EXHIBIT 5.1
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TEXOIL, INC.
$10,000,000
7.875% Convertible Subordinated General Obligation Notes
NOTE PURCHASE AGREEMENT
Dated as of December 31, 1997
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NOTE PURCHASE AGREEMENT
This NOTE PURCHASE AGREEMENT dated as of December 31, 1997 is
among TEXOIL, INC., a Nevada corporation (the "COMPANY"), and RIMCO PARTNERS,
L.P., a Delaware limited partnership, RIMCO PARTNERS, ▇.▇. ▇▇, a Delaware
limited partnership, RIMCO PARTNERS, L.P. III, a Delaware limited partnership,
and RIMCO PARTNERS, ▇.▇. ▇▇, a Delaware limited partnership (together with their
respective successors and assigns, collectively, the "NOTEHOLDERS").
In consideration of the mutual covenants herein contained, the
Company and the Noteholders agree as follows:
ARTICLE I
DEFINITIONS, ETC.
SECTION 1.01 CERTAIN DEFINED TERMS. Capitalized terms used in
this Agreement and not otherwise defined herein shall have the respective
meanings set forth in ANNEX A attached hereto (such meanings to be equally
applicable to both singular and plural forms of the terms defined).
SECTION 1.02 COVENANT CONSTRUCTION. Each covenant contained
herein shall be construed (absent express provision to the contrary) as being
independent of each other covenant contained herein, so that compliance with any
one covenant shall not (absent such an express contrary provision) be deemed to
excuse compliance with any other covenant. Where any provision herein refers to
action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person.
SECTION 1.03 OTHER RULES OF CONSTRUCTION. The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement. All references herein to articles, sections, annexes, exhibits
and schedules shall, unless the context requires a different construction, be
deemed to be references to the articles and sections of this Agreement and the
annexes, exhibits and schedules attached hereto and made a part hereof. In this
Agreement, unless a clear contrary intention appears, the word "including" (and
with correlative meaning "include") means including, without limiting the
generality of any description preceding such term. The headings of the various
articles and sections of this Agreement are for convenience only and shall not
affect the meaning of the terms and conditions of this Agreement. No provision
of this Agreement shall be interpreted or
construed against any party solely because that party or its legal
representative drafted such provision.
ARTICLE II
SALE OF NOTES
SECTION 2.01 CONVERTIBLE NOTES. The Company will authorize the
issue and sale of $10,000,000 aggregate principal amount of its 7.875%
Convertible Subordinated General Obligation Notes (the "NOTES"). The Notes will
be convertible into shares of the common stock of the Company pursuant to and in
accordance with ARTICLE IV. Subject to the terms and conditions of this
Agreement, at the Closing provided for in ARTICLE III, the Company will issue
and sell to the Noteholders, and the Noteholders will purchase from the Company,
Notes in the principal amount specified opposite such Noteholder's name in
SCHEDULE A at the purchase price of 100% of the principal amount thereof. The
Notes shall be substantially in the form set out in EXHIBIT 2.01, with such
changes therefrom, if any, as may be approved by the Noteholders and the
Company.
ARTICLE III
CLOSING
The sale and purchase of the Notes to be purchased by the
Noteholders shall occur at the offices of ▇▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.P., ▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m., Houston time, at a closing (the "CLOSING")
on December 31, 1997 or on such other Business Day thereafter on or prior to
December 31, 1997 as may be agreed upon by the Company and the Noteholders. At
the Closing the Company will deliver to each Noteholder the Note to be purchased
by such Noteholder, registered in such Noteholder's name, against delivery by
such Noteholder to or for the account of the Company of immediately available
funds in the amount of the purchase price therefor by wire transfer to the
Company. If at the Closing the Company shall fail to tender such Notes to the
Noteholders as provided above in this ARTICLE III, or any of the conditions
specified in this ARTICLE III shall not have been fulfilled to the Noteholders'
satisfaction, the Noteholders shall, at the Noteholders' election, be relieved
of all further obligations under this Agreement, without thereby waiving any
rights the Noteholders may have by reason of such failure or such
nonfulfillment.
The Noteholders' obligation to purchase and pay for the Notes to
be sold to the Noteholders at the Closing is subject to the fulfillment to the
Noteholders' reasonable satisfaction, prior to or at the Closing, of the
following conditions:
SECTION 3.01 EXECUTION OF DOCUMENTS. The Noteholders shall have
received the following agreements (together with this Agreement, collectively,
the "TRANSACTION DOCUMENTS"), in such number of counterparts as the Noteholders
may reasonably request, each dated the date of the Closing and duly executed by
the Persons indicated below:
(a) the Notes duly executed by the Company;
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(b) Guaranty Agreements duly executed by each Guarantor; and
(c) the Registration Rights Agreement duly executed by the
Company and each Noteholder.
SECTION 3.02 MERGER. Evidence reasonably satisfactory to the
Noteholders that (a) the Merger has been consummated and become effective and
(b) that all of the Existing Noteholder Indebtedness shall have been exchanged
for shares of common stock in accordance with the terms thereof.
SECTION 3.03 CERTIFICATES. The Company shall have delivered to
the Noteholders:
(a) an Officer's Certificate, dated the date of the Closing,
certifying that the conditions specified in SECTION 3.05 and SECTION 3.06 have
been fulfilled;
(b) Officer's Certificates from the Company and the Guarantors
certifying as to the resolutions attached thereto and other corporate
proceedings relating to the authorization, execution and delivery of the Notes
and the other Transaction Documents to be executed by each such Person; and
(c) certificates of appropriate public officials as to the
corporate existence and good standing of, and the payment of all franchise taxes
owing by, the Company in the States of Nevada and Texas.
SECTION 3.04 OPINION OF COUNSEL. The Noteholders shall have
received opinions in form and substance satisfactory to the Noteholders, dated
the date of the Closing from ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., counsel for the Company
and Texoil Company, and from ▇▇▇▇▇▇ & Westheimer, P.C., counsel for Cliffwood
Oil & Gas Corp., covering such matters incident to the transactions contemplated
hereby as the Noteholders or the Noteholders' counsel may reasonably request
(and the Company hereby instructs its counsel to deliver such opinion to the
Noteholders).
SECTION 3.05 REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Company and the Guarantors in this Agreement and the other
Transaction Documents shall be correct when made and at the time of the Closing.
SECTION 3.06 PERFORMANCE; NO DEFAULT. The Company shall have
performed and complied with all agreements and conditions contained in this
Agreement or the other Transaction Documents required to be performed or
complied with by it prior to or at the Closing and after giving effect to the
issue and sale of the Notes (and the application of the proceeds thereof as
contemplated by SECTION 5.14) no Default or Event of Default shall have occurred
and be continuing.
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SECTION 3.07 PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and all documents and instruments incident to such transactions shall be
reasonably satisfactory to the Noteholders and the Noteholders' special counsel,
and the Noteholders and the Noteholders' special counsel shall have received all
such counterpart originals or certified or other copies of such documents as the
Noteholders or they may reasonably request.
ARTICLE IV
CONVERSION OF NOTES
SECTION 4.01. CONVERSION. (a) Each Noteholder shall have the
right, at the option of such Noteholder exercisable at any time that any of the
Notes shall remain outstanding, to convert the outstanding principal balance of
the Notes (or any portion thereof that is $1,000 or an integral multiple
thereof), plus accrued and unpaid interest due thereon to the effective date of
the conversion, into fully paid and non-assessable shares of common stock of the
Company, par value $.01 per share ("COMMON STOCK"). The number of shares of
Common Stock issuable in the conversion of the Notes shall be equal to the
quotient of the principal amount of the Notes (or the portion thereof) submitted
for conversion plus accrued, unpaid interest due thereon to the effective date
of conversion, divided by the "Conversion Price" (as defined below), subject to
possible adjustment as provided below. As used herein, the term "CONVERSION
PRICE" shall mean the price of $1.75 per share, or, in case an adjustment of
such price has taken place pursuant to the provisions hereof, then at the price
as last adjusted.
(b) If at any time following the issuance of the Notes up to and
including the Maturity Date (the "DETERMINATION PERIOD"), the average closing
price per share of Common Stock (as reported by the principal securities
exchange or trading market, as the case may be, on which the Common Stock is
then traded and subject to appropriate adjustment for any Stock Split) during a
period of 20 consecutive trading days immediately preceding any date during the
Determination Period (such 20-day average being referred to herein as the
"AVERAGE PRICE") equals or exceeds 130% of the Conversion Price (a "SPECIAL
CONVERSION EVENT"), the Company may, at its option exercisable in its sole
discretion at any time during the 30-day period following such Special
Conversion Event, convert all (but not less than all) of the outstanding
principal balance of the Notes, plus accrued, unpaid interest due thereon to the
effective date of such conversion into fully paid and non-assessable shares of
Common Stock at the Conversion Price in effect as of the effective date of such
conversion. Such conversion shall be deemed to have been effected immediately
upon the mailing of the notice referred to in SECTION 4.02(B) hereof, which
notice to be effective must be deposited in the mail on or prior to the close of
business on the thirtieth day following the Special Conversion Event, whereupon
the person or persons entitled to receive the Common Stock deliverable upon such
conversion shall thereupon be treated for all purposes as the record holder or
holders of such Common Stock, and the Notes shall be deemed to represent only
the right to receive certificates representing the number of shares of Common
Stock, plus cash in lieu of fractional shares in accordance with SECTION 4.04,
into which each such Note has been so converted. If the Company does not convert
the Notes in accordance with this SECTION 4.01(B) within the 30-day
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period following any Special Conversion Event, then a new period of trading days
shall begin for purposes of determining whether the Company may convert the
Notes pursuant to this SECTION 4.01(B).
(c) If, on December 31, 1999, (i) Cash Availability is less than
the sum of the aggregate outstanding principal of and accrued, unpaid interest
due on the Notes, and (ii) the Average Price of the Common Stock on such date is
greater than the Conversion Price, then the Noteholders must convert all
outstanding principal of the Notes, plus accrued, unpaid interest due thereon to
the effective date of such conversion into fully paid and non-assessable shares
of Common Stock at the Conversion Price then in effect.
(d) If, on December 31, 1999, (i) Cash Availability is less than
the sum of the aggregate outstanding principal of and accrued, unpaid interest
due on the Notes, and (ii) the Average Price of the Common Stock on such date is
less than the Conversion Price, but greater than 60% of the Conversion Price,
then the Noteholders must convert all outstanding principal of the Notes, plus
accrued, unpaid interest due thereon to the effective date of such conversion
into fully paid and non-assessable shares of Common Stock at the Average Price
as of December 31, 1999.
(e) If, on December 31, 1999, (i) Cash Availability is less than
the sum of the aggregate outstanding principal of and accrued, unpaid interest
due on the Notes, (ii) the Average Price of the Common Stock on such date is
equal to or less than 60% of the Conversion Price, and (iii) the Noteholders
elect not to extend the Maturity Date in accordance with SECTION 7.04, then the
Noteholders must convert all outstanding principal of the Notes, plus accrued,
unpaid interest due thereon to the effective date of such conversion into fully
paid and non-assessable shares of Common Stock at the Average Price as of
December 31, 1999.
SECTION 4.02. CONVERSION PROCEDURE. (a) If a Noteholder desires
to convert such Note into Common Stock pursuant to SECTION 4.01(A) hereof or if
the Notes have been converted pursuant to SECTIONS 4.01(B), (C), (D), or (E)
hereof, the Noteholder shall surrender the Note at the office of the Company,
duly endorsed to the Company or in blank, or accompanied by proper instruments
of transfer to the Company or in blank, accompanied, in the case of a conversion
pursuant to SECTIONS 4.01(A) or (E) hereof, by an irrevocable written notice to
the Company that the Noteholder elects so to convert this Note in accordance
with the terms hereof, and specifying the name or names (with address) in which
a certificate or certificates for Common Stock are to be issued.
(b) If the Company elects pursuant to SECTION 4.01(B) hereof to
convert the issued and outstanding Notes into Common Stock, the Company shall,
within 30 days after the Special Conversion Event with respect to which such
election is made, send notice (or cause notice to be sent) by first class mail,
postage prepaid, to each Noteholder of record of the Notes at such Noteholder's
address as specified pursuant to the Note Purchase Agreement. Each such notice
of conversion shall specify the date such conversion was effected, the
Conversion Price, the Conversion Rate (as defined in SECTION 4.03), the place or
places that the certificates representing the Notes shall
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be surrendered and that on and after such conversion date, interest will cease
to accrue on such Notes.
