EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
TEXOIL, INC.,
TEXOIL ACQUISITION, INC.,
AND
CLIFFWOOD OIL & GAS CORP.
DECEMBER 31, 1997
TABLE OF CONTENTS
PAGE
ARTICLE 1
THE MERGER
1.1 Effective Time of the Merger.....................................2
1.2 Closing..........................................................2
1.3 Effects of the Merger............................................2
ARTICLE 2
CONVERSION OF SHARES; PAYMENT OF MERGER CONSIDERATION
2.1 Conversion of Shares.............................................2
2.2 Payment of the Merger Consideration..............................3
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF CLIFFWOOD
3.1 Organization and Good Standing...................................4
3.2 Capitalization of Cliffwood......................................4
3.3 Cliffwood Subsidiaries...........................................4
3.4 Authority; No Conflicts..........................................5
3.5 Consents.........................................................6
3.6 No Brokers.......................................................6
3.7 Financial Statements.............................................6
3.8 Absence of Changes...............................................6
3.9 Absence of Undisclosed Liabilities...............................7
3.10 Tax Returns......................................................8
3.11 Intellectual Property............................................8
3.12 Contracts and Permits............................................8
3.13 Insurance Policies...............................................9
3.14 Employees........................................................9
3.15 Employee Benefit Matters........................................10
3.16 Litigation......................................................12
3.17 Absence of Sensitive Payments...................................12
3.18 No Default......................................................12
3.19 Good and Marketable Title.......................................12
3.20 Status of the Cliffwood Leases..................................14
3.21 Gas Contracts...................................................15
3.22 Preferential Rights.............................................15
3.23 Books and Records...............................................15
3.24 Operations and Expenditures.....................................15
3.25 Tax Partnerships................................................15
3.26 ▇▇▇▇▇...........................................................16
3.27 Seismic Data....................................................16
3.28 Compliance with Laws............................................16
3.29 Property........................................................16
3.30 Environmental Compliance........................................17
3.31 Transactions with Management....................................18
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TABLE OF CONTENTS
(Continued)
PAGE
3.32 Full Disclosure.................................................18
3.33 Untrue Statements...............................................18
3.34 Survival........................................................18
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF TEXOIL
4.1 Organization and Good Standing..................................19
4.2 Capitalization of Texoil........................................19
4.3 Texoil Subsidiaries.............................................19
4.4 Authority; No Conflicts.........................................20
4.5 Consents........................................................20
4.6 No Brokers......................................................20
4.7 Financial Statements............................................20
4.8 Securities Reports and Filings..................................21
4.9 Absence of Changes..............................................21
4.10 Absence of Undisclosed Liabilities..............................22
4.11 Tax Returns.....................................................23
4.12 Intellectual Property...........................................23
4.13 Contracts and Permits...........................................23
4.14 Insurance Policies..............................................24
4.15 Employees.......................................................24
4.16 Employee Benefit Matters........................................25
4.17 Litigation......................................................26
4.18 Absence of Sensitive Payments...................................27
4.19 No Default......................................................27
4.20 Good and Marketable Title.......................................27
4.21 Status of the Texoil Leases.....................................28
4.22 Gas Contracts...................................................29
4.23 Preferential Rights.............................................29
4.24 Books and Records...............................................30
4.25 Operations and Expenditures.....................................30
4.26 Tax Partnerships................................................30
4.27 ▇▇▇▇▇...........................................................30
4.28 Seismic Data....................................................30
4.29 Compliance with Laws............................................30
4.30 Property........................................................30
4.31 Environmental Compliance........................................31
4.32 Transactions with Management....................................32
4.33 Full Disclosure.................................................32
4.34 Untrue Statements...............................................32
4.35 Survival........................................................32
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF TEXOIL SUB
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TABLE OF CONTENTS
(Continued)
