceed 5% of such company's outstanding securities, and (2) the
aggregate amount invested in such investments by Employee and all
affiliates after the date hereof does not exceed $200,000.
(ii) Employee will not during the eighteen month period following
the Termination Date, attempt to solicit, entice, persuade or induce,
directly or indirectly, any employee (or person who within the preceding
ninety (90) days was an employee) of any of the Related Parties or any
other person who is under contract with or rendering services to any of
the Related Parties, to (i) terminate his or her employment by, or
contractual relationship with, such person, (ii) refrain from extending or
renewing the same (upon the same or new terms), (iii) refrain from
rendering services to or for such person (iv) become employed by or to
enter into contractual relations with any persons other than such person,
or (v) enter into a relationship with a competitor of any of the Related
Parties.
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(iii) Employee will promptly notify the Company if employment (or
any consulting relationship) is accepted with any third party engaged in
business activities similar to those conducted by the Company.
(e) The invalidity or non-enforceability of this Section 6 in any respect
shall not affect the validity or enforceability of this Section 6 in any other
respect or of any other provisions of this Agreement. In the event that any
provision of this Section 6 shall be held invalid or unenforceable by a court of
competent jurisdiction by reason of the geographic or business scope or the
duration thereof, such invalidity or unenforceability shall attach only to the
scope or duration of such provision and shall not affect or render invalid or
unenforceable any other provision of this Agreement, and, to the fullest extent
permitted by law, this Agreement shall be construed as if the geographic or
business scope or the duration of such provision had been more narrowly drafted
so as not to be invalid or unenforceable.
(f) Employee acknowledges that the Company's remedy at law for any breach
of the provisions of this Section 6 is and will be insufficient and inadequate
and that the Company shall be entitled to equitable relief, including by way of
temporary and permanent injunction, in addition to any remedies the Company may
have at law. The Company acknowledges that if the Company gives notice of its
intention to terminate Employee's employment pursuant to Section 5(a)(ii)(C) and
there exists no justification for termination of Employee thereunder, that
Employee's remedy at law for any such improper termination is and will be
insufficient and inadequate and that Employee shall be entitled to equitable
relief, including by way of temporary and permanent injunction, in addition to
any remedies Employee may have at law.
(g) The provisions of this Section 6 shall survive the termination of this
Agreement and the termination of Employee's employment hereunder.
(h) The representations and covenants contained in this Section 6 on the
part of the Employee will be construed as ancillary to and independent of any
other provision of this Agreement, and the existence of any claim or cause of
action of the Employee against the Company or any of the other Related Parties
or any officer, director or shareholder of the Company or any of the other
Related Parties, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of the covenants of
Employee contained in this Section 6.
(i) The parties to this Agreement agree that the limitations contained in
this Section 6 with respect to time, geographical area and scope of activity are
reasonable. However, if any court shall determine that the time, geographical
area or scope of activity of any restriction contained in this Section 6 is
unenforceable, it is the intention of the parties that such restrictive covenant
set forth herein shall not thereby be terminated but shall be deemed amended to
the extent required to render it valid and enforceable.
7. BUSINESS RECORDS.
(a) Employee agrees to deliver promptly to the Company, upon termination
of his employment hereunder, or at any other time when the Company so requests,
all non-public documents relating to the business of the Related Parties,
including, without limitation: all geological and geophysical reports and
related data such as maps, charts, logs, seismographs, seismic records and other
reports and related data, calculations, summaries, memoranda and opinions
relating to the foregoing, production records, electric logs, core data,
pressure data,
6
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lease files, well files and records, land files, abstracts, title opinions,
title or curative matters, contract files, notes, records, drawings, manuals,
correspondence, financial and accounting information, customer lists,
statistical data and compilations, patents, copyrights, trademarks, trade names,
inventions, formulae, methods, processes, agreements, contracts, manuals or any
documents relating to the business of the Related Parties, (collectively, the
"Related Parties' Business Records") and all copies thereof and therefrom.
(b) Employee confirms that all of the Related Parties' Business Records
(and all copies thereof and therefrom) which are required to be delivered to the
Company pursuant to this Section 7 constitute the exclusive property of the
Company and the other Related Parties.
(c) The obligation of confidentiality set forth in Section 6 shall
continue notwithstanding Employee's delivery of such documents to the Company.
(d) The provisions of this Section 7 shall continue in effect
notwithstanding termination of the Employee's employment hereunder for any
reason.
8. DIVISIBILITY OF AGREEMENT. In the event that any term, condition or
provision of this Agreement is for any reason rendered void, all remaining
terms, conditions and provisions shall remain and continue as valid and
enforceable obligations of the parties hereto.
9. NOTICES. Any notices or other communications required or permitted to
be sent hereunder shall be in writing and shall be duly given if personally
delivered or sent postage pre-paid by certified or registered mail, return
receipt requested, as follows:
(a) If to Employee:
Jerry M. Crews
8930 Sedgemoor Drive
Tomball, Texas 77375-5156
(b) If to the Company:
Texoil, Inc.
110 Cypress Station Drive, Suite 220
Houston, Texas 77090-1629
Any party may change his or its address for the sending of notice to such party
by written notice to the other parties sent in accordance with the provisions
hereof.
10. COMPLETE AGREEMENT. This Agreement contains the entire understanding
of the parties with respect to the employment of Employee and supersedes all
prior arrangements or understanding with respect thereto and all oral or written
employment agreements or arrangements between the Company (and any its
subsidiaries) and Employee. This Agreement may not be altered or amended except
by a writing, duly executed by the party against whom such alteration or
amendment is sought to be enforced.
11. ASSIGNMENT. This Agreement is personal and non-assignable by Employee.
It may be assigned by the Company to any Related Party or to a successor created
by a reorganization of Related Parties or to any entity with which the Company
may merge or consolidate; provided,
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however, that immediately following such merger or consolidation the
shareholders of the Company must retain at least 51% of the combined companies'
outstanding securities.
12. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be an original and all of which together shall constitute one and
the same agreement.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without giving effect to
applicable choice of law principles.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
COMPANY:
TEXOIL, INC.
By:_____________________________________
Name: Frank A. Lodzinski
Title: President
EMPLOYEE:
________________________________________
Jerry M. Crews
8
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of November 10,
1999, is entered into by and between Texoil, Inc., a Nevada corporation (the
"Company"), and Francis M. Mury, an individual residing in Houston, Texas
("Employee").
WHEREAS, the Company proposes to sell certain equity securities to Quantum
Energy Partners, LP, EnCap Equity 1996 Limited Partnership, Energy Capital
Investment Company PLC, V&C Energy Limited Partnership, Arthur L. Smith, Paul B.
David, Thomas A. Reiser and Jerry M. Crews (collectively, the "Investors"), and
the Investors propose to purchase certain equity securities of the Company
pursuant to the terms and conditions of that certain Preferred Stock Purchase
Agreement (the "Purchase Agreement") to be entered into by and among the Company
and the Investors (the "Proposed Transaction");
WHEREAS, as a condition to the consummation of the Proposed Transaction,
the Investors have required that Employee enter into an employment agreement on
the terms and conditions hereinafter set forth;
WHEREAS, Employee is presently employed by the Company and, as a material
inducement for the Investors to consummate the Proposed Transaction, is willing
to commit himself to continue to serve on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
Company and Employee hereby agree as follows:
1. EMPLOYMENT. The Company agrees to continue to employ Employee,
and Employee agrees to remain in the employ of the Company, upon the terms
and subject to conditions herein provided.
2. TERM. The employment of Employee shall be for a period (referred to
herein as the "Employment Term") commencing on the date of this Agreement and
ending on the earliest of (a) the first date on which the Investors cease to own
any Series A Preferred or Conversion Shares (as such terms are defined in the
Purchase Agreement), (b) the effective date of any Sale Transaction (as such
term is defined in the Purchase Agreement), or (c) the date of termination of
Employee's employment pursuant to Section 5 hereof.
3. POSITION AND DUTIES.
(a) POSITION. During the Employment Term, Employee shall serve as
Executive Vice President of the Company and in such other capacities as the
Board of Directors of the Company may designate from time to time. In such
capacities, Employee shall have such duties, functions, responsibilities and
authority customarily associated with the position of Executive Vice President
of a company comparable to the Company which is engaged in oil and gas
exploration and production; subject, however, to applicable restrictions imposed
by the Amended and Restated Articles of Incorporation, Certificate of
Designation or Bylaws of the Company and the Purchase Agreement and to the
directives of the Board of Directors of the Company.
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(b) DUTIES. During the Employment Term, Employee shall devote
substantially all of his time, skill and attention and his best efforts to the
business and affairs of the Company, and in furtherance of the business and
affairs of the Company and its subsidiaries (collectively the "Related
Parties"), except for usual, ordinary and customary periods of vacation and
absence due to illness or other disability; provided, however, that Employee may
devote reasonable periods of time in connection with other activities, if such
activities do not materially interfere with the performance of Employee's duties
and services hereunder and do not consume more than 10% of Employee's working
hours.
4. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. Employee shall be paid a base salary at the rate of
$110,000 per annum, less statutory payroll deductions, payable in accordance
with the payroll practices adopted by the Company. The base salary may be
reviewed periodically and increases in such base salary may be granted at the
sole discretion of the Board of Directors of the Company.