(c) The Company will, as soon as practicable after such surrender
of the Notes accompanied, in the case of a conversion pursuant to SECTIONS
4.01(A) or (E) hereof, by the written notice specified in SECTION 4.02(A) hereof
and compliance with any other conditions herein contained, deliver or cause to
be delivered, to the Person for whose account such Note was so surrendered,
certificates for the number of full shares of Common Stock to which such Person
shall be entitled upon conversion as aforesaid and a cash adjustment for any
fraction of a share of Common Stock as hereinafter provided. In the case of a
conversion pursuant to SECTIONS 4.01(A), (C), (D), or (E) hereof, such
conversion shall be deemed to have been made as of the date of such surrender of
the Note, and the Person entitled to receive the Common Stock deliverable upon
conversion of the Note shall be treated for all purposes as the record holder of
such Common Stock on such date of surrender.
SECTION 4.03. ADJUSTMENTS. The Conversion Price and the number of
shares of Common Stock or amount of any other securities and property as
hereinafter provided into which a Note is convertible (the "CONVERSION RATE")
shall be subject to adjustment from time to time effective upon each occurrence
of any of the following events. As used in this SECTION 4.03, the term "SHARES"
means, collectively, shares of Common Stock (i) issued or issuable upon
conversion of the Notes and (ii) converted, distributed, issued or issuable with
respect to, the shares included in clause (i) of this definition. In case by
reason of the operation of this SECTION 4.03 the Note shall be convertible into
any other shares of stock or other securities or property of the Company or of
any other corporation, any reference herein to the conversion of the Note shall
be deemed to refer to and include the conversion of the Note for such other
shares of stock or other securities or property.
(a) If the Company shall declare or pay any dividend with respect
to its Common Stock payable in Common Stock, subdivide the outstanding shares of
Common Stock into a greater number of shares of Common Stock, or reduce the
number of shares of Common Stock outstanding (by stock split, reverse stock
split, reclassification or otherwise than by repurchase of its Common Stock)
(any of such events being hereinafter called a "STOCK SPLIT"), the Conversion
Price and number of shares of Common Stock issuable upon conversion of the Notes
shall be appropriately adjusted so as to entitle the holder hereof to receive
upon conversion of the Note, for the same aggregate consideration provided
herein, the same number of shares of Common Stock, plus cash in lieu of
fractional Shares, as the holder would have received as a result of such Stock
Split had the holder hereof converted the Note in full immediately prior to such
Stock Split.
(b) If the Company shall merge or consolidate with or into one or
more corporations or partnerships and the Company is the sole surviving
corporation, or the Company shall adopt a plan of recapitalization or
reorganization in which shares of Common Stock are exchanged for or changed into
another class of stock or other security of the Company, the Noteholders shall,
for the same aggregate consideration provided herein, be entitled upon
conversion of the Notes to receive in lieu of the number of shares of Common
Stock (plus cash in lieu of
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fractional Shares) into which the Notes would otherwise be convertible, the
number of shares of Common Stock or other securities, plus cash in lieu of
fractional Shares, to which such holder would have been entitled pursuant to the
terms of the agreement or plan of merger, consolidation, recapitalization or
reorganization had such holder converted the Notes in full immediately prior to
such merger, consolidation, recapitalization or reorganization.
(c) If the Company is merged or consolidated with or into one or
more corporations or partnerships under circumstances in which the Company is
not the sole surviving corporation, or if the Company sells or otherwise
disposes of substantially all its assets, and in connection with any such
merger, consolidation or sale the holders of Common Stock receive stock or other
securities convertible into equity of the surviving or acquiring corporations or
entities, after the effective date of such merger, consolidation or sale, as the
case may be, the Noteholders shall, for the same aggregate consideration
provided herein, be entitled upon conversion of the Notes to receive, in lieu of
shares of Common Stock (plus cash in lieu of fractional Shares) into which the
Notes would otherwise be convertible, shares of such stock or other securities
(plus cash in lieu of fractional Shares) as the Noteholders would have received
pursuant to the terms of the merger, consolidation or sale had such Noteholder
converted the Notes in full immediately prior to such merger, consolidation or
sale. In the event of any consolidation, merger or sale as described in this
SECTION 4.03(C), provision shall be made in connection therewith for the
surviving or acquiring corporations or partnerships to assume all obligations
and duties of the Company hereunder with all such changes and adjustments in the
number or kind of shares of Common Stock or other securities or property or in
the Conversion Price as shall be required in connection with this SECTION 4.03.
(d) If the Company shall declare or pay any dividend, or make any
distribution, with respect to its Common Stock that is payable in preferred
stock or other securities, assets or rights to subscribe for or purchase any
security of the Company other than Common Stock, or that is payable in debt
securities of the Company convertible into Common Stock, preferred stock or
other equity securities of the Company, the holder hereof shall, for the same
aggregate consideration provided herein, be entitled to receive upon conversion
of the Notes in lieu of the shares of Common Stock (plus cash in lieu of
fractional Shares) into which the Notes would otherwise be convertible, the same
amount of Common Stock, preferred stock and other securities, assets or rights
to subscribe for or purchase any security (plus cash in lieu of fractional
Shares) as the holder would have received had the holder converted the Notes in
full immediately prior to any such dividend or distribution.
(e) If the Company (other than in connection with a sale
described in SECTION 4.03(C)) proposes to liquidate and dissolve, the Company
shall give notice thereof as provided in SECTION 4.05(E) hereof and shall permit
the Noteholders to convert any unconverted portion hereof at any time, if such
holder should elect to do so, and participate as a stockholder of the Company in
connection with such dissolution.
(f) If the Conversion Price shall fall below the par value of the
Common Stock, the Company agrees to use its best efforts to appropriately adjust
the par value of the Common Stock to an amount less than or equal to the
Conversion Price.
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(g) In order to protect each Noteholder against the dilution of
its interest in the Company, if and whenever on or after the date hereof the
Company issues or sells any Common Stock (except any Permitted Issuance) for a
consideration per share which is less than the initial Conversion Price (a
"SPECIAL ISSUANCE"), then forthwith upon such issuance or sale the number of
Shares (as defined in SECTION 4.03), as determined immediately prior to such
Special Issuance, will be increased to equal the New Conversion Shares (as
defined below), and the Conversion Price will be equal to the New Conversion
Price, each as determined pursuant to the following formulas:
NCS = S x ((OS + SI) / (OS + SI/OCP)
NCP = (OCP x S) / NCS
where:
S = the Shares (as defined in SECTION 4.03), as determined immediately
prior to such Special Issuance
OS = the number of shares of Common Stock outstanding immediately prior
to such Special Issuance on a fully diluted basis without giving
effect to such Special Issuance
NCS = the number of Shares (as defined in SECTION 4.03), as determined
immediately following the adjustment made by reason of this SECTION
4.03(G) ("NEW CONVERSION SHARES")
SI = the number of shares of Common Stock issued or sold (or deemed
issued or sold) in such Special Issuance
SI/OCP = the number of shares of Common Stock that the aggregate cash
consideration actually received by the Company for SI would purchase
at OCP
NCP = the "NEW CONVERSION PRICE"
OCP = the Conversion Price in effect immediately prior to such Special
Issuance
"PERMITTED ISSUANCES" means any and all issuances of shares of Common Stock
pursuant to (x) any stock option, stock purchase or other employee or director
benefit plan of the Company and (y) any warrant or other right to purchase
Common Stock, in each case specifically disclosed on SCHEDULE 4.03 attached
hereto.
(h) Whenever the Conversion Rate or the Conversion Price is
adjusted as provided in any provision of this SECTION 4.03:
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(i) the Company shall compute the adjusted Conversion Rate and
Conversion Price, as applicable, in accordance with this SECTION
4.03 and shall prepare a certificate signed by the Senior
Financial Officer of the Company setting forth the adjusted
Conversion Rate and Conversion Price, as applicable, and showing
in reasonable detail the facts upon which such adjustment is
based, and such certificate shall forthwith be filed with the
Company or its designee; and
(ii) a notice stating that the Conversion Rate and the Conversion
Price, as applicable, has been adjusted and setting forth the
adjusted Conversion Rate and the Conversion Price, as applicable,
shall forthwith be required, and as soon as practicable after it
is prepared, such notice shall be mailed by the Company to the
holder of record of each Note at such holder's address specified
pursuant to the Note Agreement.
(i) If at any time, as a result of any adjustment to the
Conversion Rate made pursuant to this SECTION 4.03, the holder of any Note
thereafter surrendered for conversion shall become entitled to receive any
shares of the Company other than shares of the Company's Common Stock or to
receive any other securities, the number of such other shares or securities so
receivable upon conversion of such Note shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the
provisions contained in this SECTION 4.03 with respect to the Common Stock.
(j) All of the events requiring adjustments pursuant to the Notes
are subject to such prohibitions, limitations, restrictions and other provisions
as set forth in this Agreement or the other Transaction Documents, as any of
same may be amended from time to time.
SECTION 4.04. CASH IN LIEU OF FRACTIONAL SHARES. No fractional
shares or scrip representing fractional shares of Common Stock shall be issued
upon the conversion of the Notes. Instead of any fractional share of Common
Stock that would otherwise be issuable upon conversion of the Notes, the Company
will pay a cash adjustment in respect of such fractional interest in an amount
equal to the same fraction of the market price per share of Common Stock (as
determined by the Board of Directors or in any manner prescribed by the Board of
Directors, which shall be the last reported sale price of the Common Stock on
the principal securities exchange or trading market on which the Common Stock is
then traded) at the close of business on the Business Day prior to the day of
surrender of shares for conversion or, in the case of conversion effected
pursuant to SECTION 4.01(B) hereof, the Business Day prior to the effective date
of such conversion.
SECTION 4.05. ADDITIONAL COMPANY OBLIGATIONS. (a) The Company
shall at all times reserve and keep available, out of its authorized and
unissued stock, solely for the purpose of effecting the conversion of the Notes,
such number of shares of its Common Stock free of preemptive rights as shall
from time to time be sufficient to effect the conversion of all Notes from time
to time outstanding. The Company shall from time to time, in accordance with the
laws of the State of Nevada, increase the authorized number of shares of Common
Stock if at any time the
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number of shares of Common Stock authorized but unissued shall not be sufficient
to permit the conversion of all the then outstanding Notes into Common Stock at
the Conversion Rate then in effect.
(b) If any shares of Common Stock required to be reserved for
purposes of conversion of the Notes require registration with or approval of any
governmental authority under any federal or state law before such shares may be
issued upon conversion, the Company will in good faith and as expeditiously as
possible endeavor to cause such shares to be duly registered or approved, as the
case may be. If the Common Stock is then traded on any other national securities
exchange or trading market, the Company will, if permitted by the rules of such
exchange or trading market, list and keep listed on such exchange or approved
for trading on such trading market, subject to official notice of issuance, all
shares of Common Stock issuable upon conversion of the Notes.
(c) The Company will pay any and all issue or other taxes that
may be payable in respect of any issue or delivery of shares of Common Stock on
conversion of the Notes. The Company shall not, however, be required to pay any
tax that may be payable in respect of any transfer involved in the issue or
delivery of Common Stock (or other securities or assets) in any name or names
other than that in which the Notes were registered, and no such issue or
delivery shall be made unless and until the Person requesting such issue has
paid to the Company or its designee the amount of such tax or has represented,
to the reasonable satisfaction of the Company, that such tax has been paid.
(d) Before taking any action that would cause an adjustment
increasing the Conversion Rate, such that the effective Conversion Price would
be below the then par or stated value of the Common Stock, the Company will take
such corporate action as may, in the opinion of counsel to the Company, be
necessary in order that the Company may validly and legally issue fully paid and
non-assessable shares of Common Stock at the Conversion Rate as so adjusted.
(e) In case the Company proposes, to the extent then permitted by
this Agreement and the other Transaction Documents,
(i) to pay any stock dividend upon the Common Stock or
make any distribution (other than ordinary cash dividends payable
out of earnings) or offer any subscription or other rights to the
holders of Common Stock, or
(ii) to effect any capital reorganization or
reclassification of capital stock of the Company, or
(iii) to effect the consolidation, merger, sale of all or
substantially all of the assets, liquidation, dissolution or
winding up of the Company, or
(iv) to take any other action that would result in any
adjustment pursuant to SECTION 4.03 in the number of Shares or
the Conversion Price,
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then the Company shall cause notice of any such intended action to be given to
the Noteholders not less than 30 nor more than 60 days prior to the date on
which the transfer books of the Company shall close or a record be taken for
such dividend or distribution, or the date when such capital reorganization,
reclassification, consolidation, merger, sale, liquidation, dissolution or
winding up shall be effected, or the date of such other event, as the case may
be.