PAGE
5.1 Organization and Qualification..................................32
5.2 No Operations...................................................33
5.3 Capitalization..................................................33
5.4 Authority Relative to Agreement.................................33
5.5 Non-Contravention...............................................33
5.6 Governmental Consents...........................................33
5.7 Survival of Representations and Warranties......................33
ARTICLE 6
ADDITIONAL COVENANTS AND UNDERTAKINGS
6.1 Stockholder Approval............................................34
6.2 Further Assurances and Assistance...............................34
6.3 Access to Information...........................................34
6.4 Conduct of Business Prior to Closing............................34
6.5 Inquiries and Negotiations......................................36
6.6 Expenses........................................................37
6.7 Options and Warrants of Cliffwood...............................37
6.8 Indemnification of Resigning Texoil Officers and Directors......37
6.9 Certain Registration Rights.....................................37
ARTICLE 7
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE
7.1 Conditions Precedent to the Obligation of Texoil................40
7.2 Conditions Precedent to the Obligation of Cliffwood.............41
7.3 Conditions to the Obligations of Cliffwood, Texoil and Texoil
Sub.............................................................42
ARTICLE 8
TERMINATION
8.1 Methods of Termination..........................................43
8.2 Termination by Board of Directors...............................43
8.3 Effect of Termination...........................................43
8.4 Waiver of Conditions............................................43
8.5 Expense on Termination..........................................43
ARTICLE 9
MISCELLANEOUS
9.1 Notice..........................................................43
9.2 Schedules and Exhibits..........................................44
9.3 Execution in Counterparts.......................................44
9.4 Entire Agreement................................................45
9.5 Applicable Law and Venue........................................45
9.6 Modification....................................................45
9.7 Successors and Assigns..........................................45
9.8 Amendments and Waivers..........................................45
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TABLE OF CONTENTS
(Continued)
PAGE
9.9 Severability....................................................46
9.10 Announcements...................................................46
9.11 Knowledge, Headings, Gender, and Certain References.............46
9.12 Rights of Parties...............................................47
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of
December 31, 1997, is by and among Texoil, Inc., a Nevada corporation
("Texoil"), Texoil Acquisition, Inc., a Texas corporation and a wholly-owned
subsidiary of Texoil ("Texoil Sub") and Cliffwood Oil & Gas Corp., a Texas
corporation ("Cliffwood"). Cliffwood and Texoil Sub are the only parties to the
merger contemplated hereby and are sometimes referred to herein as the
"Constituent Corporations," and Cliffwood, as it shall exist after the
consummation of the merger contemplated hereby, is sometimes referred to herein
as the "Continuing Corporation."
WITNESSETH:
WHEREAS, Cliffwood and Texoil are each engaged in the business of
exploring for, producing and selling oil and natural gas;
WHEREAS, the Board of Directors of Texoil previously determined to
pursue a potential business combination with another oil and gas industry
participant with a view to maximizing shareholder value for Texoil shareholders;
WHEREAS, the Board of Directors of Texoil has solicited indications of
interest in such a business combination from numerous oil and gas industry
participants and having considered the available alternatives has determined
that the merger of Texoil Sub with and into Cliffwood on the terms and subject
to the conditions set forth in this Agreement (the "Merger") offers the best
opportunity for the maximization of shareholder value for Texoil stockholders;
WHEREAS, the Board of Directors of Texoil has therefore determined that
the Merger is fair to Texoil stockholders and that consummation of the Merger is
advisable and in the best interest of Texoil and its stockholders; and
WHEREAS, the Board of Directors of Cliffwood has also solicited and
considered potential business combinations with numerous other oil and gas
industry participants for the purpose of maximizing shareholder value for
Cliffwood shareholders and has likewise determined that the Merger is fair to
Cliffwood shareholders and that it is advisable and in the best interest of
Cliffwood and its shareholders that Cliffwood consummate the Merger.
NOW, THEREFORE, for the purpose of consummating the Merger and other
transactions contemplated hereby and in consideration of the respective
agreements, representations, warranties and covenants contained herein, the
parties hereby agree as follows:
ARTICLE 1
THE MERGER
1.1 EFFECTIVE TIME OF THE MERGER. Subject to the provisions of this
Agreement, Articles of Merger (the "Articles of Merger") in such form as
required by the relevant provisions of the Texas Business Corporation Act (the
"TBCA") shall be duly prepared, executed and acknowledged by each of the
Constituent Corporations and thereafter delivered to the Secretary of State of
the State of Texas for filing, as provided in the TBCA, on the Closing Date (as
defined herein). The Merger shall become effective upon the filing of the
Articles of Merger with the Secretary of State of the State of Texas or at such
time thereafter as is provided in the Articles of Merger (the "Effective Time").