(b) BENEFITS. Employee shall, during the Employment Term, be eligible to
participate in such insurance, medical and other employee benefit plans of the
Company which may be in effect, from time to time, to the extent such plans are
generally available to other executive employees of the Company.
(c) VACATIONS. Employee shall be entitled to take such vacations as he may
desire, with pay, provided that such vacations do not interfere with the
performance of his duties and services hereunder.
(d) EXPENSES. Employee will be reimbursed for reasonable expenses incurred
in the performance of his duties and services hereunder and in furtherance of
the business of the Related Parties upon presentation by Employee of an itemized
account, accompanied by appropriate receipts satisfactory to the Board of
Directors of the Company, in substantiation of such expenses.
5. TERMINATION OF EMPLOYMENT.
(a) Employee's employment hereunder:
(i) shall automatically terminate upon the occurrence of any of the
following: (A) the mental or physical incapacity or inability of Employee
to perform his duties for a consecutive period of one hundred twenty (120)
days or a non-consecutive period of one hundred eighty (180) days during
any twelve-month period; (B) the death of Employee; or (C) the voluntary
resignation or retirement of Employee; and
(ii) may be terminated by the Board of Directors of the Company, at
any time, for "cause", which shall mean by reason of any of the following:
(A) Employee's conviction of, or plea of nolo contendere to, any felony or
to any crime or offense causing substantial harm to any of the Related
Parties (whether or not for personal gain) or involving acts of theft,
fraud, embezzlement, moral turpitude or similar conduct; (B) malfeasance
in the conduct of Employee's duties, including, but not limited to, (1)
willful and intentional misuse or diversion of any of the Related Parties'
funds, (2) embezzlement or (3) fraudulent or willful and material
misrepresentations or concealments on any written reports submitted to any
of the Related Parties; (C) material failure by Employee to perform the
duties of
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Employee's employment or material failure to follow or comply with the
reasonable and lawful written directives of the Board of Directors of the
Company, provided, however, that Employee shall have been informed, in
writing, of such material failure and given a period of not more than 30
days to remedy the failure if the failure is capable of being remedied
without penalty or damage to the Company; or (D) a material breach by
Employee of the provisions of this Agreement (including, without
limitation, any breach of Section 3(b) of this Agreement); provided,
however, that Employee shall have been informed, in writing, of such
material breach and given a period of not more than 30 days to remedy the
breach if the breach is capable of being remedied without penalty or
damage to the Company; or (E) a material breach by Employee of written
policies of the Company concerning employee discrimination or harassment.
(b) Upon any termination of Employee's employment pursuant to this Section
5, all obligations of the Company under this Agreement shall terminate.
6. BUSINESS OPPORTUNITIES AND INTELLECTUAL PROPERTY; PERSONAL INVESTMENTS;
CONFIDENTIALITY; COVENANT NOT TO COMPETE. Employee acknowledges that in the
course of his employment hereunder and performance of services on behalf of the
Related Parties he will become privy to various business opportunities, economic
and trade secrets and relationships of the Related Parties. Therefore, in
consideration of this Agreement and the consummation of the Proposed
Transaction, Employee hereby agrees as provided below in this Section 6.
(a) BUSINESS OPPORTUNITIES AND INTELLECTUAL PROPERTY. Employee hereby
assigns and agrees to assign to the Company and its successors, assigns or
designees, all of Employee's right, title and interest in and to all "Business
Opportunities" and "Intellectual Property" (as defined below), and further
acknowledges and agrees that all Business Opportunities and Intellectual
Property constitute the exclusive property of the Company.
For purposes hereof "Business Opportunities" shall mean all business
ideas, prospects, proposals or other opportunities pertaining to the lease,
acquisition, exploration, production, gathering or marketing of hydrocarbons and
related products and the exploration potential of geographical areas on which
hydrocarbon exploration prospects are located, which are developed by Employee
during the Employment Term, or originated by any third party and brought to the
attention of Employee during the Employment Term, together with information
relating thereto (including, without limitation, geological and seismic data and
interpretations thereof, whether in the form of maps, charts, logs,
seismographs, calculations, summaries, memoranda, opinions or other written or
charted means).
For purposes hereof "Intellectual Property" shall mean all ideas,
inventions, discoveries, processes, designs, methods, substances, articles,
computer programs and improvements (including, without limitation, enhancements
to, or further interpretation or processing of, information that was in the
possession of Employee prior to the date of this Agreement), whether or not
patentable or copyrightable, which do not fall within the definition of Business
Opportunities, which the Employee discovers, conceives, invents, creates or
develops, alone or with others, during the Employment Term, if such discovery,
conception, invention, creation or development (A) occurs in the course of the
Employee's employment with the Company, or (B) occurs with the use of any of the
Related Parties' time, materials or facilities, or (C) in the opinion of the
Board of Directors of the Company, relates or pertains in any way to the Related
Parties' purposes, activities or affairs.
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(b) NON-COMPETE OBLIGATIONS DURING EMPLOYMENT TERM. Employee agrees that
during the Employment Term:
(i) Employee will not, other than through the Related Parties,
engage or participate in any manner, whether directly or indirectly, as an
employee, employer, consultant, agent, principal, partner, more than one percent
shareholder, officer, director, licensor, lender, lessor or in any other
individual or representative capacity, in any business or activity which is
engaged in leasing, acquiring, exploring, producing, gathering or marketing
hydrocarbons and related products; and
(ii) all investments made by Employee, directly or indirectly, which
relate to the leasing, acquisition, exploration, production, gathering or
marketing of hydrocarbons and related products shall be made solely through the
Related Parties; and Employee will, not, directly or indirectly, and will not
permit any of his controlled affiliates to: (A) invest or otherwise participate
alongside the Related Parties in any Business Opportunities, or (B) invest or
otherwise participate in any business or activity relating to a Business
Opportunity, regardless of whether any of the Related Parties ultimately
participates in such business or activity; provided that this subsection (b)
shall not preclude Employee from making investments in securities of oil and gas
companies which are publicly traded, if (1) the aggregate owned by Employee and
all affiliates does not exceed 5% of such company's outstanding securities, and
(2) the aggregate amount invested in such investments by Employee and all
affiliates after the date hereof does not exceed $200,000.
(c) CONFIDENTIALITY OBLIGATIONS. Employee hereby acknowledges that all
trade secrets and confidential or proprietary information of the Related Parties
(collectively referred to herein as "Confidential Information") constitute
valuable, special and unique assets of the Related Parties' business and that
access to and knowledge of such Confidential Information is essential to the
performance of Employee's duties hereunder. Employee agrees that during the
Employment Term and during the eighteen month period following the date of
termination of Employee's employment hereunder (the "Termination Date"),
Employee will hold the Confidential Information in strict confidence and will
not publish, disseminate or otherwise disclose, directly or indirectly, to any
person other than the Related Parties and their respective officers, directors
and employees, any Confidential Information or use any Confidential Information
for Employee's own personal benefit or the benefit of anyone other than the
Related Parties.
For purposes of this subsection (c), it is agreed that Confidential
Information includes, without limitation, any information heretofore or
hereafter acquired, developed or used by any of the Related Parties relating to
Business Opportunities or Intellectual Property or other geological,
geophysical, economic, financial or management aspects of the business,
operations, properties or prospects of the Related Parties, whether oral or in
written form in any of "Related Parties' Business Records" (as defined in
Section 7 below), but shall exclude any information which (A) has become part of
common knowledge or understanding in the oil and gas industry or otherwise in
the public domain (other than from disclosure by Employee in violation of this
Agreement), or (B) was rightfully in the possession of Employee, as shown by
Employee's records, prior to the date of the commencement of Employee's
employment with the Company; provided, however, that Employee shall provide to
the Company copies of all information described in clause (B); further provided,
however, that this subsection (c) shall not be applicable to the extent Employee
is required to testify in a judicial or regulatory proceeding pursuant to the
order of a judge or administrative law judge after Employee requests
confidential treatment for such Confidential Information.
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(d) POST EMPLOYMENT NON-COMPETE COVENANT. In the event, and only in the
event, that Employee's employment is terminated under the provisions of Sections
5(a)(i)(C) or 5(a)(ii), Employee agrees as follows:
(i) Employee will not engage or participate in any manner, whether
directly or indirectly through any family member or other person or as an
employee, employer, consultant, agent, principal, partner, more than one
percent shareholder, officer, director, licensor, lender, lessor or in any
other individual or representative capacity:
(A) during the one-year period following the Termination Date,
in any business or activity which is engaged in leasing, acquiring,
exploring, producing, gathering or marketing hydrocarbons and
related products within (1) any county or parish in which the
Company owns any oil and gas interests or conducts operations on the
Termination Date or in which the Company has owned any oil and gas
interests or conducted operations at any time during the six months
immediately preceding the Termination Date or (2) any county or
parish adjacent to any county or parish described in clause (1);
(B) during the eighteen month period following the Termination
Date, in any business or activity which is engaged in the leasing,
acquiring, exploring, producing, gathering or marketing of
hydrocarbons and related products within the boundaries of, or
within a two-mile radius of the boundaries of, any mineral property
interest of any of the Related Parties (including, without
limitation, a mineral lease, overriding royalty interest, production
payment, net profits interest, mineral fee interest or option or
right to acquire any of the foregoing, or an area of mutual interest
as designated pursuant to contractual agreements between the Company
and any third party) or any other property on which any of the
Related Parties has an option, right, license or authority to
conduct or direct exploratory activities, such as three-dimensional
seismic acquisition or other seismic, geophysical and geochemical
activities (but not including any preliminary geological mapping),
as of the Termination Date or during the six month period
immediately preceding the Termination Date; provided that, this
subsection (d) shall not preclude Employee from making investments
in securities of oil and gas companies which are publicly traded, if
(1) the aggregate owned by Employee and all affiliates does not
exceed 5% of such company's outstanding securities, and (2) the
aggregate amount invested in such investments by Employee and all
affiliates after the date hereof does not exceed $200,000.