SECTION 4.06. CONVERSION RATE INCREASE. (a) The Company from time
to time may increase the Conversion Rate by any amount for any period of time if
the period is at least 20 days and if the increase is irrevocable during the
period. Whenever the Conversion Rate is so increased, the Company shall mail to
Noteholders a notice of the increase at least 30 days before the date the
increased Conversion Rate takes effect, and such notice shall state the
increased Conversion Rate and the period it will be in effect.
(b) The Company may make such increases in the Conversion Rate,
in addition to those required or allowed by the Notes, as shall be determined by
it, as evidenced by a resolution of the Company's Board of Directors, to be
advisable in order to avoid or diminish any income tax to holders of Common
Stock resulting from any dividend or distribution of stock or issuance of rights
or warrants to purchase or subscribe for stock or from any event treated as such
for income tax purposes.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Noteholders that:
SECTION 5.01 ORGANIZATION; POWER AND AUTHORITY. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada, and is duly qualified as a foreign corporation and is in
good standing in each jurisdiction in which such qualification is required by
law, other than those jurisdictions as to which the failure to be so qualified
or in good standing could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. The Company has the corporate power
and authority to own or hold under lease the properties it purports to own or
hold under lease, to transact the business it transacts and proposes to
transact, to execute and deliver this Agreement and the other Transaction
Documents to which it is a party and to perform the provisions hereof and
thereof.
SECTION 5.02 AUTHORIZATION, ETC. This Agreement and the other
Transaction Documents to which the Company is a party have been duly authorized
by all necessary corporate action on the part of the Company, and this Agreement
constitutes, and upon execution and delivery thereof each such other Transaction
Document will constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (b) general
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principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
SECTION 5.03 COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC. The
execution, delivery and performance by the Company of this Agreement and the
other Transaction Documents to which it is a party will not (a) contravene,
result in any breach of, or constitute a default under, or result in the
creation of any Lien in respect of any property of the Company or any Subsidiary
of the Company under, any indenture, mortgage, deed of trust, loan, purchase or
credit agreement, lease, corporate charter or by-laws, or any other agreement or
instrument to which the Company or any Subsidiary of the Company is bound or by
which the Company or any Subsidiary of the Company or any of their respective
properties may be bound or affected the consequence of which would have a
Material Adverse Effect, (b) conflict with or result in a breach of any of the
terms, conditions or provisions of any order, judgment, decree, or ruling of any
court, arbitrator or Governmental Authority in respect of a proceeding to which
the Company or any Subsidiary of the Company is a party or (c) to the knowledge
of the Company, violate any provision of any statute or other rule or regulation
of any Governmental Authority applicable to the Company or any Subsidiary of the
Company.
SECTION 5.04 GOVERNMENTAL AUTHORIZATIONS, ETC. No consent,
approval or authorization of, or registration, filing or declaration with, any
Governmental Authority is required in connection with the execution, delivery or
performance by the Company of this Agreement or the other Transaction Documents
to which it is a party.
SECTION 5.05 SUBSIDIARIES. SCHEDULE 5.05 contains complete and
correct lists of the Company's Subsidiaries, showing, as to each Subsidiary, the
correct name thereof, the jurisdiction of its organization, and the percentage
of shares of each class of its capital stock or similar equity interests
outstanding owned by the Company and each other Subsidiary. No Subsidiary is a
party to, or otherwise subject to any legal restriction or any agreement (other
than this Agreement, the Credit Agreement and customary limitations imposed by
corporate law statutes) restricting the ability of such Subsidiary to pay
dividends out of profits or make any other similar distributions of profits to
the Company or any of its Subsidiaries that owns outstanding shares of capital
stock or similar equity interests of such Subsidiary.
SECTION 5.06 FINANCIAL STATEMENTS. The consolidated balance sheet
of the Company and its Subsidiaries as at September 30, 1997, and the related
consolidated statements of income, retained earnings and cash flows for the
9-month period then ended, copies of which the Company has delivered to each
Noteholder, fairly present in all material respects the consolidated financial
position of the Company and its Subsidiaries as of such date and the
consolidated results of their operations and cash flows for such period and have
been prepared in accordance with GAAP consistently applied throughout the
periods involved except as set forth in the notes thereto (subject, in the case
of any interim financial statements, to normal year-end adjustments).
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SECTION 5.07 DISCLOSURE. This Agreement, the documents,
certificates or other writings delivered to the Noteholders by or on behalf of
the Company in connection with the transactions contemplated hereby and the
financial statements referred to in SECTION 5.06, taken as a whole, do not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading. Except as
disclosed in the financial statements referred to in SECTION 5.06, since
September 30, 1997, there has been no change in the financial condition,
operations, business, properties or prospects of the Company or any Subsidiary
except changes that individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect. There is no fact known to the
Company that could reasonably be expected to have a Material Adverse Effect that
has not been set forth herein or in the other documents, certificates and other
writings (including the financial statements referred to in SECTION 5.06)
delivered to the Noteholders by or on behalf of the Company specifically for use
in connection with the transactions contemplated hereby.
SECTION 5.08 LITIGATION. Except as disclosed in SCHEDULE 5.08,
there are no actions, suits or proceedings pending of which the Company or any
of its Subsidiaries has received notice or, to the knowledge of the Company,
threatened against or affecting the Company or any Subsidiary of the Company or
any property of the Company or any Subsidiary in any court or before any
arbitrator of any kind or before or by any Governmental Authority that,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
SECTION 5.09 OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.
Neither the Company nor any Subsidiary of the Company is in default under any
term of any agreement or instrument to which it is a party or by which it is
bound, or any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority arising out of any proceeding to which it is a party or
of which it has notice or is in violation of any applicable law, ordinance, rule
or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
SECTION 5.10 TAXES. The Company and its Subsidiaries have filed
all tax returns that are required to have been filed in any jurisdiction, and
have paid all taxes shown to be due and payable on such returns and all other
taxes and assessments levied upon them or their properties, assets, income or
franchises, to the extent such taxes and assessments have become due and payable
and before they have become delinquent, except for any taxes and assessments (i)
the amount of which is not individually or in the aggregate Material or (ii) the
amount, applicability or validity of which is currently being contested in good
faith by appropriate proceedings and with respect to which the Company or a
Subsidiary, as the case may be, has established adequate reserves in accordance
with GAAP. The Company knows of no basis for any other tax or assessment that,
if imposed, could reasonably be expected to have a Material Adverse Effect. The
charges, accruals and reserves on the books of the Company and its Subsidiaries
in respect of Federal, state or other taxes for all fiscal periods are adequate
in all material respects.
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SECTION 5.11 TITLE TO PROPERTY. The Company and its Subsidiaries
have good and sufficient title to their respective properties that individually
or in the aggregate are Material, including all such properties reflected in the
most recent audited balance sheet referred to in SECTION 5.06 or purported to
have been acquired by the Company or any Subsidiary after said date, in each
case free and clear of Liens other than those permitted by this Agreement. All
leases that individually or in the aggregate are Material are valid and
subsisting and are in full force and effect in all material respects.
SECTION 5.12 LICENSES, PERMITS, ETC. The Company and its
Subsidiaries own or possess all licenses, permits, franchises, authorizations,
patents, copyrights, service marks, trademarks and trade names, or rights
thereto, that individually or in the aggregate are Material, without known
conflict with the rights of others. To the best knowledge of the Company, (a) no
product of the Company infringes in any material respect any license, permit,
franchise, authorization, patent, copyright, service ▇▇▇▇, trademark, trade name
or other right owned by any other Person; and (b) there is no Material violation
by any Person of any right of the Company or any of its Subsidiaries with
respect to any patent, copyright, service ▇▇▇▇, trademark, trade name or other
right owned or used by the Company or any of its Subsidiaries.
SECTION 5.13 COMPLIANCE WITH ERISA.
(a) The Company and each ERISA Affiliate have operated and
administered each Plan, if any, in compliance with all applicable laws except
for such instances of noncompliance as have not resulted in and could not
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any ERISA Affiliate has incurred any liability pursuant to Title I
or IV or ERISA or the penalty or excise tax provisions of the Code relating to
employee benefit plans (as defined in Section 3 of ERISA), and no event,
transaction or condition has occurred or exists that could reasonably be
expected to result in the incurrence of any such liability by the Company or any
ERISA Affiliate, or in the imposition of any Lien on any of the rights,
properties or assets of the Company or any ERISA Affiliate, in either case
pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions
or to Section 401(a)(29) or 412 of the Code, other than such liabilities or
Liens as would not be individually or in the aggregate Material.
(b) The present value of the aggregate benefit liabilities under
each of the Plans (other than Multiemployer Plans), determined as of the end of
such Plan's most recently ended plan year on the basis of the actuarial
assumptions specified for funding purposes in such Plan's most recent actuarial
valuation report, did not exceed the aggregate current value of the assets of
such Plan allocable to such benefit liabilities. The term "BENEFIT LIABILITIES"
has the meaning specified in section 4001 of ERISA and the terms "CURRENT VALUE"
and "PRESENT VALUE" have the meaning specified in section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred
withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer
Plans that individually or in the aggregate are Material.
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(d) The expected post-retirement benefit obligation (determined
as of the last day of the Company's most recently ended fiscal year in
accordance with Financial Accounting Standards Board Statement No. 106, without
regard to liabilities attributable to continuation coverage mandated by section
4980B of the Code) of the Company and its Subsidiaries is not Material.
SECTION 5.14 USE OF PROCEEDS; MARGIN REGULATIONS. The Company
will apply $6,050,000 of the proceeds of the sale of the Notes to repay the
indebtedness described on SCHEDULE 5.14 and the remainder of the proceeds of the
sale of the Notes for working capital purposes. No part of the proceeds from the
sale of the Notes hereunder will be used, directly or indirectly, for the
purpose of buying or carrying any margin stock within the meaning of Regulation
G of the Board of Governors of the Federal Reserve System (12 CFR 207), or for
the purpose of buying or carrying or trading in any securities under such
circumstances as to involve the Company in a violation of Regulation X of said
Board (12 CFR 224) or to involve any broker or dealer in a violation of
Regulation T of said Board (12 CFR 220).
SECTION 5.15 STATUS UNDER CERTAIN STATUTES. Neither the Company
nor any Subsidiary is subject to regulation under the Investment Company Act of
1940, as amended, the Public Utility Holding Company Act of 1935, as amended,
the Interstate Commerce Act, as amended, or the Federal Power Act, as amended.
SECTION 5.16 CAPITALIZATION. After giving effect to the Merger
and the transactions related thereto, the authorized capital stock of the
Company consists solely of 50,000,000 shares of $.01 par common stock, of which
36,523,638 shares are issued and outstanding and 10,000,000 shares of $.01 par
Series A preferred stock, of which no shares are issued and outstanding.
SECTION 5.17 SECURITIES MATTERS. Other than offers to Accredited
Investors, neither the Company nor anyone acting on its behalf has directly or
indirectly offered the Notes or any part thereof or any similar securities for
sale to, or solicited any offer to buy any of the same from, or otherwise
approached or negotiated in respect thereof with, anyone other than the
Noteholders named in SCHEDULE A. Neither the Company nor anyone acting on its
behalf has taken or will take any action which would subject the issuance and
sale of the Notes to the registration and prospectus delivery provisions of the
Securities Act.
SECTION 5.18 ENVIRONMENTAL MATTERS. Neither the Company nor any
Subsidiary has knowledge of any claim or has received any notice of any claim,
and no proceeding has been instituted of which the Company has notice raising
any claim against the Company or any of its Subsidiaries or any of their
respective real properties now or formerly owned, leased or operated by any of
them or other assets, alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect. Except as otherwise disclosed
to the Noteholders in writing, (a) neither the Company nor any Subsidiary has
knowledge of any facts which would give rise to any claim, public
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or private, of violation of Environmental Laws or damage to the environment
emanating from, occurring on or in any way related to real properties now or
formerly owned, leased or operated by any of them or to other assets or their
use, except, in each case, such as could not reasonably be expected to result in
a Material Adverse Effect; (b) neither the Company nor any of its Subsidiaries
has stored any Hazardous Materials on real properties now or formerly owned,
leased or operated by any of them and has not disposed of any Hazardous
Materials in a manner contrary to any Environmental Laws in each case in any
manner that could reasonably be expected to result in a Material Adverse Effect;
and (c) all buildings on all real properties now owned, leased or operated by
the Company or any of its Subsidiaries are in compliance with applicable
Environmental Laws, except where failure to comply could not reasonably be
expected to result in a Material Adverse Effect.