1.2 CLOSING. The closing of the Merger (the "Closing") will take place
at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P. or such other place as shall be agreed
by the parties hereto, on (i) the first business day after the last of the
conditions set forth in Article 7 is fulfilled or waived, or (ii) on such other
date as is specified by Texoil and Cliffwood after all of the conditions to the
Merger set forth in Article 7 have been satisfied or waived, subject to the
rights of termination and abandonment hereinafter set forth (the "Closing
Date").
1.3 EFFECTS OF THE MERGER.
1.3.1 At the Effective Time: (i) the separate existence of
Texoil Sub shall cease and Texoil Sub shall be merged with and into Cliffwood
with Cliffwood as the surviving entity, (ii) the Articles of Incorporation of
Cliffwood on the Closing Date shall be the Articles of Incorporation of the
Continuing Corporation, (iii) the Bylaws of Cliffwood on the Closing Date shall
be the Bylaws of the Continuing Corporation, and (iv) the directors and officers
of Cliffwood shall be the officers and directors of the Continuing Corporation.
1.3.2(i) The separate existence of Texoil Sub shall cease; (ii)
all rights, title and interests to all real estate and other property owned by
the Constituent Corporations shall be allocated to and vested in Cliffwood as
provided in this Agreement without reversion or impairment, without further act
or deed, and without any transfer or assignment having occurred, but subject to
any existing liens or other encumbrances thereon; and (iii) all liabilities and
obligations of the Constituent Corporations shall be allocated to Cliffwood.
ARTICLE 2
CONVERSION OF SHARES; PAYMENT OF MERGER CONSIDERATION
2.1 CONVERSION OF SHARES. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of capital
stock of Texoil Sub or Cliffwood:
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2.1.1 Each issued and outstanding share of Cliffwood's Class A
Common Stock, par value $0.01 per share, and Cliffwood's Class B Common Stock,
par value $0.01 per share at the Effective Time (collectively, the "Old
Cliffwood Common Stock") shall be converted, automatically and without further
action on the part of the holder, into the right to receive 6.74 shares (the
"Merger Consideration") of common stock, par value $0.01 per share of Texoil
(the "Texoil Common Stock"). Until surrendered, the certificates representing
shares of Old Cliffwood Common Stock shall represent for all purposes only the
right to receive the Merger Consideration. At the Effective Time, the holders of
such certificates shall immediately and permanently cease to have any rights as
stockholders of Cliffwood, except such rights, if any, as they may have pursuant
to the TBCA.
2.1.2 Each issued and outstanding share of common stock, par
value $0.01 per share, of Texoil Sub at the Effective Time (the "Texoil Sub
Common Stock") shall be converted into and become one validly issued, fully paid
and nonassessable share of common stock, par value $0.01 per share, of the
Continuing Corporation (the "New Cliffwood Common Stock"). After the Effective
Time and until surrender, each certificate representing shares of Texoil Sub
Common Stock shall represent for all purposes a like number of shares of New
Cliffwood Common Stock.
2.2 PAYMENT OF THE MERGER CONSIDERATION.
2.2.1 As soon as practicable after the Effective Time, Texoil
shall mail or otherwise cause to be delivered to each record holder of
certificates representing shares of Old Cliffwood Common Stock who has not
already delivered a transmittal form and related stock certificates to Texoil, a
notice and transmittal form for use in effecting the surrender of such holder's
Old Cliffwood Common Stock certificates for payment therefor. Upon surrender to
Texoil of such certificates together with such letter of transmittal duly
executed, the holder of such certificate(s) shall be entitled to receive the
Merger Consideration in exchange therefor and such certificate shall forthwith
be canceled.
2.2.2 All payments of the Merger Consideration made in respect
of shares of Old Cliffwood Common Stock which are made in accordance with the
terms of this Article shall be deemed to have been made in full satisfaction of
all rights pertaining to such shares of Old Cliffwood Common Stock.