(ii) Employee will not during the eighteen month period following
the Termination Date, attempt to solicit, entice, persuade or induce,
directly or indirectly, any employee (or person who within the preceding
ninety (90) days was an employee) of any of the Related Parties or any
other person who is under contract with or rendering services to any of
the Related Parties, to (i) terminate his or her employment by, or
contractual relationship with, such person, (ii) refrain from extending or
renewing the same (upon the same or new terms), (iii) refrain from
rendering services to or for such person (iv) become employed by or to
enter into contractual relations with any persons other than such person,
or (v) enter into a relationship with a competitor of any of the Related
Parties.
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(iii) Employee will promptly notify the Company if employment (or
any consulting relationship) is accepted with any third party engaged in
business activities similar to those conducted by the Company.
(e) The invalidity or non-enforceability of this Section 6 in any respect
shall not affect the validity or enforceability of this Section 6 in any other
respect or of any other provisions of this Agreement. In the event that any
provision of this Section 6 shall be held invalid or unenforceable by a court of
competent jurisdiction by reason of the geographic or business scope or the
duration thereof, such invalidity or unenforceability shall attach only to the
scope or duration of such provision and shall not affect or render invalid or
unenforceable any other provision of this Agreement, and, to the fullest extent
permitted by law, this Agreement shall be construed as if the geographic or
business scope or the duration of such provision had been more narrowly drafted
so as not to be invalid or unenforceable.
(f) Employee acknowledges that the Company's remedy at law for any breach
of the provisions of this Section 6 is and will be insufficient and inadequate
and that the Company shall be entitled to equitable relief, including by way of
temporary and permanent injunction, in addition to any remedies the Company may
have at law. The Company acknowledges that if the Company gives notice of its
intention to terminate Employee's employment pursuant to Section 5(a)(ii)(C) and
there exists no justification for termination of Employee thereunder, that
Employee's remedy at law for any such improper termination is and will be
insufficient and inadequate and that Employee shall be entitled to equitable
relief, including by way of temporary and permanent injunction, in addition to
any remedies Employee may have at law.
(g) The provisions of this Section 6 shall survive the termination of this
Agreement and the termination of Employee's employment hereunder.
(h) The representations and covenants contained in this Section 6 on the
part of the Employee will be construed as ancillary to and independent of any
other provision of this Agreement, and the existence of any claim or cause of
action of the Employee against the Company or any of the other Related Parties
or any officer, director or shareholder of the Company or any of the other
Related Parties, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of the covenants of
Employee contained in this Section 6.
(i) The parties to this Agreement agree that the limitations contained in
this Section 6 with respect to time, geographical area and scope of activity are
reasonable. However, if any court shall determine that the time, geographical
area or scope of activity of any restriction contained in this Section 6 is
unenforceable, it is the intention of the parties that such restrictive covenant
set forth herein shall not thereby be terminated but shall be deemed amended to
the extent required to render it valid and enforceable.
7. BUSINESS RECORDS.
(a) Employee agrees to deliver promptly to the Company, upon termination
of his employment hereunder, or at any other time when the Company so requests,
all non-public documents relating to the business of the Related Parties,
including, without limitation: all geological and geophysical reports and
related data such as maps, charts, logs, seismographs, seismic records and other
reports and related data, calculations, summaries, memoranda and opinions
relating to the foregoing, production records, electric logs, core data,
pressure data,
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lease files, well files and records, land files, abstracts, title
opinions, title or curative matters, contract files, notes, records, drawings,
manuals, correspondence, financial and accounting information, customer lists,
statistical data and compilations, patents, copyrights, trademarks, trade names,
inventions, formulae, methods, processes, agreements, contracts, manuals or any
documents relating to the business of the Related Parties, (collectively, the
"Related Parties' Business Records") and all copies thereof and therefrom.
(b) Employee confirms that all of the Related Parties' Business Records
(and all copies thereof and therefrom) which are required to be delivered to the
Company pursuant to this Section 7 constitute the exclusive property of the
Company and the other Related Parties.
(c) The obligation of confidentiality set forth in Section 6 shall
continue notwithstanding Employee's delivery of such documents to the Company.
(d) The provisions of this Section 7 shall continue in effect
notwithstanding termination of the Employee's employment hereunder for any
reason.
8. DIVISIBILITY OF AGREEMENT. In the event that any term, condition or
provision of this Agreement is for any reason rendered void, all remaining
terms, conditions and provisions shall remain and continue as valid and
enforceable obligations of the parties hereto.
9. NOTICES. Any notices or other communications required or permitted to
be sent hereunder shall be in writing and shall be duly given if personally
delivered or sent postage pre-paid by certified or registered mail, return
receipt requested, as follows:
(a) If to Employee:
Francis M. Mury
17611 Fireside
Spring, Texas 77379-8016
(b) If to the Company:
Texoil, Inc.
110 Cypress Station Drive, Suite 220
Houston, Texas 77090-1629
Any party may change his or its address for the sending of notice to such party
by written notice to the other parties sent in accordance with the provisions
hereof.
10. COMPLETE AGREEMENT. This Agreement contains the entire understanding
of the parties with respect to the employment of Employee and supersedes all
prior arrangements or understanding with respect thereto and all oral or written
employment agreements or arrangements between the Company (and any its
subsidiaries) and Employee. This Agreement may not be altered or amended except
by a writing, duly executed by the party against whom such alteration or
amendment is sought to be enforced.
11. ASSIGNMENT. This Agreement is personal and non-assignable by Employee.
It may be assigned by the Company to any Related Party or to a successor created
by a reorganization of Related Parties or to any entity with which the Company
may merge or consolidate; provided,
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however, that immediately following such merger or consolidation the
shareholders of the Company must retain at least 51% of the combined companies'
outstanding securities.
12. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be an original and all of which together shall constitute
one and the same agreement.
13. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas, without giving effect to
applicable choice of law principles.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
COMPANY:
TEXOIL, INC.
By:_______________________________
Name: Frank A. Lodzinski
Title: President
EMPLOYEE:
__________________________________
Francis M. Mury
8
EXHIBIT 10.15
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of November 10,
1999, is entered into by and between Texoil, Inc., a Nevada corporation (the
"Company"), and Peggy C. Simpson, an individual residing in Houston, Texas
("Employee").
WHEREAS, the Company proposes to sell certain equity securities to Quantum
Energy Partners, LP, EnCap Equity 1996 Limited Partnership, Energy Capital
Investment Company PLC, V&C Energy Limited Partnership, Arthur L. Smith, Paul B.
David, Thomas A. Reiser and Jerry M. Crews (collectively, the "Investors"), and
the Investors propose to purchase certain equity securities of the Company
pursuant to the terms and conditions of that certain Preferred Stock Purchase
Agreement (the "Purchase Agreement") to be entered into by and among the Company
and the Investors (the "Proposed Transaction");
WHEREAS, as a condition to the consummation of the Proposed Transaction,
the Investors have required that Employee enter into an employment agreement on
the terms and conditions hereinafter set forth;
WHEREAS, Employee is presently employed by the Company and, as a material
inducement for the Investors to consummate the Proposed Transaction, is willing
to commit herself to continue to serve on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
Company and Employee hereby agree as follows:
1. EMPLOYMENT. The Company agrees to continue to employ Employee, and
Employee agrees to remain in the employ of the Company, upon the terms and
subject to conditions herein provided.
2. TERM. The employment of Employee shall be for a period (referred to
herein as the "Employment Term") commencing on the date of this Agreement and
ending on the earliest of (a) the first date on which the Investors cease to own
any Series A Preferred or Conversion Shares (as such terms are defined in the
Purchase Agreement), (b) the effective date of any Sale Transaction (as such
term is defined in the Purchase Agreement), or (c) the date of termination of
Employee's employment pursuant to Section 5 hereof.
3. POSITION AND DUTIES.
(a) POSITION. During the Employment Term, Employee shall serve as Vice
President and Controller of the Company and in such other capacities as the
Board of Directors of the Company may designate from time to time. In such
capacities, Employee shall have such duties, functions, responsibilities and
authority customarily associated with the position of Vice President and
Controller of a company comparable to the Company which is engaged in oil and
gas exploration and production; subject, however, to applicable restrictions
imposed by the Amended and Restated Articles of Incorporation, Certificate of
Designation or Bylaws of the Company and the Purchase Agreement and to the
directives of the Board of Directors of the Company.
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(b) DUTIES. During the Employment Term, Employee shall devote
substantially all of her time, skill and attention and her best efforts to the
business and affairs of the Company, and in furtherance of the business and
affairs of the Company and its subsidiaries (collectively the "Related
Parties"), except for usual, ordinary and customary periods of vacation and
absence due to illness or other disability; provided, however, that Employee may
devote reasonable periods of time in connection with other activities, if such
activities do not materially interfere with the performance of Employee's duties
and services hereunder and do not consume more than 10% of Employee's working
hours.
4. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. Employee shall be paid a base salary at the rate of
$75,000 per annum, less statutory payroll deductions, payable in accordance with
the payroll practices adopted by the Company. The base salary may be reviewed
periodically and increases in such base salary may be granted at the sole
discretion of the Board of Directors of the Company.
(b) BENEFITS. Employee shall, during the Employment Term, be eligible to
participate in such insurance, medical and other employee benefit plans of the
Company which may be in effect, from time to time, to the extent such plans are
generally available to other executive employees of the Company.
(c) VACATIONS. Employee shall be entitled to take such vacations as she
may desire, with pay, provided that such vacations do not interfere with the
performance of her duties and services hereunder.
(d) EXPENSES. Employee will be reimbursed for reasonable expenses incurred
in the performance of her duties and services hereunder and in furtherance of
the business of the Related Parties upon presentation by Employee of an itemized
account, accompanied by appropriate receipts satisfactory to the Board of
Directors of the Company, in substantiation of such expenses.
5. TERMINATION OF EMPLOYMENT.
(a) Employee's employment hereunder:
(i) shall automatically terminate upon the occurrence of any of the
following: (A) the mental or physical incapacity or inability of Employee
to perform her duties for a consecutive period of one hundred twenty (120)
days or a non-consecutive period of one hundred eighty (180) days during
any twelve-month period; (B) the death of Employee; or (C) the voluntary
resignation or retirement of Employee; and
(ii) may be terminated by the Board of Directors of the Company, at
any time, for "cause", which shall mean by reason of any of the following:
(A) Employee's conviction of, or plea of nolo contendere to, any felony or
to any crime or offense causing substantial harm to any of the Related
Parties (whether or not for personal gain) or involving acts of theft,
fraud, embezzlement, moral turpitude or similar conduct; (B) malfeasance
in the conduct of Employee's duties, including, but not limited to, (1)
willful and intentional misuse or diversion of any of the Related Parties'
funds, (2) embezzlement or (3) fraudulent or willful and material
misrepresentations or concealments on any written reports submitted to any
of the Related Parties; (C) material failure by Employee to perform the
duties of
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Employee's employment or material failure to follow or comply with the
reasonable and lawful written directives of the Board of Directors of the
Company, provided, however, that Employee shall have been informed, in
writing, of such material failure and given a period of not more than 30
days to remedy the failure if the failure is capable of being remedied
without penalty or damage to the Company; or (D) a material breach by
Employee of the provisions of this Agreement (including, without
limitation, any breach of Section 3(b) of this Agreement); provided,
however, that Employee shall have been informed, in writing, of such
material breach and given a period of not more than 30 days to remedy the
breach if the breach is capable of being remedied without penalty or
damage to the Company; or (E) a material breach by Employee of written
policies of the Company concerning employee discrimination or harassment.
(b) Upon any termination of Employee's employment pursuant to this Section
5, all obligations of the Company under this Agreement shall terminate.
6. BUSINESS OPPORTUNITIES AND INTELLECTUAL PROPERTY; PERSONAL INVESTMENTS;
CONFIDENTIALITY; COVENANT NOT TO COMPETE. Employee acknowledges that in the
course of her employment hereunder and performance of services on behalf of the
Related Parties she will become privy to various business opportunities,
economic and trade secrets and relationships of the Related Parties. Therefore,
in consideration of this Agreement and the consummation of the Proposed
Transaction, Employee hereby agrees as provided below in this Section 6.
(a) BUSINESS OPPORTUNITIES AND INTELLECTUAL PROPERTY. Employee hereby
assigns and agrees to assign to the Company and its successors, assigns or
designees, all of Employee's right, title and interest in and to all "Business
Opportunities" and "Intellectual Property" (as defined below), and further
acknowledges and agrees that all Business Opportunities and Intellectual
Property constitute the exclusive property of the Company.
For purposes hereof "Business Opportunities" shall mean all business
ideas, prospects, proposals or other opportunities pertaining to the lease,
acquisition, exploration, production, gathering or marketing of hydrocarbons and
related products and the exploration potential of geographical areas on which
hydrocarbon exploration prospects are located, which are developed by Employee
during the Employment Term, or originated by any third party and brought to the
attention of Employee during the Employment Term, together with information
relating thereto (including, without limitation, geological and seismic data and
interpretations thereof, whether in the form of maps, charts, logs,
seismographs, calculations, summaries, memoranda, opinions or other written or
charted means).
For purposes hereof "Intellectual Property" shall mean all ideas,
inventions, discoveries, processes, designs, methods, substances, articles,
computer programs and improvements (including, without limitation, enhancements
to, or further interpretation or processing of, information that was in the
possession of Employee prior to the date of this Agreement), whether or not
patentable or copyrightable, which do not fall within the definition of Business
Opportunities, which the Employee discovers, conceives, invents, creates or
develops, alone or with others, during the Employment Term, if such discovery,
conception, invention, creation or development (A) occurs in the course of the
Employee's employment with the Company, or (B) occurs with the use of any of the
Related Parties' time, materials or facilities, or (C) in the opinion of the
Board of Directors of the Company, relates or pertains in any way to the Related
Parties' purposes, activities or affairs.
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(b) NON-COMPETE OBLIGATIONS DURING EMPLOYMENT TERM. Employee agrees
that during the Employment Term:
(i) Employee will not, other than through the Related Parties,
engage or participate in any manner, whether directly or indirectly, as an
employee, employer, consultant, agent, principal, partner, more than one percent
shareholder, officer, director, licensor, lender, lessor or in any other
individual or representative capacity, in any business or activity which is
engaged in leasing, acquiring, exploring, producing, gathering or marketing
hydrocarbons and related products; and
(ii) all investments made by Employee, directly or indirectly, which
relate to the leasing, acquisition, exploration, production, gathering or
marketing of hydrocarbons and related products shall be made solely through the
Related Parties; and Employee will, not, directly or indirectly, and will not
permit any of her controlled affiliates to: (A) invest or otherwise participate
alongside the Related Parties in any Business Opportunities, or (B) invest or
otherwise participate in any business or activity relating to a Business
Opportunity, regardless of whether any of the Related Parties ultimately
participates in such business or activity; provided that this subsection (b)
shall not preclude Employee from making investments in securities of oil and gas
companies which are publicly traded, if (1) the aggregate owned by Employee and
all affiliates does not exceed 5% of such company's outstanding securities, and
(2) the aggregate amount invested in such investments by Employee and all
affiliates after the date hereof does not exceed $200,000.
(c) CONFIDENTIALITY OBLIGATIONS. Employee hereby acknowledges that all
trade secrets and confidential or proprietary information of the Related Parties
(collectively referred to herein as "Confidential Information") constitute
valuable, special and unique assets of the Related Parties' business and that
access to and knowledge of such Confidential Information is essential to the
performance of Employee's duties hereunder. Employee agrees that during the
Employment Term and during the eighteen month period following the date of
termination of Employee's employment hereunder (the "Termination Date"),
Employee will hold the Confidential Information in strict confidence and will
not publish, disseminate or otherwise disclose, directly or indirectly, to any
person other than the Related Parties and their respective officers, directors
and employees, any Confidential Information or use any Confidential Information
for Employee's own personal benefit or the benefit of anyone other than the
Related Parties.
For purposes of this subsection (c), it is agreed that Confidential
Information includes, without limitation, any information heretofore or
hereafter acquired, developed or used by any of the Related Parties relating to
Business Opportunities or Intellectual Property or other geological,
geophysical, economic, financial or management aspects of the business,
operations, properties or prospects of the Related Parties, whether oral or in
written form in any of "Related Parties' Business Records" (as defined in
Section 7 below), but shall exclude any information which (A) has become part of
common knowledge or understanding in the oil and gas industry or otherwise in
the public domain (other than from disclosure by Employee in violation of this
Agreement), or (B) was rightfully in the possession of Employee, as shown by
Employee's records, prior to the date of the commencement of Employee's
employment with the Company; provided, however, that Employee shall provide to
the Company copies of all information described in clause (B); further provided,
however, that this subsection (c) shall not be applicable to the extent Employee
is required to testify in a judicial or regulatory proceeding pursuant to the
order of a judge or administrative law judge after Employee requests
confidential treatment for such Confidential Information.