ARTICLE VI
REPRESENTATIONS OF THE PURCHASER
SECTION 6.01 PURCHASE FOR INVESTMENT. Each Noteholder represents
that it is acquiring its Notes for its own account or for one of its separate
accounts (or for the account of trusts for which it is trustee) for investment
with no intention of presently distributing or reselling the same, subject,
nevertheless, to its right to dispose of, in compliance with applicable
securities laws, its respective Notes, or any part of any thereof held by it, if
at some future time in its sole discretion it deems it advisable so to do. Each
Noteholder hereby agrees that it will not sell, transfer or otherwise dispose of
its Notes in violation of the Securities Act.
SECTION 6.02 STATUS; NO REGISTRATION. Each Noteholder represents
that it is an Accredited Investor. Each Noteholder acknowledges that the Notes
have not been registered under the Securities Act, and that such Notes must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available.
ARTICLE VII
PAYMENT OF THE NOTES
SECTION 7.01 PLACE OF PAYMENT. The Company will pay all sums
becoming due to any Noteholder under any Transaction Document by the method and
at the address specified for such purpose below such Noteholder's name in
SCHEDULE A, or by such other method or at such other address as such Noteholder
shall have from time to time specified to the Company in writing for such
purpose, without the presentation or surrender of such Note or the making of any
notation thereon, except that upon written request of the Company made
concurrently with or reasonably promptly after payment or prepayment in full of
any Note, the Noteholders shall surrender such Note for cancellation, reasonably
promptly after any such request, to the Company at its principal executive
office.
SECTION 7.02 PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this
Agreement or the Notes to the contrary notwithstanding, any payment of principal
of or interest on any Note that
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is due on a date other than a Business Day shall be made on the next succeeding
Business Day without including the additional days elapsed in the computation of
the interest payable on such next succeeding Business Day.
SECTION 7.03 MANDATORY REPAYMENT OF NOTES. The Notes shall be due
and payable as follows:
(a) commencing on February 1, 1998, on the first day of each
month, a payment equal to all accrued, unpaid interest on the Notes shall be due
and payable;
(b) on the Maturity Date, the entire unpaid principal of the
Notes, together with all accrued, unpaid interest on the Notes, shall be fully
and finally due and payable; and
(c) if a Change of Control shall occur, the entire unpaid
principal of the Notes, together with all accrued, unpaid interest on the Notes
shall be fully and finally due and payable on the date one day after such Change
of Control occurs.
All payments on the Notes shall be applied pro rata, in accordance with the
principal amounts outstanding on the Notes, first to accrued unpaid interest on
the Notes and the remainder, if any, to the principal amount outstanding on the
Notes.
SECTION 7.04 EXTENSION OF MATURITY DATE. If, on December 31,
1999, (a) Cash Availability is less than the sum of the aggregate outstanding
principal of and accrued, unpaid interest due on the Notes, (b) the Average
Price of the Company's Common Stock on such date is equal to or less than 60% of
the Conversion Price, and (c) the Noteholders elect not to convert the aggregate
outstanding principal of and interest on the Notes into the Company's Common
Stock on such date in accordance with ARTICLE IV, then the Maturity Date shall
be extended to February 1, 2001.
SECTION 7.05 NO OPTIONAL PREPAYMENTS OF NOTES. The Company shall
not have the right to prepay the Notes, in whole or in part, prior to the
Maturity Date.
SECTION 7.06 PURCHASE OF NOTES. The Company will not, and will
not permit any Affiliate to, purchase, redeem, prepay or otherwise acquire,
directly or indirectly, any of the outstanding Notes except upon the payment of
the Notes in accordance with the terms of this Agreement and the Notes. The
Company will promptly cancel all Notes acquired by it or any Affiliate pursuant
to any payment, prepayment or purchase of Notes pursuant to any provision of
this Agreement and no Notes may be issued in substitution or exchange for any
such Notes.
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ARTICLE VIII
INFORMATION AS TO COMPANY
SECTION 8.01 FINANCIAL AND BUSINESS INFORMATION. The Company
shall deliver to each of the Noteholders:
(a) Within 45 days after the end of each quarterly fiscal period
in each fiscal year of the Company, copies of (i) a consolidated balance sheet
of the Company and its Subsidiaries as at the end of such quarter, and (ii)
consolidated statements of income, changes in shareholders' equity and cash
flows of the Company and its Subsidiaries, for such quarter and for the portion
of the fiscal year ending with such quarter, setting forth in each case in
comparative form the figures for the corresponding periods in the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP
applicable to quarterly financial statements generally, and certified by a
Senior Financial Officer as fairly presenting, in all material respects, the
financial position of the companies being reported on and their results of
operations and cash flows, subject to changes resulting from year-end
adjustments.
(b) Within 90 days after the end of each fiscal year of the
Company, copies of (i) a consolidated balance sheet of the Company and its
Subsidiaries, as at the end of such year, and (ii) consolidated statements of
income, changes in shareholders' equity and cash flows of the Company and its
Subsidiaries, for such year, setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP, and accompanied (A) by an opinion thereon of independent
certified public accountants of recognized national standing, which opinion
shall state that such financial statements present fairly, in all material
respects, the financial position of the companies being reported upon and their
results of operations and cash flows and have been prepared in conformity with
GAAP, and that the examination of such accountants in connection with such
financial statements has been made in accordance with generally accepted
auditing standards, and that such audit provides a reasonable basis for such
opinion in the circumstances, and (B) a certificate of such accountants stating
that they have reviewed this Agreement and stating further whether, in making
their audit, they have become aware of any condition or event that then
constitutes a Default or an Event of Default, and, if they are aware that any
such condition or event then exists, specifying the nature and period of the
existence thereof.
(c) Within 25 days after the end of each calendar month, copies
of (i) a consolidated balance sheet of the Company and its Subsidiaries as at
the end of such month, and (ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its Subsidiaries, for
such month and for the portion of the fiscal year ending with such month,
setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP applicable to monthly financial statements generally, and
certified by a Senior Financial Officer as fairly presenting, in all material
respects, the financial position of the companies being reported on and their
results of operations and cash flows, subject to changes resulting from year-end
adjustments.
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(d) By March 1 each year commencing March 1, 1998, the Company
shall furnish to the Noteholders a Reserve Report dated as of the immediately
preceding December 31. Each Reserve Report shall be prepared by certified
independent petroleum engineers acceptable to the Noteholders. Each such Reserve
Report shall be in form and substance satisfactory to the Noteholders and shall
set forth, as of the immediately preceding December 31: (i) the Proved Reserves
attributable to the Company's and its Subsidiaries' Oil and Gas Properties
together with a projection of the rate of production and future net income,
taxes, operating expenses and capital expenditures with respect thereto as of
such date, based upon pricing and escalation assumptions acceptable to the
Noteholders and (ii) such other information as the Noteholders may reasonably
request.
(e) Promptly upon their becoming available, one copy of (i) each
financial statement, report, notice or proxy statement sent by the Company or
any Subsidiary of the Company to public securities holders generally, and (ii)
each regular or periodic report, each registration statement (without exhibits
except as expressly requested by such holder), and each prospectus and all
amendments thereto filed by the Company or any Subsidiary of the Company with
the Securities and Exchange Commission and of all press releases and other
statements made available generally by the Company or any Subsidiary of the
Company to the public concerning developments that are Material.
(f) Promptly, and in any event within five Business Days after a
Responsible Officer becoming aware of the existence of any Default or Event of
Default or that any Person has given any notice or taken any action with respect
to a claimed default hereunder or that any Person has given any notice or taken
any action with respect to a claimed default of the type referred to in SECTION
11.01, a written notice specifying the nature and period of existence thereof
and what action the Company is taking or proposes to take with respect thereto.
(g) Promptly, and in any event within five Business Days after a
Responsible Officer becoming aware of any of the following, a written notice
setting forth the nature thereof and the action, if any, that the Company or an
ERISA Affiliate proposes to take with respect thereto: (i) with respect to any
Plan, any reportable event, as defined in section 4043(b) of ERISA and the
regulations thereunder, for which notice thereof has not been waived pursuant to
such regulations as in effect on the date hereof; or (ii) the taking by the PBGC
of steps to institute, or the threatening by the PBGC of the institution of,
proceedings under section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the receipt by the Company
or any ERISA Affiliate of a notice from a Multiemployer Plan that such action
has been taken by the PBGC with respect to such Multiemployer Plan; or (iii) any
event, transaction or condition that could result in the incurrence of any
liability by the Company or any ERISA Affiliate pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the Code relating to employee
benefit plans, or in the imposition of any Lien on any of the rights, properties
or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of
ERISA or such penalty or excise tax provisions, if such liability
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or Lien, taken together with any other such liabilities or Liens then existing,
could reasonably be expected to be Material.
(h) Promptly, and in any event within 30 days of receipt thereof,
copies of any notice to the Company or any Subsidiary of the Company from any
Federal or state Governmental Authority relating to any order, ruling, statute
or other law or regulation that could reasonably be expected to have a Material
Adverse Effect.
(i) With reasonable promptness, such other data and information
relating to the business, operations, affairs, financial condition, assets or
properties of the Company or any of its Subsidiaries or relating to the ability
of the Company to perform its obligations hereunder and under the Notes as from
time to time may be reasonably requested by any of Noteholder.
SECTION 8.02 OFFICER'S CERTIFICATE. Each set of financial
statements delivered to a holder of Notes pursuant to SECTION 8.01(A), SECTION
8.01(B) or SECTION 8.01(C) shall be accompanied by a certificate of a Senior
Financial Officer setting forth: (a) the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of SECTION 10.03 hereof during the monthly,
quarterly or annual period covered by the statements then being furnished
(including with respect to each such Section, where applicable, the calculations
of the maximum or minimum amount, ratio or percentage, as the case may be,
permissible under the terms of such Sections, and the calculation of the amount,
ratio or percentage then in existence); and (b) a statement that such officer
has reviewed the relevant terms hereof and has made, or caused to be made, under
his or her supervision, a review of the transactions and conditions of the
Company and its Subsidiaries from the beginning of the monthly, quarterly or
annual period covered by the statements then being furnished to the date of the
certificate and that such review shall not have disclosed the existence during
such period of any condition or event that constitutes a Default or an Event of
Default or, if any such condition or event existed or exists (including, without
limitation, any such event or condition resulting from the failure of the
Company or any Subsidiary of the Company to comply with any Environmental Law),
specifying the nature and period of existence thereof and what action the
Company shall have taken or proposes to take with respect thereto.
SECTION 8.03 INSPECTION. The Company shall permit the
representatives of each Noteholder, at the expense of the Company and upon
reasonable prior notice to the Company, to visit and inspect any of the offices
or properties of the Company or any Subsidiary of the Company, to examine all
their respective books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs, finances
and accounts with their respective officers and independent public accountants
(and by this provision the Company authorizes said accountants to discuss the
affairs, finances and accounts of the Company and its Subsidiaries), all at such
times and as often as may be requested.
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ARTICLE IX
AFFIRMATIVE COVENANTS
The Company covenants that so long as any of the Notes are
outstanding:
SECTION 9.01 COMPLIANCE WITH LAW; CONTRACTS. The Company will,
and will cause each of its Subsidiaries to, comply with all laws, ordinances or
governmental rules or regulations to which each of them is subject, including,
without limitation, Environmental Laws, and will obtain and maintain in effect
all licenses, certificates, permits, franchises and other governmental
authorizations necessary to the ownership of their respective properties or to
the conduct of their respective businesses, in each case to the extent necessary
to ensure that non-compliance with such laws, ordinances or governmental rules
or regulations or failures to obtain or maintain in effect such licenses,
certificates, permits, franchises and other governmental authorizations could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company will, and will cause each of its Subsidiaries to,
comply with, and perform their respective obligations under, each contract or
agreement to which each is a party, unless, in the good faith judgment of the
Company, the failure to so comply or perform could not reasonably be expected to
have a Material Adverse Effect.
SECTION 9.02 INSURANCE. The Company will, and will cause each of
its Subsidiaries to, maintain, with financially sound and reputable insurers,
insurance with respect to their respective properties and businesses against
such casualties and contingencies, of such types, on such terms and in such
amounts (including deductibles, co-insurance and self-insurance, if adequate
reserves are maintained with respect thereto) as is customary in the case of
entities of established reputations engaged in the same or a similar business
and similarly situated.