2.2.3 No certificates or scrip representing fractional shares
of Texoil Common Stock shall be issued for shares of Old Cliffwood Common Stock,
and such fractional share interests will not entitle the owner thereof to vote
or to any rights of a stockholder of Texoil. Each holder of shares of Old
Cliffwood Common Stock who would otherwise have been entitled to receive in the
Merger a fraction of a share of Texoil Common Stock, after taking into account
all certificates surrendered by such holder, shall be entitled to receive, in
lieu thereof, cash in an amount equal to such fractional part of a share of
Texoil Common Stock multiplied by the average of the bid and asked price for the
Texoil Common Stock, as quoted on the Nasdaq SmallCap Market for the five
trading days immediately preceding the Closing Date. All fractional shares of
Texoil Common Stock otherwise due to a holder of Old Cliffwood Common Stock
shall be aggregated so that such holder shall receive additional whole shares of
Texoil Common Stock to the extent the sum of such
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fractional parts equals or exceeds a whole number, and such holder shall receive
cash for any net fractional shares less than one whole share.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF CLIFFWOOD
Except as disclosed in the Cliffwood Property Schedule or other
schedules referred to in this Article 3, Cliffwood hereby represents and
warrants to Texoil and Texoil Sub as follows:
3.1 ORGANIZATION AND GOOD STANDING. Cliffwood is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas and has full corporate power and authority to carry on its business as it
is now being conducted. Cliffwood is qualified as a foreign corporation and is
in good standing under the laws of each jurisdiction in which the conduct of its
business or the ownership of its properties requires such qualification, except
where the failure to be so qualified would not have a Material Adverse Effect
with respect to Cliffwood (a "Cliffwood Material Adverse Effect"). As used
herein, the term "Material Adverse Effect" shall mean, with respect to any
party, a material adverse effect on the assets, financial condition or business
of such party and its Subsidiaries, taken as a whole. As used herein, the term
"Subsidiary" shall mean, with respect to any party, any corporations,
partnerships, limited liability companies, joint ventures or other business
entities owned or controlled by such party, directly or indirectly, whether by
owning a majority of the shares or other interests having the power to elect
directors of such entity or other persons exercising similar functions or
otherwise.
3.2 CAPITALIZATION OF CLIFFWOOD. The authorized capital stock of
Cliffwood consists of 25,000,000 shares of Old Cliffwood Common Stock, par value
$0.01 per share, divided into 20,000,000 shares of Class A Common Stock, of
which 3,442,657 shares are issued and outstanding, and 5,000,000 shares of Class
B Common Stock, of which 333,334 shares are issued and outstanding; and
10,000,000 shares of preferred stock, par value $0.01 per share, of which none
are issued and outstanding. All the outstanding shares of capital stock of
Cliffwood have been validly issued, are fully paid and nonassessable, were
issued in compliance with all applicable state and federal laws, and were not
issued in violation of any right of first refusal, preemptive right, or similar
right of any person. Except as described in SCHEDULE 3.2, (i) no shares of
capital stock of Cliffwood are held in treasury and (ii) there are no other
issued or outstanding securities (as defined under the Securities Act of 1933,
as amended (the "Securities Act")) of Cliffwood. Except as described in SCHEDULE
3.2, Cliffwood is not subject to any commitment or obligation that would require
the issuance or sale of additional securities of Cliffwood at any time under
options, subscriptions, warrants, rights, conversion rights, exercise rights or
any other obligations or that requires Cliffwood to purchase or redeem any
securities.
3.3 CLIFFWOOD SUBSIDIARIES. Each of the Subsidiaries of Cliffwood (each
a "Cliffwood Subsidiary") is set forth as SCHEDULE 3.3. As used herein, the term
"Cliffwood Group" means Cliffwood and all of its Subsidiaries. Except as set
forth in SCHEDULE 3.3, all of the outstanding securities of each of the
Cliffwood Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable, are owned beneficially and of record by Cliffwood or a Cliffwood
Subsidiary and
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Cliffwood has good and marketable title thereto free and clear of any
Encumbrance (as defined herein). Each such Cliffwood Subsidiary is duly
organized, validly existing, and in good standing under the laws of the
jurisdiction under which it is organized and has full requisite power and
authority to own its property and carry on its business as presently conducted
by it and is duly qualified or licensed to do business and in good standing as a
foreign business entity authorized to do business in all jurisdictions in which
the character of the properties owned or the nature of the business conducted
makes such qualification or licensing necessary except for those jurisdictions
where the failure to be so qualified or licensed and in good standing would not
constitute a Cliffwood Material Adverse Effect. Except as set forth in SCHEDULE
3.3, there are no existing options, warrants, calls, commitments, agreements,
conversion rights, exercise rights or other securities obligating any Cliffwood
Subsidiary to issue or transfer any securities to any person or that require any
of the Cliffwood Subsidiaries to purchase or redeem any securities. Except as
set forth in SCHEDULE 3.3, no member of the Cliffwood Group directly or
indirectly owns any security issued by any corporation, partnership, joint
venture or other business association or entity.