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(d) POST EMPLOYMENT NON-COMPETE COVENANT. In the event, and only in the
event, that Employee's employment is terminated under the provisions of Sections
5(a)(i)(C) or 5(a)(ii), Employee agrees as follows:
(i) Employee will not engage or participate in any manner, whether
directly or indirectly through any family member or other person or as an
employee, employer, consultant, agent, principal, partner, more than one
percent shareholder, officer, director, licensor, lender, lessor or in any
other individual or representative capacity:
(A) during the one-year period following the Termination Date,
in any business or activity which is engaged in leasing, acquiring,
exploring, producing, gathering or marketing hydrocarbons and
related products within (1) any county or parish in which the
Company owns any oil and gas interests or conducts operations on the
Termination Date or in which the Company has owned any oil and gas
interests or conducted operations at any time during the six months
immediately preceding the Termination Date or (2) any county or
parish adjacent to any county or parish described in clause (1);
(B) during the eighteen month period following the Termination
Date, in any business or activity which is engaged in the leasing,
acquiring, exploring, producing, gathering or marketing of
hydrocarbons and related products within the boundaries of, or
within a two-mile radius of the boundaries of, any mineral property
interest of any of the Related Parties (including, without
limitation, a mineral lease, overriding royalty interest, production
payment, net profits interest, mineral fee interest or option or
right to acquire any of the foregoing, or an area of mutual interest
as designated pursuant to contractual agreements between the Company
and any third party) or any other property on which any of the
Related Parties has an option, right, license or authority to
conduct or direct exploratory activities, such as three-dimensional
seismic acquisition or other seismic, geophysical and geochemical
activities (but not including any preliminary geological mapping),
as of the Termination Date or during the six month period
immediately preceding the Termination Date; provided that, this
subsection (d) shall not preclude Employee from making investments
in securities of oil and gas companies which are publicly traded, if
(1) the aggregate owned by Employee and all affiliates does not
exceed 5% of such company's outstanding securities, and (2) the
aggregate amount invested in such investments by Employee and all
affiliates after the date hereof does not exceed $200,000.
(ii) Employee will not during the eighteen month period following
the Termination Date, attempt to solicit, entice, persuade or induce,
directly or indirectly, any employee (or person who within the preceding
ninety (90) days was an employee) of any of the Related Parties or any
other person who is under contract with or rendering services to any of
the Related Parties, to (i) terminate his or her employment by, or
contractual relationship with, such person, (ii) refrain from extending or
renewing the same (upon the same or new terms), (iii) refrain from
rendering services to or for such person (iv) become employed by or to
enter into contractual relations with any persons other than such person,
or (v) enter into a relationship with a competitor of any of the Related
Parties.
5
<PAGE>
(iii) Employee will promptly notify the Company if employment (or
any consulting relationship) is accepted with any third party engaged in
business activities similar to those conducted by the Company.
(e) The invalidity or non-enforceability of this Section 6 in any respect
shall not affect the validity or enforceability of this Section 6 in any other
respect or of any other provisions of this Agreement. In the event that any
provision of this Section 6 shall be held invalid or unenforceable by a court of
competent jurisdiction by reason of the geographic or business scope or the
duration thereof, such invalidity or unenforceability shall attach only to the
scope or duration of such provision and shall not affect or render invalid or
unenforceable any other provision of this Agreement, and, to the fullest extent
permitted by law, this Agreement shall be construed as if the geographic or
business scope or the duration of such provision had been more narrowly drafted
so as not to be invalid or unenforceable.
(f) Employee acknowledges that the Company's remedy at law for any breach
of the provisions of this Section 6 is and will be insufficient and inadequate
and that the Company shall be entitled to equitable relief, including by way of
temporary and permanent injunction, in addition to any remedies the Company may
have at law. The Company acknowledges that if the Company gives notice of its
intention to terminate Employee's employment pursuant to Section 5(a)(ii)(C) and
there exists no justification for termination of Employee thereunder, that
Employee's remedy at law for any such improper termination is and will be
insufficient and inadequate and that Employee shall be entitled to equitable
relief, including by way of temporary and permanent injunction, in addition to
any remedies Employee may have at law.
(g) The provisions of this Section 6 shall survive the termination of this
Agreement and the termination of Employee's employment hereunder.
(h) The representations and covenants contained in this Section 6 on the
part of the Employee will be construed as ancillary to and independent of any
other provision of this Agreement, and the existence of any claim or cause of
action of the Employee against the Company or any of the other Related Parties
or any officer, director or shareholder of the Company or any of the other
Related Parties, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of the covenants of
Employee contained in this Section 6.
(i) The parties to this Agreement agree that the limitations contained in
this Section 6 with respect to time, geographical area and scope of activity are
reasonable. However, if any court shall determine that the time, geographical
area or scope of activity of any restriction contained in this Section 6 is
unenforceable, it is the intention of the parties that such restrictive covenant
set forth herein shall not thereby be terminated but shall be deemed amended to
the extent required to render it valid and enforceable.
7. BUSINESS RECORDS.
(a) Employee agrees to deliver promptly to the Company, upon termination
of her employment hereunder, or at any other time when the Company so requests,
all non-public documents relating to the business of the Related Parties,
including, without limitation: all geological and geophysical reports and
related data such as maps, charts, logs, seismographs, seismic records and other
reports and related data, calculations, summaries, memoranda and opinions
relating to the foregoing, production records, electric logs, core data,
pressure data,
6
<PAGE>
lease files, well files and records, land files, abstracts, title opinions,
title or curative matters, contract files, notes, records, drawings, manuals,
correspondence, financial and accounting information, customer lists,
statistical data and compilations, patents, copyrights, trademarks, trade names,
inventions, formulae, methods, processes, agreements, contracts, manuals or any
documents relating to the business of the Related Parties, (collectively, the
"Related Parties' Business Records") and all copies thereof and therefrom.
(b) Employee confirms that all of the Related Parties' Business Records
(and all copies thereof and therefrom) which are required to be delivered to the
Company pursuant to this Section 7 constitute the exclusive property of the
Company and the other Related Parties.
(c) The obligation of confidentiality set forth in Section 6 shall
continue notwithstanding Employee's delivery of such documents to the Company.
(d) The provisions of this Section 7 shall continue in effect
notwithstanding termination of the Employee's employment hereunder for any
reason.
8. DIVISIBILITY OF AGREEMENT. In the event that any term, condition or
provision of this Agreement is for any reason rendered void, all remaining
terms, conditions and provisions shall remain and continue as valid and
enforceable obligations of the parties hereto.
9. NOTICES. Any notices or other communications required or permitted
to be sent hereunder shall be in writing and shall be duly given if personally
delivered or sent postage pre-paid by certified or registered mail, return
receipt requested, as follows:
(a) If to Employee:
Peggy C. Simpson
3614 Lost Oak Drive
Spring, Texas 77388-5040
(b) If to the Company:
Texoil, Inc.
110 Cypress Station Drive, Suite 220
Houston, Texas 77090-1629
Any party may change her or its address for the sending of notice to such party
by written notice to the other parties sent in accordance with the provisions
hereof.
10. COMPLETE AGREEMENT. This Agreement contains the entire understanding
of the parties with respect to the employment of Employee and supersedes all
prior arrangements or understanding with respect thereto and all oral or written
employment agreements or arrangements between the Company (and any its
subsidiaries) and Employee. This Agreement may not be altered or amended except
by a writing, duly executed by the party against whom such alteration or
amendment is sought to be enforced.
11. ASSIGNMENT. This Agreement is personal and non-assignable by Employee.
It may be assigned by the Company to any Related Party or to a successor created
by a reorganization of Related Parties or to any entity with which the Company
may merge or consolidate; provided,
7
<PAGE>
however, that immediately following such merger or consolidation the
shareholders of the Company must retain at least 51% of the combined companies'
outstanding securities.
12. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be an original and all of which together shall constitute one and
the same agreement.
13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without giving effect to
applicable choice of law principles.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
COMPANY:
TEXOIL, INC.
By:__________________________________
Name: Frank A. Lodzinski
Title: President
EMPLOYEE:
______________________________________
Peggy C. Simpson
8
Exhibit 10.16
SEVENTH AMENDMENT TO CREDIT AGREEMENT
This Seventh Amendment to Amended and Restated Credit Agreement (this
"Amendment") is dated as of June 30, 1999 and is made by and among CLIFFWOOD OIL
& GAS CORP., CLIFFWOOD ENERGY COMPANY and CLIFFWOOD PRODUCTION CO. (the
"Borrowers"), COMERICA BANK-TEXAS, as Agent for itself and certain other lenders
(in such capacity, the "Agent") and as a Lender (as defined in the Agreement
described below) and FIRST UNION NATIONAL BANK, as a Lender.
R E C I T A L S:
WHEREAS, Borrowers, Agent and certain Lenders are party to the Amended and
Restated Credit Agreement dated as of August 1, 1997 (as amended through the
date hereof and as it may be further amended, extended, renewed or restated from
time to time, the "Agreement") pursuant to which Lenders made a revolving line
of credit available to Borrowers under the terms and provisions stated therein;
and
WHEREAS, Borrowers, Agent and Lenders desire to amend the Agreement in
connection with, among other things, redetermination the Borrowing Base;
NOW, THEREFORE, in consideration of the premises herein contained, the
covenants and agreements set forth below and other good and valuable
considerations, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows, intending to be legally bound:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS AND TERMS. Capitalized terms used in this
Amendment, to the extent not otherwise defined herein, shall have the same
meaning as in the Agreement, as amended hereby, and all references to
"Sections," "clauses," "Articles" and "Exhibits" are references to the
Agreement's sections, clauses, articles and exhibits.
ARTICLE II
AMENDMENTS
Section 2.1 AMENDMENTS TO SECTION 2.1. Section 2.8(a) is amended in its
entirety to read as follows:
"The Borrowing Base is acknowledged by the Borrowers, the Agent and
the Lenders to be $31,000,000. Commencing on September 1, 1999, and
continuing thereafter on the first day of each month until the next
redetermination of the Borrowing Base and the amount by which the
Borrowing Base shall be reduced are orally communicated
SEVENTH AMENDMENT TO CREDIT AGREEMENT - Page 1
<PAGE>
to the Borrowers pursuant to Section 2.8(c), the amount of the
Borrowing Base shall be reduced monthly by the amount of $516,666
(the "Commitment Reduction Schedule")."