SECTION 9.03 MAINTENANCE OF PROPERTIES. The Company will, and
will cause each of its Subsidiaries to, maintain and keep, or cause to be
maintained and kept, their respective properties in good repair, working order
and condition (other than ordinary wear and tear), so that the business carried
on in connection therewith may be properly conducted at all times, provided that
this Section shall not prevent the Company or any Subsidiary of the Company from
discontinuing the operation and the maintenance of any of its properties if such
discontinuance is desirable in the conduct of its business and the Company has
concluded that such discontinuance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
SECTION 9.04 PAYMENT OF TAXES AND CLAIMS. The Company will, and
will cause each of its Subsidiaries to, file all tax returns required to be
filed in any jurisdiction and to pay and discharge all taxes shown to be due and
payable on such returns and all other taxes, assessments, governmental charges,
or levies imposed on them or any of their properties, assets, income or
franchises, to the extent such taxes and assessments have become due and payable
and before they have become delinquent and all claims for which sums have become
due and payable that have or might become a Lien on properties or assets of the
Company or any Subsidiary of the Company, provided that neither the Company nor
any Subsidiary of the Company need pay any such tax or
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assessment or claims if (i) the amount, applicability or validity thereof is
contested by the Company or such Subsidiary on a timely basis in good faith and
in appropriate proceedings, and the Company or such Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in
the aggregate could not reasonably be expected to have a Material Adverse
Effect.
SECTION 9.05 CORPORATE EXISTENCE, ETC. The Company will at all
times preserve and keep in full force and effect its corporate existence. The
Company will at all times preserve and keep in full force and effect the
corporate existence of each of its Subsidiaries and all rights and franchises of
the Company and its Subsidiaries unless, in the good faith judgment of the
Company, the termination of or failure to preserve and keep in full force and
effect such corporate existence, right or franchise could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.
ARTICLE X
NEGATIVE COVENANTS
The Company covenants that so long as any of the Notes are
outstanding:
SECTION 10.01 RESTRICTIONS ON INDEBTEDNESS. The Company will not,
and will not permit any Subsidiary of the Company to, create, incur, assume,
Guaranty or permit to exist any Indebtedness, except: (a) the Notes, and (b) the
Senior Debt.
SECTION 10.02 RESTRICTIONS ON LIENS. The Company will not, and
will not permit any Subsidiary of the Company to, create, incur, assume, or
permit to exist any Lien with respect to any asset now owned or hereafter
acquired, except:
(a) Liens securing the Senior Debt;
(b) all contracts, leases, agreements and instruments, and all
defects and irregularities and other matters affecting the Company's or its
Subsidiaries' Oil and Gas Properties which were in existence at the time such
Oil and Gas Properties were originally acquired by such Person and all routine
operational agreements related to such Oil and Gas Properties entered into in
the ordinary course of business, which contracts, agreements, instruments,
defects, irregularities and other matters and routine operational agreements do
not reduce the Company's or its Subsidiaries' net interest in production in its
Oil and Gas Properties below the interests reflected in each Reserve Report
delivered to the Noteholders and do not interfere Materially with the operation,
value or use of such Oil and Gas Properties;
(c) royalties, overriding royalties, reversionary interests,
production payments and similar burdens granted by the Company or its
Subsidiaries with respect to their respective Oil and Gas Properties to the
extent such burdens do not reduce the Company's or its Subsidiaries' net
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interests in production in their respective Oil and Gas Properties below the
interests reflected in each Reserve Report delivered to the Noteholders and do
not operate to deprive the Company or its Subsidiaries of any Material rights in
respect of such Oil and Gas Properties;
(d) encumbrances consisting of easements of ingress or egress
over real property, where the same do not materially detract from the use or
enjoyment of such property by, or the value of such property to, the Company;
(e) Liens for taxes or assessments or governmental charges or
levies, if payment shall not at the time be required to be made in accordance
with the provisions of SECTION 9.04;
(f) any judgment lien, unless the judgment it secures shall not,
within 30 days after the entry thereof, have been discharged or execution
thereof stayed pending appeal, or shall not have been discharged within 30 days
after the expiration of any such stay;
(g) statutory liens of landlords and liens of carriers,
warehousemen, mechanics, laborers and materialmen incurred in the ordinary
course of business for sums not yet due or being contested in good faith; and
(h) Liens (other than liens created by section 4068 of ERISA)
incurred on pledges or deposits made in the ordinary course of business in
connection with workmen's compensation, unemployment insurance, social security
laws or similar legislation.
SECTION 10.03 FINANCIAL COVENANTS. The Company will not permit:
(a) its Current Assets, at any time, to be less than the sum of
(i) its Current Liabilities as at such date, minus (ii) any portion of such
Current Liabilities consisting of amounts owing on the Notes; or
(b) the Total Debt, at any time, to be greater than the Reserve
Value.
SECTION 10.04 RESTRICTED PAYMENTS. The Company will not, directly
or indirectly, make or pay (a) any dividend or other distribution on any shares
of the Company's capital stock (including any dividends payable in shares of
capital stock), or (b) any payment on account of the purchase, redemption,
retirement or acquisition of any shares of the Company's capital stock or any
option, warrant or other right to acquire such shares, except with respect to
the redemption obligations specifically listed on SCHEDULE 10.04 attached
hereto.
SECTION 10.05 MERGER, CONSOLIDATION, ETC. Without the
Noteholders' prior written consent, the Company shall not, and shall not permit
any Subsidiary of the Company to, (a) consolidate with or merge with any other
Person, except that any Subsidiary of the Company may consolidate or merge with
any other Subsidiary of the Company or the Company or (b) convey,
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transfer or lease all or substantially all of its assets in a single transaction
or series of transactions to any Person.
SECTION 10.06 RESTRICTIONS ON ASSET SALES. Without the
Noteholders' prior written consent, the Company will not, and will not permit
any of its Subsidiaries to, sell, transfer, assign, convey or otherwise dispose
of an interest in any asset now owned or hereafter acquired, except (a) sales of
Hydrocarbon production in the ordinary course of business, (b) sales of assets,
the net proceeds of which are used to pay Senior Debt and (c) sales of other
assets that have an aggregate sales price not to exceed $2,000,000.
SECTION 10.07 TRANSACTIONS WITH AFFILIATES. After the date
hereof, the Company will not, and will not permit any of its Subsidiaries to,
enter into directly or indirectly any Material transaction or Material group of
related transactions (including without limitation the purchase, lease, sale or
exchange of properties of any kind or the rendering of any service) with any
Affiliate (other than the Company or another Subsidiary of the Company), except
in the ordinary course and pursuant to the reasonable requirements of the
Company's or such Subsidiary's business and upon fair and reasonable terms no
less favorable to the Company or such Subsidiary than would be obtainable in a
comparable arm's-length transaction with a Person not an Affiliate.
SECTION 10.08 CHANGE IN BUSINESS. The Company will not, and will
not permit any of its Subsidiaries to, directly or indirectly engage to a
material extent in any business other than those in which it is presently
engaged or that are directly related thereto, or discontinue any of its existing
lines of business or substantially alter its method of doing business.
ARTICLE XI
DEFAULT AND REMEDIES
SECTION 11.01 EVENTS OF DEFAULT. An "EVENT OF DEFAULT" shall
exist if any of the following conditions or events shall occur and be
continuing:
(a) the Company defaults in the payment of any principal or
interest on any Note when the same becomes due and payable, whether at maturity,
by declaration or otherwise; or
(b) the Company defaults in the performance of or compliance with
any term contained in ARTICLE X; or
(c) the Company defaults in the performance of or compliance with
any term contained herein (other than those referred to in paragraphs (a) and
(b) of this SECTION 11.01) and such default is not remedied within 30 days after
the earlier of (i) a Responsible Officer obtains actual knowledge of such
default or (ii) the Company receives written notice of such default from any
holder of a Note; or
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(d) any representation or warranty made in writing by or on
behalf of the Company or any Guarantor or by any officer of the Company or any
Guarantor in this Agreement or the other Transaction Documents or in any writing
furnished in connection with the transactions contemplated hereby or thereby
proves to have been false or incorrect in any Material respect on the date as of
which made; or
(e) (i) the Company or any Subsidiary of the Company is in
default (as principal or as guarantor or other surety) in the payment of any
principal of or premium or interest on any Indebtedness that is outstanding in
an aggregate principal amount of at least $100,000 beyond any period of grace
provided with respect thereto, or (ii) the Company or any Subsidiary of the
Company is in default in the performance of or compliance with any term of any
evidence of any Indebtedness in an aggregate outstanding principal amount of at
least $100,000 or of any mortgage, indenture or other agreement relating thereto
or any other condition exists, and as a consequence of such default or condition
such Indebtedness has become, or has been declared (or one or more Persons are
entitled to declare such Indebtedness to be), due and payable before its stated
maturity or before its regularly scheduled dates of payment, or (iii) as a
consequence of the occurrence or continuation of any event or condition (other
than the passage of time or the right of the holder of Indebtedness to convert
such Indebtedness into equity interests), (x) the Company or any Subsidiary of
the Company has become obligated to purchase or repay Indebtedness before its
regular maturity or before its regularly scheduled dates of payment in an
aggregate outstanding principal amount of at least $100,000, or (y) one or more
Persons have the right to require the Company or any Subsidiary of the Company
to purchase or repay such Indebtedness; or
(f) the Company or any Subsidiary of the Company (i) is generally
not paying, or admits in writing its inability to pay, its debts as they become
due, (ii) files, or consents by answer or otherwise to the filing against it of,
a petition for relief or reorganization or arrangement or any other petition in
bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency,
reorganization, moratorium or other similar law of any jurisdiction, (iii) makes
an assignment for the benefit of its creditors, (iv) consents to the appointment
of a custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its property, (v) is
adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for
the purpose of any of the foregoing; or
(g) a Governmental Authority enters an order appointing, without
consent by the Company or any of its Subsidiaries, a custodian, receiver,
trustee or other officer with similar powers with respect to it or with respect
to any substantial part of its property, or constituting an order for relief or
approving a petition for relief or reorganization or any other petition in
bankruptcy or for liquidation or to take advantage of any bankruptcy or
insolvency law of any jurisdiction, or ordering the dissolution, winding-up or
liquidation of the Company or any of its Subsidiaries, or any such petition
shall be filed against the Company or any of its Subsidiaries and such petition
shall not be dismissed within 60 days; or
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(h) a final judgment or judgments for the payment of money
aggregating in excess of $250,000 are rendered against one or more of the
Company and its Subsidiaries and such judgments are not, within 60 days after
entry thereof, bonded, discharged or stayed pending appeal, or are not
discharged within 60 days after the expiration of such stay; or
(i) the Company fails to own (both beneficially and of record)
100% of the common stock and other equity securities of the Guarantors; or
(j) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a waiver of
such standards or extension of any amortization period is sought or granted
under section 412 of the Code, (ii) a notice of intent to terminate any Plan
shall have been or is reasonably expected to be filed with the PBGC or the PBGC
shall have instituted proceedings under ERISA section 4042 to terminate or
appoint a trustee to administer any Plan or the PBGC shall have notified the
Company or any ERISA Affiliate that a Plan may become a subject to any such
proceedings (iii) the aggregate "amount of unfunded benefit liabilities" (within
the meaning of section 4001(a)(18) of ERISA) under all Plans, determined in
accordance with Title IV of ERISA, shall exceed $25,000, (iv) the Company or any
ERISA Affiliate shall have incurred or is reasonably expected to incur any
liability pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, (v) the Company or
any ERISA Affiliate withdraws from any Multiemployer Plan, (vi) the Company or
any ERISA Affiliate fails to make any contribution due, or payment to, any
employee benefit plan, or (vii) the Company or any Subsidiary establishes or
amends any employee welfare benefit plan that provides post-employment welfare
benefits in a manner that would increase the liability of the Company or any
Subsidiary thereunder, and any such event or events described in clauses (i)
through (vii) above, either individually or together with any other such event
or events, could reasonably be expected to have a Material Adverse Effect.
As used in this Section 11.01(j), the terms "EMPLOYEE BENEFIT PLAN" and
"EMPLOYEE WELFARE BENEFIT PLAN" shall have the respective meanings assigned to
such terms in Section 3 of ERISA.
SECTION 11.02 ACCELERATION.
(a) If an Event of Default with respect to the Company described
in paragraph (f) or (g) of SECTION 11.01 (other than an Event of Default
described in clause (i) of paragraph (f) or described in clause (vi) of
paragraph (f) by virtue of the fact that such clause encompasses clause (i) of
paragraph (f)) has occurred, all the Notes then outstanding shall automatically
become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing,
the Required Holders at any time at its or their option, by notice or notices to
the Company, declare all the Notes then outstanding to be immediately due and
payable.