3.4 AUTHORITY; NO CONFLICTS.
3.4.1 Cliffwood has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Cliffwood. This Agreement has been duly executed
and delivered by Cliffwood and, assuming the due authorization, execution and
delivery by Texoil and Texoil Sub, constitutes the valid and binding obligation
of Cliffwood, enforceable in accordance with its terms, except as such
enforceability may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to creditors rights
generally and (ii) the availability of injunctive relief and other general
principles of equity.
3.4.2 Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will: (i) conflict with
or result in any violation or breach of any provision of the Articles of
Incorporation or Bylaws of any member of the Cliffwood Group; (ii) give rise to
any right to purchase any securities or assets of any member of the Cliffwood
Group; (iii) conflict with, result in a breach of, constitute a default under,
without regard to requirements of notice or the lapse of time or both,
accelerate or permit the acceleration of the performance required by, result in
the loss or modification of, or require any consent, authorization or approval
under any lease, license, franchise, permit, contract or other agreement,
authorization or instrument to which any member of the Cliffwood Group is a
party or by which they are bound or to which any of their properties are
subject; or (iv) conflict with or result in any violation of any judgment,
order, decree, statute or law applicable to any member of the Cliffwood Group or
any of their properties or assets, except in the case of (ii), (iii) or (iv) for
any such conflicts, violations, defaults, terminations, cancellations or
accelerations which would not have a Cliffwood Material Adverse Effect.
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3.5 CONSENTS. Except for (i) filings required by the TBCA, (ii) consents
of private third parties that have been or will be obtained by Closing, and
(iii) filings, consents, approvals and authorizations that the failure to obtain
or make would not have a Cliffwood Material Adverse Effect, no filing with or
consent, approval or authorization of any governmental authority or of any third
party on the part of any member of the Cliffwood Group is required in connection
with the execution and delivery of this Agreement or the consummation of any of
the transactions contemplated hereby.
3.6 NO BROKERS. No member of the Cliffwood Group or anyone acting on
their behalf has employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finders' fees in connection with the transactions
contemplated by this Agreement.
3.7 FINANCIAL STATEMENTS. Cliffwood has delivered to Texoil copies of
its unaudited consolidated balance sheets as of September 30, 1997, its audited
consolidated balance sheets as at December 31, 1996 and related audited
consolidated statements of operations, consolidated statements of cash flows for
the year ended December 31, 1996 with appended notes which are an integral part
of such statements (collectively, the "Cliffwood Financial Statements"). True
and correct copies of such financial statements are appended hereto as SCHEDULE
3.7. The Cliffwood Financial Statements are complete in all material respects,
present fairly the financial condition of the Cliffwood Group as at the dates
indicated and the results of operations for the respective periods indicated,
and have been prepared in accordance with generally accepted accounting
principles in the United States applied on a consistent basis ("GAAP"), except
as noted therein. The accounts receivable reflected in the September 30, 1997
balance sheet, and those which have been thereafter acquired by any member of
the Cliffwood Group, have been collected or are not delinquent and collectible
in the aggregate recorded amounts thereof less applicable reserves computed in
accordance with GAAP, which reserves are adequate. None of the Cliffwood
Financial Statements include or omit an asset or a liability of any kind or
nature, the inclusion or omission of which would render such financial
statements materially misleading.