Section 2.2 AMENDMENT TO SECTION 5.2. Section 5.2 is amended as follows:
(a) by deleting the word "Deliver" at the beginning thereof and
substituting the following words therefor: "Cause Texoil to deliver";
(b) by deleting the words "combined and combining "therefrom and
substituting the following therefor: "consolidated and consolidating";
(c) by adding after the word "Borrowers" each time it appears the
words "and the Guarantors"; and
(d) by deleting the words "each Borrower" and substituting
therefor the word "Texoil".
Section 2.3 AMENDMENT TO SECTION 5.3. Section 5.3 is amended by adding the
word "consolidated and consolidating" before the word "Financial" and by adding
the words "and the Guarantors" after the word" Borrowers."
Section 2.4 AMENDMENT TO SECTION 5.5. Section 5.5 is amended as by adding
the words "or any Guarantor" after the word "Borrower."
Section 2.5 AMENDMENT TO SECTION 5.6 AND 5.7. Sections 5.6 and 5.7 are
amended by adding the words "and each Guarantor" immediately after each
reference to "Borrower" and "Borrowers".
Section 2.6 AMENDMENT TO SECTION 6.13. Section 6.13 is amended by adding
the words "of the Borrowers and the Guarantors" after the word "capital" found
therein.
Section 2.7 AMENDMENT TO SECTION 6.16. Section 6.16 is amended by deleting
therefrom the word "its" and by adding the words "of the Borrowers, the
Guarantors and their respective Subsidiaries."
Section 2.8 AMENDMENT TO ARTICLE VI. Article VI is amended by adding
thereto a new section, numbered 6.17, reading as follows:
"6.17 Directly or indirectly, create, enter into any agreement with
any Person or otherwise cause or suffer to exist or become effective (or
permit the Guarantors or any Subsidiary so to do) any consensual lien or
restriction of any kind that by its terms restricts the ability of any
Borrower, Subsidiary or Guarantor to (a) pay any dividends or make any
other distributions on its capital stock, (b) pay any Indebtedness of such
Person, (c) make loans or advances to any Borrower, Subsidiary or
Guarantor or (d) transfer any of its Property
SEVENTH AMENDMENT TO CREDIT AGREEMENT - Page 2
<PAGE>
to any Borrower or Guarantor, except any encumbrance or restriction
contained in this Agreement, the Note Purchase Agreement and any other
agreement to the extent the same constitute restrictions on the sale or
other disposition of Property securing Indebtedness permitted hereunder
that is secured by a Permitted Lien on such Property."
ARTICLE III
CONDITIONS PRECEDENT AND EFFECTIVENESS OF INCREASES
Section 3.1 CONDITIONS PRECEDENT. This Amendment shall be effective upon
satisfaction of the following conditions precedent:
(a) The Agent shall have received, reviewed, and approved the
following documents and other items, appropriately executed and
acknowledged when necessary, all in form and substance satisfactory to the
Agent:
(i) multiple counterparts of this Amendment, as requested
by the Agent;
(ii) Amended and Restated Guaranty Agreement; and
(iii) such other agreements, documents, instruments, opinions,
certificates, waivers, consents and evidence as the Agent and the
Lenders may require.
ARTICLE IV
MISCELLANEOUS
Section 4.1 RATIFICATIONS, REPRESENTATIONS AND WARRANTIES. Except as
expressly modified and superseded by this Amendment, the terms and provisions of
the Agreement and the other Loan Documents are ratified and confirmed and shall
continue in full force and effect. The representations and warranties contained
herein and in all other Loan Documents, as amended hereby, shall be true and
correct as of, and as if made on, the date hereof. Borrowers, Agent and Lenders
agree that the Agreement as amended hereby shall continue to be legal, valid,
binding and enforceable in accordance with its terms.
Section 4.2 REFERENCE TO THE AGREEMENT. Each of the Loan Documents,
including the Agreement and any and all other agreements, documents or
instruments now or hereafter executed and delivered pursuant to the terms hereof
or pursuant to the terms of the Agreement as amended hereby, are hereby amended
so that any reference in such Loan Documents to the Agreement shall mean a
reference to the Agreement as amended hereby.
Section 4.3 EXPENSES OF AGENT, ETC. As provided for in the Agreement, each
Borrower agrees, jointly and severally, to pay on demand all reasonable cost and
expenses incurred by Agent in connection with the preparation, negotiation,
execution of this Amendment, and the other Loan Documents executed pursuant
hereto and any and all amendments, modifications and supplements
SEVENTH AMENDMENT TO CREDIT AGREEMENT - Page 3
<PAGE>
thereto including, without limitation, the reasonable cost of Agent's legal
counsel, and all reasonable costs and expenses incurred by Agent in connection
with the enforcement or preservation of any rights under the Agreement, as
amended hereby, or any other Loan Documents. In addition, the Borrowers agree to
pay an additional fee of $15,000 if the Loma Novia Field is included in the
Borrowing Base.
Section 4.4 SEVERABILITY. Any provisions of this Amendment held by court
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provisions so held to be invalid or unenforceable.
Section 4.5 APPLICABLE LAW. This Amendment and all other Loan Documents
executed pursuant hereto shall be governed by and construed in accordance with
the laws of the State of Texas.
Section 4.6 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and
shall enure to the benefit of Agent, Lenders and Borrowers and their respective
successors and assigns.
Section 4.7 COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original
but all of which when taken together shall constitute one and the same
instrument.
Section 4.8 HEADINGS. The headings, captions, and arrangements used in
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
Section 4.9 ENTIRE AGREEMENT. THIS AMENDMENT AND ALL OTHER INSTRUMENTS,
DOCUMENTS, AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS
AMENDMENT EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND
SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THIS AMENDMENT, AND MAY NOT
BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL
AGREEMENTS AMONG THE PARTIES HERETO.
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGE FOLLOWS.
SEVENTH AMENDMENT TO CREDIT AGREEMENT - Page 4
<PAGE>
EXECUTED as of the day and year first above written.
CLIFFWOOD OIL & GAS CORP.,
as a BORROWER
By:_______________________________
Frank A. Lodzinski
President
CLIFFWOOD ENERGY COMPANY,
as a BORROWER
By:________________________________
Frank A. Lodzinski
President
CLIFFWOOD PRODUCTION CO.,
as a BORROWER
By:_________________________________
Frank A. Lodzinski
President
SEVENTH AMENDMENT TO CREDIT AGREEMENT - SIGNATURE PAGE 1 OF 2
<PAGE>
COMERICA BANK-TEXAS,
as AGENT and a LENDER
By:_________________________________
James W. Kimble
Vice President
FIRST UNION NATIONAL BANK,
as a LENDER
By:_________________________________
Jay M. Chernosky
Senior Vice President
SEVENTH AMENDMENT TO CREDIT AGREEMENT - SIGNATURE PAGE 2 OF 2
Exhibit 10.17
EIGHTH AMENDMENT TO CREDIT AGREEMENT
This Eighth Amendment to Amended and Restated Credit Agreement (this
"Amendment") is dated as of July 30, 1999 and is made by and among CLIFFWOOD OIL
& GAS CORP., CLIFFWOOD ENERGY COMPANY and CLIFFWOOD PRODUCTION CO. (the
"Borrowers"), COMERICA BANK-TEXAS, as Agent for itself and certain other lenders
(in such capacity, the "Agent") and as a Lender (as defined in the Agreement
described below) and FIRST UNION NATIONAL BANK, as a Lender.
R E C I T A L S:
WHEREAS, Borrowers, Agent and certain Lenders are party to the Amended and
Restated Credit Agreement dated as of August 1, 1997 (as amended through the
date hereof and as it may be further amended, extended, renewed or restated from
time to time, the "Agreement") pursuant to which Lenders made a revolving line
of credit available to Borrowers under the terms and provisions stated therein;
and
WHEREAS, Borrowers, Agent and Lenders desire to amend the Agreement in
connection with, among other things, redetermination the Borrowing Base;
NOW, THEREFORE, in consideration of the premises herein contained, the
covenants and agreements set forth below and other good and valuable
considerations, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows, intending to be legally bound:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS AND TERMS. Capitalized terms used in this
Amendment, to the extent not otherwise defined herein, shall have the same
meaning as in the Agreement, as amended hereby, and all references to
"Sections," "clauses," "Articles" and "Exhibits" are references to the
Agreement's sections, clauses, articles and exhibits.
ARTICLE II
AMENDMENTS
Section 2.1 AMENDMENT TO SECTION 1.1. The definition of EBITDA found in
Section 1.1 is amended by deleting therefrom the words "NET OF" and inserting in
lieu thereof the word "PLUS."
Section 2.2 AMENDMENTS TO SECTION 2.1. Section 2.8(a) is amended in its
entirety to read as follows:
EIGHTH AMENDMENT TO CREDIT AGREEMENT - Page 1
<PAGE>
"The Borrowing Base is acknowledged by the Borrowers, the Agent and
the Lenders to be $36,000,000. Commencing on October 1, 1999, and
continuing thereafter on the first day of each month until the next
redetermination of the Borrowing Base and the amount by which the
Borrowing Base shall be reduced are orally communicated to the
Borrowers pursuant to Section 2.8(c), the amount of the Borrowing
Base shall be reduced monthly by the amount of $500,000 (the
"Commitment Reduction Schedule")."