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(c) If any Event of Default described in paragraph (a) of SECTION
11.01 has occurred and is continuing, any holder or holders of Notes at the time
outstanding affected by such Event of Default may at any time, at its or their
option, by notice or notices to the Company, declare all the Notes held by it or
them to be immediately due and payable.
Upon any Notes becoming due and payable under this SECTION 11.02,
whether automatically or by declaration, such Notes will forthwith mature and
the entire unpaid principal amount of such Notes, plus all accrued and unpaid
interest thereon, shall all be immediately due and payable, in each and every
case without presentment, demand, notice of default, notice of intent to
accelerate, notice of acceleration, protest or further notice, all of which are
hereby waived.
SECTION 11.03 OTHER REMEDIES. If any Default or Event of Default
has occurred and is continuing, and irrespective of whether any Notes have
become or have been declared immediately due and payable under SECTION 11.02,
the holder of any Note at the time outstanding may proceed to protect and
enforce the rights of such holder by an action at law, suit in equity or other
appropriate proceeding, whether for the specific performance of any agreement
contained herein or in any Note, or for an injunction against a violation of any
of the terms hereof or thereof, or in aid of the exercise of any power granted
hereby or thereby or by law or otherwise.
SECTION 11.04 NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power or
remedy conferred by this Agreement or by any Note upon any holder thereof shall
be exclusive of any other right, power or remedy referred to herein or therein
or now or hereafter available at law, in equity, by statute or otherwise.
Without limiting the obligations of the Company under SECTION 13.01, the Company
will pay to the holder of each Note on demand such further amount as shall be
sufficient to cover all reasonable costs and expenses of such holder incurred in
any enforcement or collection under this ARTICLE XI, including, without
limitation, reasonable attorneys' fees, expenses and disbursements, together
with interest on such amounts at the Default Rate accruing from the date of
demand.
ARTICLE XII
REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES
SECTION 12.01 REGISTRATION OF NOTES. The Company shall keep at
its principal executive office a register for the registration and registration
of transfers of Notes. The name and address of each holder of one or more Notes,
each transfer thereof and the name and address of each transferee of one or more
Notes shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Note shall be registered
shall be deemed and treated as the owner and holder thereof for all purposes
hereof, and the Company shall not be affected by any notice or knowledge to the
contrary. The Company shall give to any holder of a Note promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes.
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SECTION 12.02 TRANSFER AND EXCHANGE OF NOTES. Subject to
compliance with all applicable securities laws, upon surrender of any Note at
the principal executive office of the Company for registration of transfer or
exchange (and in the case of a surrender for registration of transfer, duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered holder of such Note or his attorney duly authorized in writing and
accompanied by the address for notices of each transferee of such Note or part
thereof), the Company shall execute and deliver, at the Company's expense, one
or more new Notes (as requested by the holder thereof) in exchange therefor, in
an aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person as such
holder may request and shall be substantially in the form specified herein. Each
such new Note shall be dated and bear interest from the date to which interest
shall have been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon.
SECTION 12.03 REPLACEMENT OF NOTES. Upon receipt by the Company
of evidence reasonably satisfactory to it of the ownership of and the loss,
theft, destruction or mutilation of any Note, and (a) in the case of loss, theft
or destruction, of indemnity reasonably satisfactory to it (provided that if the
holder of such Note is, or is a nominee for, an original Noteholder, such
Person's own unsecured agreement of indemnity shall be deemed to be
satisfactory), or (b) in the case of mutilation, upon surrender and cancellation
thereof, the Company at its own expense shall execute and deliver, in lieu
thereof, a new Note, dated and bearing interest from the date to which interest
shall have been paid on such lost, stolen, destroyed or mutilated Note or dated
the date of such lost, stolen, destroyed or mutilated Note if no interest shall
have been paid thereon.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01 TRANSACTION EXPENSES. Whether or not the
transactions contemplated hereby are consummated, the Company will pay all
reasonable costs and expenses (including reasonable attorneys' fees of a special
counsel and any local or other counsel) incurred by the Noteholders or holder of
a Note in connection with such transactions and in connection with any
amendments, waivers or consents under or in respect of this Agreement or the
other Transaction Documents (whether or not such amendment, waiver or consent
becomes effective), including, without limitation: (a) the reasonable costs and
expenses incurred in enforcing or defending (or determining whether or how to
enforce or defend) any rights under this Agreement or the other Transaction
Documents or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement or the other
Transaction Documents, or by reason of being a holder of any Note, (b) the
reasonable costs and expenses of negotiation, preparation and execution of this
Agreement and the other Transaction Documents, and (c) the reasonable costs and
expenses, including reasonable financial advisors' fees, incurred in connection
with the insolvency or bankruptcy of the Company or any Subsidiary or in
connection with any work-out or restructuring of the transactions contemplated
hereby and by the Notes. The Company will pay, and will save the Noteholders and
each other holder of a Note harmless from, all claims in respect of any fees,
costs or expenses if any, of brokers and finders (other than those retained by
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the Noteholders). The obligations of the Company under this SECTION 13.01 will
survive the payment or transfer of any Note, the enforcement, amendment or
waiver of any provision of this Agreement or the other Transaction Documents,
and the termination of this Agreement.
SECTION 13.02 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the Notes, the purchase or transfer by the
Noteholders of any Note or portion thereof or interest therein and the payment
of any Note, and may be relied upon by any subsequent holder of a Note,
regardless of any investigation made at any time by or on behalf of the
Noteholders or any other holder of a Note. All statements contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant to this Agreement shall be deemed representations and warranties of the
Company under this Agreement.
SECTION 13.03 AMENDMENT AND WAIVER. This Agreement and the Notes
may be amended, and the observance of any term hereof or of the Notes may be
waived (either retroactively or prospectively), with (and only with) the written
consent of the Company and the Required Holders, except that (a) no amendment or
waiver of any of the provisions of ARTICLES II, III OR IV, or any defined term
(as it is used therein), will be effective as to the Noteholders unless
consented to by all of the Noteholders in writing, and (b) no such amendment or
waiver may, without the written consent of the holder of each Note at the time
outstanding affected thereby, (i) subject to the provisions of ARTICLE XI
relating to acceleration or rescission, change the amount or time of any
prepayment or payment of principal of, or reduce the rate or change the time of
payment or method of computation of interest on, the Notes, or (ii) change the
percentage of the principal amount of the Notes the holders of which are
required to consent to any such amendment or waiver. Any amendment or waiver
consented to as provided in this SECTION 13.03 applies equally to all holders of
Notes and is binding upon them and upon each future holder of any Note and upon
the Company without regard to whether such Note has been marked to indicate such
amendment or waiver. No such amendment or waiver will extend to or affect any
obligation, covenant, agreement, Default or Event of Default not expressly
amended or waived or impair any right consequent thereon. No course of dealing
between the Company and the holder of any Note nor any delay in exercising any
rights hereunder or under any Note shall operate as a waiver of any rights of
any holder of such Note.
SECTION 13.04 NOTICES. All notices and communications provided
for hereunder shall be in writing and sent (a) by telecopy if the sender on the
same day sends a confirming copy of such notice by a recognized overnight
delivery service (charges prepaid), or (b) by registered or certified mail with
return receipt requested (postage prepaid), or (c) by a recognized overnight
delivery service (with charges prepaid). Any such notice must be sent: (i) if to
a Noteholder, to its address specified for such communications in SCHEDULE A, or
at such other address as it shall have specified to the Company in writing, (ii)
if to the Company, to the Company at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, Telecopy No.: 713-652-9601, or at such other address as the Company
shall have specified to the holder of each Note in writing. Notices under this
SECTION 13.04 will be deemed given only when actually received.
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SECTION 13.05 LIMITATION ON INTEREST. Each provision in this
Agreement and each other Transaction Document is expressly limited so that in no
event whatsoever shall the amount paid, or otherwise agreed to be paid, by the
Company for the use, forbearance or detention of the money to be loaned under
this Agreement or any other Transaction Document or otherwise (including any
sums paid as required by any covenant or obligation contained herein or in any
other Transaction Document which is for the use, forbearance or detention of
such money), exceed that amount of money which would cause the effective rate of
interest thereon to exceed the Highest Lawful Rate, and all amounts owed under
this Agreement and each other Transaction Document shall be held to be subject
to reduction to the effect that such amounts so paid or agreed to be paid which
are for the use, forbearance or detention of money under this Agreement or such
Transaction Document shall in no event exceed that amount of money which would
cause the effective rate of interest thereon to exceed the Highest Lawful Rate.
Notwithstanding the provisions of SECTION 13.14, to the extent that the Highest
Lawful Rate applicable to a Noteholder is at any time determined by Texas law,
such rate shall be the "indicated rate ceiling" described in Section (a)(1) of
Article 1.04 of Chapter 1, Title 79, of the Revised Civil Statutes of Texas,
1925, as amended; PROVIDED, HOWEVER, to the extent permitted by such Article,
the Noteholders from time to time by notice to Company may revise the aforesaid
election of such interest rate ceiling as such ceiling affects the then-current
or future balances of the loans outstanding under the Notes. Notwithstanding any
provision in this Agreement or any other Transaction Document to the contrary,
if the maturity of the Notes or the obligations in respect of the other
Transaction Documents are accelerated for any reason, or in the event of
prepayment of all or any portion of the Notes or the obligations in respect of
the other Transaction Documents by the Company or in any other event, earned
interest on the Notes and such other obligations of the Company may never exceed
the maximum amount permitted by applicable law, and any unearned interest
otherwise payable under the Notes or the obligations in respect of the other
Transaction Documents that is in excess of the maximum amount permitted by
applicable law shall be canceled automatically as of the date of such
acceleration or prepayment or other such event and, if theretofore paid, shall
be credited on the principal of the Notes or, if the principal of the Notes has
been paid in full, refunded to the Company. In determining whether or not the
interest paid or payable, under any specific contingency, exceeds the Highest
Lawful Rate, the Company and the Noteholders shall, to the maximum extent
permitted by applicable law, amortize, prorate, allocate and spread, in equal
parts during the period of the actual term of this Agreement, all interest at
any time contracted for, charged, received or reserved in connection with the
Transaction Documents.
SECTION 13.06 INDEMNIFICATION. The Company agrees to indemnify,
defend and hold each Noteholder, their partners and their respective officers,
employees, agents, directors, partners, affiliates and shareholders
(collectively, "INDEMNIFIED PERSONS") harmless from and against any and all
loss, liability, damage, judgment, claim, deficiency or reasonable expense
(including interest, penalties, reasonable attorneys' fees and amounts paid in
settlement) incurred by or asserted against any Indemnified Person arising out
of, in any way connected with, or as a result of (a) the execution and delivery
of this Agreement and the other documents contemplated hereby, the performance
by the parties hereto and thereto of their respective obligations hereunder and
thereunder and consummation of the transactions contemplated hereby and thereby,
(b) the
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actual or proposed use of the proceeds of the loans contemplated hereby, (c) any
violation by the Company or any of its Subsidiaries of any requirement of law,
including but not limited to Environmental Laws, (d) any Noteholder being deemed
an operator of any real or personal property of the Company in circumstances in
which no Noteholder is generally operating or generally exercising control over
such property, to the extent such losses, liabilities, damages, judgments,
claims, deficiencies or expenses arise out of or result from any Hazardous
Materials located in, on or under such property or (e) any claim, litigation,
investigation or proceeding relating to any of the foregoing, whether or not any
Indemnified Person is a party thereto; PROVIDED that such indemnity shall not
apply to any such losses, claims, damages, liabilities or related expenses that
are determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of, or
willful violation of the Transaction Documents by, such Indemnified Person.
WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION
DOCUMENTS, IT IS THE EXPRESS INTENTION OF THE PARTIES THAT EACH INDEMNIFIED
PERSON SHALL BE INDEMNIFIED AND HELD HARMLESS AGAINST ANY AND ALL LOSSES,
LIABILITIES, CLAIMS, DEFICIENCIES, JUDGMENTS AND REASONABLE EXPENSES ARISING OUT
OF OR RESULTING FROM THE ORDINARY NEGLIGENCE (WHETHER SOLE OR CONTRIBUTORY) OF
SUCH INDEMNIFIED PERSON. Each Indemnified Person will attempt to consult with
the Company prior to entering into any settlement of any lawsuit or proceeding
that could give rise to a claim for indemnity under this SECTION 13.06, although
nothing herein shall give the Company the right to direct, or control any such
settlement negotiations or any related lawsuit or proceeding on behalf of such
Indemnified Party. The obligations of the Company under this SECTION 13.06 shall
survive the termination of this Agreement and repayment of the Notes.