3.8 ABSENCE OF CHANGES. Since September 30, 1997, there has not been
any:
3.8.1 transaction by any member of the Cliffwood Group except
in the ordinary course of business as conducted on that date except as otherwise
provided on SCHEDULE 3.8;
3.8.2 capital expenditure by any member of the Cliffwood Group
exceeding $4,000,000 in the aggregate;
3.8.3 Cliffwood Material Adverse Effect;
3.8.4 destruction, damage to, or loss of any asset of any
member of the Cliffwood Group, whether or not covered by insurance, that could
have a Cliffwood Material Adverse Effect;
3.8.5 labor difficulties or other event or condition of any
character that could have a Cliffwood Material Adverse Effect;
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3.8.6 change in accounting methods or practices including,
without limitation, any change in depreciation or amortization policies or rates
by any member of the Cliffwood Group;
3.8.7 re-valuation by any member of the Cliffwood Group of any
of its assets;
3.8.8 declaration, setting aside or payment of a dividend or
other distribution in respect to the capital stock of any member of the
Cliffwood Group or any direct or indirect redemption, purchase or other
acquisition by any member of the Cliffwood Group of any securities;
3.8.9 material increase in the salary or other compensation
payable or to become payable by any member of the Cliffwood Group to any of
their officers, directors or employees, or any declaration, payment or
commitment or obligation of any kind for the payment by any member of the
Cliffwood Group of a bonus or other additional salary or compensation to any
such person;
3.8.10 sale or transfer of any asset of any member of the
Cliffwood Group, except in the ordinary course of business;
3.8.11 amendment or termination of any material contract, to
which any member of the Cliffwood Group is a party, except in the ordinary
course of business;
3.8.12 loan by any member of the Cliffwood Group to any person
or entity or guaranty by any member of the Cliffwood Group of any loan, except
as otherwise disclosed herein;
3.8.13 mortgage, pledge, lien or other encumbrance (an
"Encumbrance") of any asset of any member of the Cliffwood Group;
3.8.14 waiver or release of any material right or claim of any
member of the Cliffwood Group;
3.8.15 other event or condition of any character that has or
might reasonably have a Cliffwood Material Adverse Effect;
3.8.16 issuance or sale by any member of the Cliffwood Group of
any securities; or
3.8.17 agreement or understanding by any member of the
Cliffwood Group to do any of the things described in the preceding clauses 3.8.1
through 3.8.16, except as otherwise contemplated or disclosed by this Agreement.
3.9 ABSENCE OF UNDISCLOSED LIABILITIES. No member of the Cliffwood Group
has any debt, liability, or obligation of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, that is not reflected
or reserved against in the Cliffwood Financial Statements, except for those
incurred after September 30, 1997 that: (i) were incurred in the ordinary course
of business, (ii) are usual and normal in amount both individually and in the
aggregate, and (iii) do not exceed $1,000,000 in the aggregate.
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3.10 TAX RETURNS. Within the times and in the manner prescribed by law,
each member of the Cliffwood Group has filed all required federal, state and
local tax returns and paid all taxes, assessments and penalties due and payable,
except as set forth in SCHEDULE 3.10. No federal tax return of any member of the
Cliffwood Group has been audited by the Internal Revenue Service, and no notice
of any proposed audit has been received by any member of the Cliffwood Group.
The provisions for taxes reflected in the Cliffwood Financial Statements are
adequate for any and all federal, state, county and local taxes for the periods
covered by the Cliffwood Financial Statements and for all prior periods, whether
or not disputed. There are no present disputes with any governmental authority
as to taxes of any nature payable by any member of the Cliffwood Group. Each
member of the Cliffwood Group has made all withholdings of taxes required to be
made under all federal, state, county, local and other tax laws and regulations.
No member of the Cliffwood Group has granted any extension to any taxing
authority of the limitation period during which any tax liability may be
asserted thereby.
3.11 INTELLECTUAL PROPERTY. Except as set forth in SCHEDULE 3.11 or in
the CLIFFWOOD PROPERTY SCHEDULE, there are no Encumbrances on any patent
applications, trademarks and service marks, including registrations and
applications therefor, trade names, copyrights and written know-how, trade
secrets, and all other similar proprietary data owned by any member of the
Cliffwood Group or regarding which any such member has rights or licenses
(collectively, the "Cliffwood Intellectual Property") that are material to the
business of the Cliffwood Group. SCHEDULE 3.11 and the CLIFFWOOD PROPERTY
SCHEDULE together set forth all Cliffwood Intellectual Property that is material
to the business of the Cliffwood Group. Except as set forth in SCHEDULE 3.11 or
in the CLIFFWOOD PROPERTY SCHEDULE, no member of the Cliffwood Group has granted
to any other person or entity any license to use any Cliffwood Intellectual
Property. No member of the Cliffwood Group has received any notice of
infringement, misappropriation, or conflict with the intellectual property
rights of others in connection with the use by any member of the Cliffwood Group
of the Cliffwood Intellectual Property.