ARTICLE III
CONDITIONS PRECEDENT AND EFFECTIVENESS OF INCREASES
Section 3.1 CONDITIONS PRECEDENT. This Amendment shall be effective upon
satisfaction of the following conditions precedent:
(a) The Agent shall have received, reviewed, and approved the
following documents and other items, appropriately executed and
acknowledged when necessary, all in form and substance satisfactory to the
Agent:
(i) multiple counterparts of this Amendment, as requested
by the Agent;
(ii) Amended and Restated Guaranty Agreement; and
(iii) such other agreements, documents, instruments, opinions,
certificates, waivers, consents and evidence as the Agent and the
Lenders may require.
(b) The Agent shall have received Deeds of Trust covering the new
Mortgaged Properties described on Schedule 3.1(b) to this Amendment.
ARTICLE IV
MISCELLANEOUS
Section 4.1 RATIFICATIONS, REPRESENTATIONS AND WARRANTIES. Except as
expressly modified and superseded by this Amendment, the terms and provisions of
the Agreement and the other Loan Documents are ratified and confirmed and shall
continue in full force and effect. The representations and warranties contained
herein and in all other Loan Documents, as amended hereby, shall be true and
correct as of, and as if made on, the date hereof. Borrowers, Agent and Lenders
agree that the Agreement as amended hereby shall continue to be legal, valid,
binding and enforceable in accordance with its terms.
Section 4.2 REFERENCE TO THE AGREEMENT. Each of the Loan Documents,
including the Agreement and any and all other agreements, documents or
instruments now or hereafter executed and delivered pursuant to the terms hereof
or pursuant to the terms of the Agreement as amended hereby, are hereby amended
so that any reference in such Loan Documents to the Agreement shall mean a
reference to the Agreement as amended hereby.
EIGHTH AMENDMENT TO CREDIT AGREEMENT - Page 2
<PAGE>
Section 4.3 EXPENSES OF AGENT, ETC. As provided for in the Agreement, each
Borrower agrees, jointly and severally, to pay on demand all reasonable cost and
expenses incurred by Agent in connection with the preparation, negotiation,
execution of this Amendment, and the other Loan Documents executed pursuant
hereto and any and all amendments, modifications and supplements thereto
including, without limitation, the reasonable cost of Agent's legal counsel, and
all reasonable costs and expenses incurred by Agent in connection with the
enforcement or preservation of any rights under the Agreement, as amended
hereby, or any other Loan Documents.
Section 4.4 SEVERABILITY. Any provisions of this Amendment held by court
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provisions so held to be invalid or unenforceable.
Section 4.5 APPLICABLE LAW. This Amendment and all other Loan Documents
executed pursuant hereto shall be governed by and construed in accordance with
the laws of the State of Texas.
Section 4.6 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and
shall enure to the benefit of Agent, Lenders and Borrowers and their respective
successors and assigns.
Section 4.7 COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original
but all of which when taken together shall constitute one and the same
instrument.
Section 4.8 HEADINGS. The headings, captions, and arrangements used in
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
Section 4.9 ENTIRE AGREEMENT. THIS AMENDMENT AND ALL OTHER INSTRUMENTS,
DOCUMENTS, AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS
AMENDMENT EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND
SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THIS AMENDMENT, AND MAY NOT
BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL
AGREEMENTS AMONG THE PARTIES HERETO.
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.
EIGHTH AMENDMENT TO CREDIT AGREEMENT - Page 3
<PAGE>
EXECUTED as of the day and year first above written.
CLIFFWOOD OIL & GAS CORP.,
as a BORROWER
By:_________________________________
Frank A. Lodzinski
President
CLIFFWOOD ENERGY COMPANY,
as a BORROWER
By:_________________________________
Frank A. Lodzinski
President
CLIFFWOOD PRODUCTION CO.,
as a BORROWER
By:_________________________________
Frank A. Lodzinski
President
SEVENTH AMENDMENT TO CREDIT AGREEMENT - SIGNATURE PAGE 1 OF 2
<PAGE>
COMERICA BANK-TEXAS,
as AGENT and a LENDER
By:_________________________________
James W. Kimble
Vice President
FIRST UNION NATIONAL BANK,
as a LENDER
By:_________________________________
Jay M. Chernosky
Senior Vice President
SEVENTH AMENDMENT TO CREDIT AGREEMENT - SIGNATURE PAGE 2 OF 2
Exhibit 10.18
NINTH AMENDMENT TO CREDIT AGREEMENT
This Ninth Amendment to Amended and Restated Credit Agreement (this
"Amendment") is dated as of October 29, 1999 and is made by and among CLIFFWOOD
OIL & GAS CORP., CLIFFWOOD ENERGY COMPANY and CLIFFWOOD PRODUCTION CO. (the
"Borrowers"), COMERICA BANK-TEXAS, as Agent for itself and certain other lenders
(in such capacity, the "Agent") and as a Lender (as defined in the Agreement
described below) and FIRST UNION NATIONAL BANK, as a Lender.
R E C I T A L S:
WHEREAS, Borrowers, Agent and certain Lenders are party to the Amended and
Restated Credit Agreement dated as of August 1, 1997 (as amended through the
date hereof and as it may be further amended, extended, renewed or restated from
time to time, the "Agreement") pursuant to which Lenders made a revolving line
of credit available to Borrowers under the terms and provisions stated therein;
and
WHEREAS, Borrowers, Agent and Lenders desire to amend the Agreement in
connection with, among other things, redetermination the Borrowing Base;
NOW, THEREFORE, in consideration of the premises herein contained, the
covenants and agreements set forth below and other good and valuable
considerations, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows, intending to be legally bound:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS AND TERMS. Capitalized terms used in this
Amendment, to the extent not otherwise defined herein, shall have the same
meaning as in the Agreement, as amended hereby, and all references to
"Sections," "clauses," "Articles" and "Exhibits" are references to the
Agreement's sections, clauses, articles and exhibits.
ARTICLE II
AMENDMENT
Section 2.1 AMENDMENT TO SECTION 2.8. Section 2.8(a) is amended in its
entirety to read as follows:
"The Borrowing Base is acknowledged by the Borrowers, the Agent and
the Lenders to be $40,000,000. Commencing on February 1, 2000, and
continuing thereafter on the first day of each month until the next
redetermination of the Borrowing Base and the amount by which the
Borrowing Base shall
NINTH AMENDMENT TO CREDIT AGREEMENT - PAGE 1
<PAGE>
be reduced are orally communicated to the Borrowers pursuant to
Section 2.8(c), the amount of the Borrowing Base shall be reduced
monthly by the amount of $800,000 (the "Commitment Reduction
Schedule")."
ARTICLE III
CONDITIONS PRECEDENT AND EFFECTIVENESS OF INCREASES
Section 3.1 CONDITIONS PRECEDENT. This Amendment shall be effective upon
satisfaction of the following conditions precedent:
(a) The Agent shall have received, reviewed, and approved the
following documents and other items, appropriately executed and
acknowledged when necessary, all in form and substance satisfactory to the
Agent:
(i) multiple counterparts of this Amendment, as requested by
the Agent;
(ii) Amended and Restated Guaranty Agreement; and
(iii) such other agreements, documents, instruments, opinions,
certificates, waivers, consents and evidence as the Agent and the
Lenders may require.
(b) The Agent shall have received Deeds of Trust covering the new
Mortgaged Properties described on Schedule 3.1(b) to this Amendment.
ARTICLE IV
MISCELLANEOUS
Section 4.1 RATIFICATIONS, REPRESENTATIONS AND WARRANTIES. Except as
expressly modified and superseded by this Amendment, the terms and provisions of
the Agreement and the other Loan Documents are ratified and confirmed and shall
continue in full force and effect. The representations and warranties contained
herein and in all other Loan Documents, as amended hereby, shall be true and
correct as of, and as if made on, the date hereof. Borrowers, Agent and Lenders
agree that the Agreement as amended hereby shall continue to be legal, valid,
binding and enforceable in accordance with its terms.
Section 4.2 REFERENCE TO THE AGREEMENT. Each of the Loan Documents,
including the Agreement and any and all other agreements, documents or
instruments now or hereafter executed and delivered pursuant to the terms hereof
or pursuant to the terms of the Agreement as amended hereby, are hereby amended
so that any reference in such Loan Documents to the Agreement shall mean a
reference to the Agreement as amended hereby.
Section 4.3 EXPENSES OF AGENT, ETC. As provided for in the Agreement, each
Borrower agrees, jointly and severally, to pay on demand all reasonable cost and
expenses incurred by Agent in connection with the preparation, negotiation,
execution of this Amendment, and the other Loan Documents executed pursuant
hereto and any and all amendments, modifications and supplements
NINTH AMENDMENT TO CREDIT AGREEMENT - PAGE 2
<PAGE>
thereto including, without limitation, the reasonable cost of Agent's legal
counsel, and all reasonable costs and expenses incurred by Agent in connection
with the enforcement or preservation of any rights under the Agreement, as
amended hereby, or any other Loan Documents.
Section 4.4 SEVERABILITY. Any provisions of this Amendment held by court
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provisions so held to be invalid or unenforceable.
Section 4.5 APPLICABLE LAW. This Amendment and all other Loan Documents
executed pursuant hereto shall be governed by and construed in accordance with
the laws of the State of Texas.