SECTION 13.07 SUCCESSORS AND ASSIGNS. All covenants and other
agreements contained in this Agreement by or on behalf of any of the parties
hereto bind and inure to the benefit of their respective successors and assigns
(including, without limitation, any subsequent holder of a Note) whether so
expressed or not.
SECTION 13.08 SEVERABILITY. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall (to the full
extent permitted by law) not invalidate or render unenforceable such provision
in any other jurisdiction.
SECTION 13.09 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies hereof, each signed by less than all, but together signed by
all, of the parties hereto.
SECTION 13.10 CONFIDENTIALITY. In connection with the negotiation
and administration of this Agreement and the other Transaction Documents, the
Company has furnished
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and will from time to time furnish the Noteholders certain written information
(such information, other than any such information which (i) was publicly
available, or otherwise known to the Noteholders, at the time of disclosure,
(ii) subsequently becomes publicly available other than through any act or
omission by the Noteholders or (iii) otherwise subsequently becomes known to the
Noteholders, being hereinafter referred to as "CONFIDENTIAL INFORMATION"). The
Noteholders will maintain the confidentiality of any Confidential Information in
accordance with such procedures as the Noteholders apply generally to
information of that nature. Subject to the prohibitions and restrictions imposed
on the Noteholders with respect to the Confidential Information under applicable
securities laws, it is understood that the foregoing will not restrict the
Noteholders' ability to exchange such Confidential Information with their
current or prospective investors, assignees of the Notes and advisors. It is
further understood that the foregoing will not prohibit the disclosure of any or
all Confidential Information if and to the extent that such disclosure may be
required or requested (w) by a Governmental Authority, (x) pursuant to court
order, subpoena or other legal process or in connection with any pending or
threatened litigation hereunder, (y) otherwise as required by law, or (z) in
order to protect its interests or its rights or remedies hereunder or under the
other Transaction Documents; in the event of any required disclosure under
clause (w), (x), or (y) above, the Noteholders agree to use reasonable efforts
to inform the Company as promptly as practicable.
SECTION 13.11 FINAL AGREEMENT OF THE PARTIES. THIS AGREEMENT AND
THE OTHER TRANSACTION DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
SECTION 13.12 JURY WAIVER. THE COMPANY AND THE NOTEHOLDERS HEREBY
IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 13.13 CHOICE OF FORUM. THE COMPANY AND THE NOTEHOLDERS
AGREE THAT ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE BROUGHT IN THE FEDERAL OR STATE
COURTS OF ▇▇▇▇▇▇ COUNTY, TEXAS, OTHER THAN LEGAL PROCEEDINGS INSTITUTED BY THE
NOTEHOLDERS WITH RESPECT TO THEIR RIGHTS AND REMEDIES UNDER THE SECURITY
DOCUMENTS, WHICH PROCEEDINGS MAY BE BROUGHT IN THE FEDERAL OR STATE COURTS OF
▇▇▇▇▇▇ COUNTY, TEXAS OR THE COURTS OF ANY OTHER JURISDICTION DEEMED APPROPRIATE
BY THE NOTEHOLDERS TO ENFORCE THEIR RIGHTS AND REMEDIES UNDER THE SECURITY
DOCUMENTS.
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SECTION 13.14 GOVERNING LAW. This Agreement and the Notes shall
be construed and enforced in accordance with, and the rights of the parties
shall be governed by, the law of the State of New York excluding choice-of-law
principles of the law of such State that would require the application of the
laws of a jurisdiction other than such State.
SECTION 13.15 SUBORDINATION AGREEMENT. Each Noteholder
acknowledges that its rights hereunder are subject to the rights of the "Senior
Creditors" under that certain Subordination Agreement dated as of even date
herewith by and among Comerica Bank - Texas, as Agent, the Noteholders, the
Company, Cliffwood Oil & Gas Corp., Cliffwood Energy Company and Cliffwood
Production Co.; provided that nothing in such Subordination Agreement shall
limit, release, impair or waive any liability or obligation of the Company under
this Agreement, the Notes or the other Transaction Documents.
-33-
IN WITNESS WHEREOF, the Company and the Noteholders have caused
this Agreement to be executed by their respective representatives thereunto duly
authorized effective as of the date first above written.
TEXOIL, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
President
RIMCO PARTNERS, L.P.,
RIMCO PARTNERS, ▇.▇. ▇▇,
RIMCO PARTNERS, L.P. III, AND
RIMCO PARTNERS, ▇.▇. ▇▇
By: RESOURCE INVESTORS MANAGEMENT COMPANY
LIMITED PARTNERSHIP, THEIR GENERAL
PARTNER
By: RIMCO ASSOCIATES, INC.,
ITS GENERAL PARTNER
By: /s/ ▇. ▇. ▇▇▇▇▇▇
▇. ▇. ▇▇▇▇▇▇
Vice President
SCHEDULE A
INFORMATION RELATING TO NOTEHOLDERS
Principal Amount of
NAME AND ADDRESS OF NOTEHOLDER NOTES TO BE PURCHASED
NOTES
RIMCO PARTNERS, L.P. $4,730,000.00
RIMCO PARTNERS, ▇.▇. ▇▇ 2,540,000.00
RIMCO PARTNERS, L.P. III 970,000.00
RIMCO PARTNERS, ▇.▇. ▇▇ 1,760,000.00
------------
$10,000,000.00
(1) All payments by wire transfer of immediately available funds to:
Fleet Bank, N.Y.
ABA No. ▇▇▇▇▇▇▇▇▇
Account Name: Texoil, Inc.
Automatic Clearing Account
Account No. 939 066 5251
with sufficient information to identify the source and application of
such funds.
(2) All notices of payments and
written confirmations of such
wire transfers:
Resource Investors Management Company
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
Schedule A-1
(3) All other communications:
Resource Investors Management Company
Suite 6875
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to
Resource Investors Management Company
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
Schedule A-2
SCHEDULE 4.03
Schedule 4.03
SCHEDULE 5.05
TEXOIL SUBSIDIARIES
Texoil Company, a Tennessee corporation;
Texoil de Argentina, S.A., a Nevada Corporation;
Cliffwood Oil & Gas Corp.; a Texas corporation; 100% of its issued and
outstanding shares is owned by Texoil, Inc.;
Cliffwood Production Co., a Texas corporation; 100% of its issued and
outstanding shares is owned by Cliffwood Oil & Gas Corp.;
New Cliffwood Company, a Texas corporation; 100% of its issued and outstanding
shares is owned by Cliffwood Oil & Gas Corp.; and
Cliffwood Exploration Company, a Texas corporation; 100% of its issued and
outstanding shares is owned by Cliffwood Oil & Gas Corp.
New Cliffwood Company is the general partner of Cliffwood Acquisition - 1996
Limited Partnership, a Texas limited partnership, and Cliffwood Exploration
Company owns 80% of the issued and outstanding shares of Cliffwood-Blue Moon
Joint Venture, Inc., a Texas corporation.
Schedule 5.05
SCHEDULE 5.08
LITIGATION
None
Schedule 5.08
SCHEDULE 5.14
LIST OF INDEBTEDNESS TO BE PAID
1. The sum of $1,000,000 payable to ▇.▇. ▇▇▇▇▇, ▇▇. pursuant to a promissory
note executed by Texoil, Inc.;
2. The sum of $50,000 payable to Opal Air, Inc. pursuant to a promissory
note executed by Texoil, Inc.; and
3. The sum of $5,000,000 payable to Comerica Bank - Texas pursuant to the
Amended and Restated Credit Agreement dated August 1, 1997 by and among
Cliffwood Oil & Gas Corp., Cliffwood Energy Company, Cliffwood
Production Co., First Union National Bank and Comerica Bank - Texas.
Schedule 5.14
SCHEDULE 10.04
REDEMPTION OBLIGATIONS
I Common Stock and Warrant Purchase Agreement Between Cliffwood Oil & Gas
Corp. and First Union Capital Partners, Inc. dated May 30, 1997: On the
earlier of (i) May 27, 2001 or (ii) a change of control in the company,
First Union Capital Partners, Inc. ("First Union") will have the right
to require Cliffwood Oil & Gas Corp. ("Cliffwood") to repurchase all or
part of the 333,334 shares and 167,500 warrants purchased by First
Union. This put right will terminate upon (i) a public offering
resulting in gross proceeds of $20,000,000 or more or (ii) a cash
purchase by a third party of over 75% of Cliffwood Common Stock.
II. Common Stock and Warrant Purchase Agreement between Cliffwood Oil & Gas
Corp. and Belleview 1992 Income Fund, L.P., dated August 4, 1997: From
August 4, 1999 until the earlier of (i) August 4, 2002 or (ii) any class
of the securities of Cliffwood become subject to reporting requirements
under the Securities Exchange Act of 1934, Belleview 1992 Income Fund,
L.P. ("Belleview") will have the right to require Cliffwood to
repurchase all or part of the 550,000 shares of Class A Common Stock
purchased by Belleview. If Cliffwood grants put rights to a third party
within 2 years after August 4, 1997, Belleview will have the right to
receive put rights equivalent to those in the new grant.
III. Investment Agreement ("Investment Agreement") by and between Cliffwood
Oil & Gas Corp. ("Cliffwood"), Energy Capital Investment Company PLC
("Energy") and EnCap Equity 1996 Limited Partnership ("EnCap") dated
September 27, 1996; if, Energy and/or EnCap determine in good faith
during the period commencing May 27, 2001 and ending September 27, 2001
that (i) there is no reasonable prospect that a public market for the
Cliffwood Class A Common Stock is likely to develop or (ii) the
Cliffwood Class A Common Stock held by either of them cannot be sold
pursuant to the demand and piggyback registration provisions of the
Investment Agreement at a price per share equal to or greater than a
price per share equal to the net asset value of Cliffwood, as determined
under the Investment Agreement, then Energy and/or EnCap shall have the
right to require Cliffwood to purchase all or a portion of the 75,000
and 225,000 shares of Class A Common Stock purchased by Energy and
EnCap, respectively, at a price per share equal to the net asset value
of Cliffwood, as determined in the Investment Agreement.
Schedule 10.04
ANNEX A
DEFINED TERMS
"ACCREDITED INVESTOR" means an "accredited investor" as such term
is defined in Regulation D, Rule 501, promulgated by the Securities and Exchange
Commission.
"AFFILIATE" means, at any time, and with respect to any Person,
(a) any other Person that at such time directly or indirectly through one or
more intermediaries Controls, or is Controlled by, or is under common Control
with, such first Person, and (b) any Person beneficially owning or holding,
directly or indirectly, 10% or more of any class of voting or equity interests
of the Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or more of any class of voting or equity interests. As used in this
definition, "CONTROL" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Unless the context otherwise clearly requires, any reference to an "Affiliate"
is a reference to an Affiliate of the Company.
"AGREEMENT" means this Amended and Restated Note Purchase
Agreement, as amended, modified or restated from time to time.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a
day on which commercial banks in Houston, Texas or New York, New York are
required or authorized to be closed.
"CAPITAL LEASE" means, at any time, a lease with respect to which
the lessee is required concurrently to recognize the acquisition of an asset and
the incurrence of a liability in accordance with GAAP.
"CASH AVAILABILITY" means, as of any date, the sum (without
duplication) of (a) the aggregate amount of the Company's and its Subsidiaries'
cash, cash equivalents and 80% of the borrowing base in effect as of such date
under the Credit Agreement (or such larger percentage of the borrowing base in
effect as of such date under the Credit Agreement agreed to by the holders of
the Senior Debt in the absence of capital expenditure requirements necessary to
maintain or enhance production from the Company's and its Subsidiaries' Oil and
Gas Properties), plus (b) the aggregate amount of the Company's and its
Subsidiaries' accounts receivable, minus (c) the aggregate amount of the
Company's and its Subsidiaries' accounts payable and accrued current
liabilities, minus (d) an amount equal to the projected operating expenses for
the Company's and its Subsidiaries' Oil and Gas Properties (exclusive of
optional drilling and development expenditures) for the following six months.