3.12 CONTRACTS AND PERMITS. Except for contracts which provide for
consideration with a fair market value of less than $25,000, SCHEDULE 3.12 and
the CLIFFWOOD PROPERTY SCHEDULE together set forth a complete and current list
of all contracts (other than Cliffwood Employment Agreements, as defined below),
leases, oil and gas leases, licenses (including without limitation Cliffwood
Seismic Licenses, as defined herein) and permits of each member of the Cliffwood
Group (the "Cliffwood Permits"), all such contracts, together with the Cliffwood
Employment Agreements, the Cliffwood Leases (as defined herein) the Cliffwood
Seismic Licenses and Cliffwood Permits being hereafter referred to as the
"Cliffwood Material Contracts." Each of the Cliffwood Material Contracts is
valid and binding upon each party thereto and is in full force and effect
according to its terms, and there have been no amendments, modifications or
supplements thereto other than such as are listed on SCHEDULE 3.12 or the
CLIFFWOOD PROPERTY SCHEDULE. Except as set forth on SCHEDULE 3.12 or the
CLIFFWOOD PROPERTY SCHEDULE, there is no default or claim of default under any
Cliffwood Material Contract and, to Cliffwood's Knowledge, no event has occurred
which, with the passage of time or the giving of notice, would constitute a
default by any member of the Cliffwood Group, or any other party thereto, under
any Cliffwood Material Contract or would permit modification, acceleration or
termination of any Cliffwood Material Contract, or result in the
8
creation of any Encumbrance on any assets of any member of the Cliffwood Group,
except for such defaults or creation of Encumbrances which would not have a
Cliffwood Material Adverse Effect. Except as indicated on SCHEDULE 3.12 or the
CLIFFWOOD PROPERTY SCHEDULE, no Cliffwood Material Contract will require the
consent of or notice to any party thereto with respect to any of the
transactions contemplated hereby, except to the extent that the failure to
obtain such consent or provide notice will not have a Cliffwood Material Adverse
Effect. None of the material permits require the payments of any further fees
except as listed on SCHEDULE 3.12 or the CLIFFWOOD PROPERTY SCHEDULE nor, to
Cliffwood's Knowledge, do any facts or circumstances exist which would indicate
that any member of the Cliffwood Group will not be entitled to renew any
material permit upon its expiration or would be required to pay an extraordinary
fee or charge in connection therewith. Except for the permits listed on SCHEDULE
3.12 or the CLIFFWOOD PROPERTY SCHEDULE, no permit is required for the operation
of the businesses of any member of the Cliffwood Group as presently conducted,
except for such permits, the absence of which would not have a Cliffwood
Material Adverse Effect.
3.13 INSURANCE POLICIES. A description of all insurance policies held by
each member of the Cliffwood Group concerning its businesses and properties is
set forth on SCHEDULE 3.13. All of these policies are in the respective
principal amounts as set forth on SCHEDULE 3.13. Each member of the Cliffwood
Group has maintained and now maintains (i) insurance on all of its material
assets and businesses of a type customarily insured, covering property damage
and loss of income by fire or other casualty and (ii) adequate insurance
protection against all liabilities, claims, and risks against which it is
customary to insure.
3.14 EMPLOYEES. SCHEDULE 3.14 contains a correct and current list of all
contracts with respect to employment and collective bargaining agreements to
which any member of the Cliffwood Group is a party or by which any member of the
Cliffwood Group is bound (the "Cliffwood Employment Agreements"); all such
contracts are in full force and effect, and no member of the Cliffwood Group or
any other party is in default under any of them. There have been no claims of
defaults, and there are no facts or conditions which if continued or on notice
will result in a default under such contracts. Each member of the Cliffwood
Group has paid all salaries and wages accrued to or for the benefit of its
respective employees and has complied in all respects with all applicable laws
relating to the employment of labor, including those relating to wages, hours,
collective bargaining and the payment and withholding of taxes, and has withheld
and paid to the appropriate governmental authority, or is holding for payment
not yet due to such authority, all amounts required by law or agreement to be
withheld from the wages or salaries of such employees. Except as set forth on
SCHEDULE 3.14, there has been no material adverse change in the relationship of
any member of the Cliffwood Group with its employees, including any threatened
union organization, any strike, work stoppage or labor disturbance by any such
employees or any other third party employees performing services, and no member
of the Cliffwood Group is aware of any indication that such a change or event is
likely. A complete and correct list of the names and addresses of all officers,
directors and employees of each member of the Cliffwood Group, stating the rates
of compensation payable to each, is set forth on SCHEDULE 3.14.