Section 4.6 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and
shall enure to the benefit of Agent, Lenders and Borrowers and their respective
successors and assigns.
Section 4.7 COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original
but all of which when taken together shall constitute one and the same
instrument.
Section 4.8 HEADINGS. The headings, captions, and arrangements used in
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
Section 4.9 ENTIRE AGREEMENT. THIS AMENDMENT AND ALL OTHER INSTRUMENTS,
DOCUMENTS, AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS
AMENDMENT EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND
SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THIS AMENDMENT, AND MAY NOT
BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL
AGREEMENTS AMONG THE PARTIES HERETO.
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.
NINTH AMENDMENT TO CREDIT AGREEMENT - PAGE 3
<PAGE>
EXECUTED as of the day and year first above written.
CLIFFWOOD OIL & GAS CORP.,
as a BORROWER
By:_______________________________
Frank A. Lodzinski
President
CLIFFWOOD ENERGY COMPANY,
as a BORROWER
By:_______________________________
Frank A. Lodzinski
President
CLIFFWOOD PRODUCTION CO.,
as a BORROWER
By:_______________________________
Frank A. Lodzinski
President
NINTH AMENDMENT TO CREDIT AGREEMENT - SIGNATURE PAGE 1 OF 2
<PAGE>
COMERICA BANK-TEXAS,
as AGENT and a LENDER
By:_______________________________
Daniel G. Steele
Senior Vice President
FIRST UNION NATIONAL BANK,
as a LENDER
By:_______________________________
Robert Wetteroff
Senior Vice President
NINTH AMENDMENT TO CREDIT AGREEMENT - SIGNATURE PAGE 2 OF 2
Exhibit 10.19
TENTH AMENDMENT TO CREDIT AGREEMENT
This Tenth Amendment to Amended and Restated Credit Agreement (this
"Amendment") is dated as of December 29, 1999 and is made by and among CLIFFWOOD
OIL & GAS CORP., CLIFFWOOD ENERGY COMPANY and CLIFFWOOD PRODUCTION CO. (the
"Borrowers"), COMERICA BANK-TEXAS, as Agent for itself and certain other lenders
(in such capacity, the "Agent") and as a Lender (as defined in the Agreement
described below) and FIRST UNION NATIONAL BANK, as a Lender.
R E C I T A L S:
WHEREAS, Borrowers, Agent and certain Lenders are party to the Amended and
Restated Credit Agreement dated as of August 1, 1997 (as amended through the
date hereof and as it may be further amended, extended, renewed or restated from
time to time, the "Agreement") pursuant to which Lenders made a revolving line
of credit available to Borrowers under the terms and provisions stated therein;
and
WHEREAS, Borrowers, Agent and Lenders desire to amend the Agreement in
connection with, among other things, redetermination of the Borrowing Base and
extension of the Commitment Termination Date;
NOW, THEREFORE, in consideration of the premises herein contained, the
covenants and agreements set forth below and other good and valuable
considerations, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows, intending to be legally bound:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS AND TERMS. Capitalized terms used in this
Amendment, to the extent not otherwise defined herein, shall have the same
meaning as in the Agreement, as amended hereby, and all references to
ASections,@ Aclauses,@ AArticles@ and "Exhibits" are references to the
Agreement=s sections, clauses, articles and exhibits.
ARTICLE II
AMENDMENT
Section 2.1 AMENDMENT TO SECTION 1.1. Section 1.1 is amended by deleting
from the definition of "COMMITMENT TERMINATION DATE" the reference to "August 4,
2000" and inserting in lieu thereof a reference to "July 1, 2001."
Section 2.2 AMENDMENT TO SECTION 2.8. Section 2.8(a) is amended in its
entirety to read as follows:
TENTH AMENDMENT TO CREDIT AGREEMENT - Page 1
<PAGE>
"Effective as of December 1, 1999, the Borrowing Base is
acknowledged by the Borrowers, the Agent and the Lenders to be
$45,000,000. Commencing on February 1, 2000, and continuing
thereafter on the first day of each month until the next
redetermination of the Borrowing Base and the amount by which the
Borrowing Base shall be reduced are orally communicated to the
Borrowers pursuant to Section 2.8(c), the amount of the Borrowing
Base shall be reduced monthly by the amount of $750,000 (the
"Commitment Reduction Schedule")."
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1 CONDITIONS PRECEDENT. This Amendment shall be effective when
the Agent shall have received, reviewed, and approved the following documents
and other items, appropriately executed and acknowledged when necessary, all in
form and substance satisfactory to the Agent:
(a) multiple counterparts of this Amendment, as requested by
the Agent; and
(b) such other agreements, documents, instruments, opinions,
certificates, waivers, consents and evidence as the Agent and the Lenders
may require.
ARTICLE IV
MISCELLANEOUS
Section 4.1 RATIFICATIONS, REPRESENTATIONS AND WARRANTIES. Except as
expressly modified and superseded by this Amendment, the terms and provisions of
the Agreement and the other Loan Documents are ratified and confirmed and shall
continue in full force and effect. The representations and warranties contained
herein and in all other Loan Documents, as amended hereby, shall be true and
correct as of, and as if made on, the date hereof. Borrowers, Agent and Lenders
agree that the Agreement as amended hereby shall continue to be legal, valid,
binding and enforceable in accordance with its terms.
Section 4.2 REFERENCE TO THE AGREEMENT. Each of the Loan Documents,
including the Agreement and any and all other agreements, documents or
instruments now or hereafter executed and delivered pursuant to the terms hereof
or pursuant to the terms of the Agreement as amended hereby, are hereby amended
so that any reference in such Loan Documents to the Agreement shall mean a
reference to the Agreement as amended hereby.
TENTH AMENDMENT TO CREDIT AGREEMENT - Page 2
<PAGE>
Section 4.3 EXPENSES OF AGENT, ETC. As provided for in the Agreement, each
Borrower agrees, jointly and severally, to pay on demand all reasonable cost and
expenses incurred by Agent in connection with the preparation, negotiation,
execution of this Amendment, and the other Loan Documents executed pursuant
hereto and any and all amendments, modifications and supplements thereto
including, without limitation, the reasonable cost of Agent's legal counsel, and
all reasonable costs and expenses incurred by Agent in connection with the
enforcement or preservation of any rights under the Agreement, as amended
hereby, or any other Loan Documents.
Section 4.4 SEVERABILITY. Any provisions of this Amendment held by court
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provisions so held to be invalid or unenforceable.
Section 4.5 APPLICABLE LAW. This Amendment and all other Loan Documents
executed pursuant hereto shall be governed by and construed in accordance with
the laws of the State of Texas.
Section 4.6 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and
shall enure to the benefit of Agent, Lenders and Borrowers and their respective
successors and assigns.
Section 4.7 COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original
but all of which when taken together shall constitute one and the same
instrument.
Section 4.8 HEADINGS. The headings, captions, and arrangements used in
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
Section 4.9 ENTIRE AGREEMENT. THIS AMENDMENT AND ALL OTHER INSTRUMENTS,
DOCUMENTS, AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS
AMENDMENT EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND
SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND
UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THIS AMENDMENT, AND MAY NOT
BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL
AGREEMENTS AMONG THE PARTIES HERETO.
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.
TENTH AMENDMENT TO CREDIT AGREEMENT - Page 3
<PAGE>
EXECUTED as of the day and year first above written.
CLIFFWOOD OIL & GAS CORP.,
as a BORROWER
By:__________________________________
Frank A. Lodzinski
President
CLIFFWOOD ENERGY COMPANY,
as a BORROWER
By:__________________________________
Frank A. Lodzinski
President
CLIFFWOOD PRODUCTION CO.,
as a BORROWER
By:__________________________________
Frank A. Lodzinski
President
TENTH AMENDMENT TO CREDIT AGREEMENT - SIGNATURE PAGE 1 OF 2
<PAGE>
COMERICA BANK-TEXAS,
as AGENT and a LENDER
By:__________________________________
Daniel G. Steele
Senior Vice President
FIRST UNION NATIONAL BANK,
as a LENDER
By:__________________________________
Name:
Title:
CONSENTED AND AGREED TO:
TEXOIL, INC.; TEXOIL COMPANY; AND
CLIFFWOOD EXPLORATION COMPANY
By:__________________________________
Frank A. Lodzinski
President
TENTH AMENDMENT TO CREDIT AGREEMENT - SIGNATURE PAGE 2 OF 2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM TEXOIL, INC. 12/31/99 10-KSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,223
<SECURITIES> 0
<RECEIVABLES> 6,252
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,842
<PP&E> 67,345
<DEPRECIATION> (10,119)
<TOTAL-ASSETS> 65,259
<CURRENT-LIABILITIES> 7,765
<BONDS> 0
0
28
<COMMON> 66
<OTHER-SE> 34,598
<TOTAL-LIABILITY-AND-EQUITY> 65,259
<SALES> 22,533
<TOTAL-REVENUES> 23,704
<CGS> 9,623
<TOTAL-COSTS> 2,000
<OTHER-EXPENSES> 4,856
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,482
<INCOME-PRETAX> 4,743
<INCOME-TAX> 1,591
<INCOME-CONTINUING> 3,152
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,152
<EPS-BASIC> .44
<EPS-DILUTED> .41
</TABLE>