-ii-
"CHANGE OF CONTROL" means any of (a) the acquisition by any
Person or two or more Persons (excluding underwriters in the course of their
distribution of voting stock in an underwritten public offering) acting in
concert, of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Security Exchange Act of 1934, as amended) of 35% or more of the
outstanding shares of voting stock of the Company, (b) 50% or more of the
members of the Board of Directors of the Company on any date shall not have been
(i) members of the Board of Directors of the Company on the date 12 months prior
to such date or (ii) approved (by recommendation, nomination, election or
otherwise) by Persons who constitute at least a majority of the members of the
Board of Directors of the Company as constituted on the date 12 months prior to
such date, (c) all or substantially all of the assets of the Company or any
Subsidiary of the Company are sold in a single transaction or series or related
transactions to any Person, or (d) the Company or any Subsidiary of the Company
merges with or consolidates with any other Person other than the merger or
consolidation of any Subsidiary of the Company with the Company or another
Subsidiary of the Company.
"CLOSING" is defined in ARTICLE III.
"CODE" means the Internal Revenue Code of 1986, as amended from
time to time, and the rules and regulations promulgated thereunder from time to
time.
"COMPANY" is defined in the introduction to this Agreement.
"CREDIT AGREEMENT" means that certain Amended and Restated Credit
Agreement by and among Cliffwood Oil & Gas Corp., Cliffwood Energy Company and
Cliffwood Production Co., Comerica Bank - Texas, N.A., as Agent and the
financial institutions party thereto dated as of August 1, 1997, as amended by
that certain First Amendment dated as of September 23, 1997, that certain Second
Amendment dated as of October 1, 1997, that certain Third Amendment dated as of
November 21, 1997 and that certain Fourth Amendment of even date herewith and as
same may be amended, extended, renewed, replaced or restated in the future or
any other subsequent credit agreement or other similar agreement entered into by
the Company or any Subsidiary of the Company, together with all notes, Swap
agreements, security documents and other instruments or agreements executed in
connection therewith or secured thereby.
"CURRENT ASSETS" means, as of any date, all assets of the Company
and its Subsidiaries that would be reflected as current assets on a consolidated
balance sheet of the Company and its Subsidiaries prepared on such date in
accordance with GAAP consistently applied.
"CURRENT LIABILITIES" means, as of any date, all liabilities of
the Company and its Subsidiaries that would be reflected as current liabilities
on a consolidated balance sheet of the Company and its Subsidiaries prepared on
such date in accordance with GAAP consistently applied.
-iii-
"DEFAULT" means an event or condition the occurrence or existence
of which would, with the lapse of time or the giving of notice or both, become
an Event of Default.
"DEFAULT RATE" means twelve percent (12%) per annum, but in no
event to exceed the Highest Lawful Rate.
"ENVIRONMENTAL LAWS" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the rules and regulations promulgated
thereunder from time to time in effect.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.
"EVENT OF DEFAULT" is defined in SECTION 11.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXISTING NOTEHOLDER INDEBTEDNESS" means the Indebtedness owing
to the Noteholders under those certain Tranche A Notes and Tranche C Notes
issued by Texoil Company under that certain Amended and Restated Note Purchase
Agreement dated May 21, 1997.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States of America.
"GOVERNMENTAL AUTHORITY" means (a) the government of (i) the
United States of America or any State or other political subdivision thereof, or
(ii) any jurisdiction in which the Company or any of its Subsidiaries conducts
all or any part of its business, or which asserts jurisdiction over any
properties of the Company or any of its Subsidiaries, or (b) any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of, or pertaining to, any such government.
"GUARANTORS" means Texoil Company, a Tennessee corporation, and
Cliffwood Oil & Gas Corp., a Texas corporation.
-iv-
"GUARANTY" means, with respect to any Person, any obligation
(except the endorsement in the ordinary course of business of negotiable
instruments for deposit or collection) of such Person guaranteeing or in effect
guaranteeing any indebtedness, dividend or other obligation of any other Person
in any manner, whether directly or indirectly, including (without limitation)
obligations incurred through an agreement, contingent or otherwise, by such
Person: (a) to purchase such indebtedness or obligation or any property
constituting security therefor; (b) to advance or supply funds (i) for the
purchase or payment of such indebtedness or obligation, or (ii) to maintain any
working capital or other balance sheet condition or any income statement
condition of any other Person or otherwise to advance or make available funds
for the purchase or payment of such indebtedness or obligation; (c) to lease
properties or to purchase properties or services primarily for the purpose of
assuring the owner of such indebtedness or obligation of the ability of any
other Person to make payment of the indebtedness or obligation; or (d) otherwise
to assure the owner of such indebtedness or obligation against loss in respect
thereof. In any computation of the indebtedness or other liabilities of the
obligor under any Guaranty, the indebtedness or other obligations that are the
subject of such Guaranty shall be assumed to be direct obligations of such
obligor.
"GUARANTY AGREEMENT" means each Guaranty Agreement executed by a
Guarantor, guaranteeing the obligations of the Company under this Agreement and
the Notes, in form and substance satisfactory to the Noteholders, as any of the
same may be amended from time to time.
"HAZARDOUS MATERIAL" means any and all pollutants, toxic or
hazardous wastes or any other substances that might pose a hazard to health or
safety, the removal of which may be required or the generation, manufacture,
refining, production, processing, treatment, storage, handling, transportation,
transfer, use, disposal, release, discharge, spillage, seepage, or filtration of
which is or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polycholorinated biphenyls).
"HIGHEST LAWFUL RATE" means with respect to any indebtedness owed
to any Noteholder under any Transaction Document, the maximum nonusurious
interest rate, if any, that at any time or from time to time may be contracted
for, taken, reserved, charged or received by such Noteholder with respect to
such indebtedness under law applicable to such Noteholder.
"HOLDER" means, with respect to any Note, the Person in whose
name such Note is registered in the register maintained by the Company pursuant
to SECTION 13.01.
"HYDROCARBONS" means oil, natural gas, condensate and all other
liquid or gaseous hydrocarbons and all products produced or separated therefrom.
"INDEBTEDNESS" with respect to any Person means, at any time,
without duplication, (a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily
-v-
redeemable Preferred Stock; (b) its liabilities for the deferred purchase price
of property acquired by such Person (excluding accounts payable arising in the
ordinary course of business but including all liabilities created or arising
under any conditional sale or other title retention agreement with respect to
any such property); (c) all liabilities appearing on its balance sheet in
accordance with GAAP in respect of Capital Leases; (d) all liabilities for
borrowed money secured by any Lien with respect to any property owned by such
Person (whether or not it has assumed or otherwise become liable for such
liabilities); (e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its account by
banks and other financial institutions (whether or not representing obligations
for borrowed money); (f) Swaps of such Person; and (g) any Guaranty of such
Person with respect to liabilities of a type described in any of clauses (a)
through (f) hereof. Indebtedness of any Person shall include all obligations of
such Person of the character described in clauses (a) through (g) to the extent
such Person remains legally liable in respect thereof notwithstanding that any
such obligation is deemed to be extinguished under GAAP.
"INDEMNIFIED PERSON" is defined in SECTION 13.06.
"INVESTMENT" means, with respect to any Person, any direct or
indirect purchase or other acquisition by such Person of stock or other
securities of any other Person, or any direct or indirect loan, advance or
capital contribution by such Person to any other Person, and any other item
which would be classified as an "investment" on a balance sheet of such Person
prepared in accordance with GAAP.
"LIEN" means, with respect to any Person, any mortgage, lien,
pledge, charge, security interest or other encumbrance of any kind (whether
voluntary or involuntary), or any interest or title of any vendor, lessor,
lender or other secured party to or of such Person under any conditional sale or
other title retention agreement or Capital Lease, upon or with respect to any
property or asset of such Person (including in the case of stock, stockholder
agreements, voting trust agreements and all similar arrangements).
"MATERIAL" means, as to any Person, material in relation to the
business, operations, affairs, financial condition, assets, properties, or
prospects of such Person and its Subsidiaries and parents taken as a whole.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a)
the business, operations, affairs, financial condition, assets or properties of
the Company and its Subsidiaries taken as a whole, or (b) the ability of the
Company to perform its obligations under this Agreement and the other
Transaction Documents, or (c) the validity or enforceability of this Agreement
or the other Transaction Documents.
"MATURITY DATE" means December 31, 1999 or such later date as
provided for in SECTION 7.04.
-vi-
"MERGER" means the merger of Texoil Acquisition, Inc. with and
into Cliffwood Oil & Gas Corp., pursuant to that certain Agreement and Plan of
Merger among such parties and the Company dated of even date herewith.
"MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA).
"NOTEHOLDERS" is defined in the introduction to this Agreement.
"NOTES" is defined in SECTION 2.01.
"OFFICER'S CERTIFICATE" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.
"OIL AND GAS PROPERTIES" means oil and gas leasehold interests,
overriding royalty interests, mineral interests, royalty interests, net profits
interests, oil payments, production payments, carried interests, operating
rights and other similar properties or interests, including contractual rights
to any of the foregoing, together with all ▇▇▇▇▇ and units located on, or
attributable to, such properties or interests.
"PBGC" means the Pension Benefit Guaranty Corporation referred to
and defined in ERISA or any successor thereto.
"PERMITTED LIENS" means Liens permitted under SECTION 10.02.
"PERSON" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"PLAN" means an "employee benefit plan" (as defined in section
3(3) of ERISA) that is or, within the preceding five years, has been established
or maintained, or to which contributions are or, within the preceding five
years, have been made or required to be made, by the Company or any ERISA
Affiliate or with respect to which the Company or any ERISA Affiliate may have
any liability.
"PREFERRED STOCK" means any class of capital stock of a
corporation that is preferred over any other class of capital stock of such
corporation as to the payment of dividends or the payment of any amount upon
liquidation or dissolution of such corporation.
"PROVED RESERVES" means recoverable Hydrocarbon reserves that
have been proved to a high degree of certainty by analysis of the producing
history of a reservoir and/or by volumetric analysis of adequate geological and
engineering data. Commercial productivity has been established
-vii-
by actual production, successful testing, or in certain cases by favorable core
analyses and electrical- log interpretation when the producing characteristics
of the formation are known from nearby fields.
"REGISTRATION RIGHTS AGREEMENT" means that certain Amended and
Restated Stock Ownership and Registration Rights Agreement dated of even date
herewith among the Company and the Noteholders, as same may be amended from time
to time.
"REQUIRED HOLDERS" means, at any time, the holder or holders of
at least 51% of the then outstanding principal amount of the Notes (exclusive of
Notes then owned by the Company or any of its Affiliates).
"RESERVE REPORT" means each reserve report delivered to the
Noteholders in accordance with SECTION 8.01(D).
"RESERVE VALUE" means, as of any date, the sum of (a) the
aggregate present value of the estimated future net revenues from Proved
Reserves for each of the Company's and its Subsidiaries' Oil and Gas Properties,
discounted at 10%, as set forth in the most recent Reserve Report delivered to
the Noteholders under SECTION 8.01(D), plus (b) the lesser of (i) the costs of
the Company's and its Subsidiaries' Oil and Gas Properties with no Proved
Reserves attributable thereto, including lease costs, costs of seismic data and
other capitalized prospect costs attributable thereto, and (ii) the fair market
value of such Oil and Gas Properties with no Proved Reserves attributable
thereto.
"RESPONSIBLE OFFICER" means any Senior Financial Officer and any
other officer of the Company with responsibility for the administration of the
relevant portion of this Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time.
"SENIOR DEBT" means the principal, interest, fees and other
Indebtedness outstanding under the Credit Agreement or any other Indebtedness
under a bank credit facility to the extent such Indebtedness is in compliance
with SECTION 10.03(B).
"SENIOR FINANCIAL OFFICER" means any of the chief financial
officer, principal accounting officer, treasurer or comptroller of the Company.
"SUBSIDIARY" means, as to any Person, any corporation,
association or other business entity in which such Person or one or more of its
Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient
equity or voting interests to enable it or them (as a group) ordinarily, in the
absence of contingencies, to elect a majority of the directors (or Persons
performing similar functions) of such entity, and any partnership or joint
venture if more than a 50% interest in the profits or capital thereof is owned
by such Person or one or more of its Subsidiaries or such Person
-viii-
and one or more of its Subsidiaries (unless such partnership can and does
ordinarily take major business actions without the prior approval of such Person
or one or more of its Subsidiaries).
"TOTAL DEBT" means the sum of the Senior Debt, plus all
outstanding principal of and interest on the Notes.
"SWAPS" means, with respect to any Person, foreign exchange
transactions and commodity, currency and interest rate swaps, floors, caps,
collars, forward sales, options, other similar transactions and combinations of
the foregoing.
"TRANSACTION DOCUMENTS" is defined in SECTION 3.01.
-ix-