9
3.15 EMPLOYEE BENEFIT MATTERS.
3.15.1 SCHEDULE 3.15 sets forth a brief description all of the
bonus, deferred and incentive compensation, profit sharing, pension, retirement,
vacation, sick leave, leave of absence, disability, life insurance,
hospitalization, severance, and fringe benefit plans, policies, programs and
arrangements, all "employee pension benefit plans" (as defined in Section 3(2)
of the Employee Retirement Income Security Act ("ERISA")), and all "employee
welfare benefit plans" (as defined in Section 3(1) of ERISA), which any member
of the Cliffwood Group maintains, to which any member of the Cliffwood Group
contributes or has an obligation to contribute, or with respect to which any
member of the Cliffwood Group has any liability or reasonable expectation of
liability (all such plans, policies, programs and arrangements shall be
individually referred to herein as "Plan" and collectively as "Plans") as of the
Closing. Except as set forth in SCHEDULE 3.15, no member of the Cliffwood Group
maintains any Plans. For purposes of this Section 3.15, all references to the
Cliffwood Group shall be deemed to refer to each member of the Cliffwood Group
and any trade or business, whether or not incorporated, which together with
Cliffwood would be deemed or treated as a "single employer" within the meaning
of Section 414 of the Internal Revenue Code of 1986, as amended (the "Code") or
ERISA Section 4001. None of the Plans (i) is subject to Title IV of ERISA or the
minimum funding requirements of Section 412 of the Code or Section 302 of ERISA,
(ii) is a plan of the type described in Section 4063 of ERISA or Section 413(c)
of the Code, (iii) is a "multi-employer plan" (as defined in Section 3(37) of
ERISA), (iv) provides for medical, dental, life, disability or other insurance
benefits to current or future retired employees or former employees of any
member of the Cliffwood Group (other than as required for group health plan
continuation coverage under Code Section 4980B or similar state law), (v)
obligates any member of the Cliffwood Group to pay any severance or similar
benefits solely as a result of a change in control or ownership within the
meaning of Code Section 280G, or (vi) is a "voluntary employees' beneficiary
association" within the meaning of Code Section 501(c)(9).
3.15.2 Each Plan is, in all material respects, in compliance,
and has been administered, maintained and funded in all material respects in
accordance, with the applicable provisions of ERISA and the Code and all other
applicable laws, rules and regulations. To the best knowledge of each member of
the Cliffwood Group, no member of the Cliffwood Group or any fiduciary to any
Plan, with respect to any Plan, has (i) engaged in any prohibited transaction
under ERISA or the Code, (ii) breached any fiduciary duty owed by it, or (iii)
failed to file and distribute, timely and properly, all reports and information
required to be filed or distributed in accordance with ERISA or the Code. There
are also no pending or threatened, actions, suits, investigations, arbitrations
or claims with respect to any Plan (other than routine claims for benefits)
which could reasonably be expected to result in material liability to any member
of the Cliffwood Group, and there are no changes in contributions or benefit
levels that have been implemented, or negotiated and not yet implemented, with
respect to any Plan that has not been disclosed in SCHEDULE 3.15.
3.15.3 All contributions or premiums which are due on or before
the Closing with respect to the Plans have been or will be timely paid by each
member of the Cliffwood Group.
10
3.15.4 Each Plan which is intended to be qualified under Code
Section 401(a), (i) has been timely amended to reflect all requirements of the
Tax Reform Act of 1986 ("TRA 86") and all subsequent legislation which is
required to be adopted prior to the Closing and (ii) has received from the
Internal Revenue Service a favorable determination letter which considers the
terms of the Plan as amended for such tax law changes. Nothing has occurred
since the date of such determination letter that would adversely affect the
qualified status of each such Plan or the tax-exempt status of any related
trust.
3.15.5 During the six years preceding the Closing Date, (i) no
under-funded pension plan subject to Section 412 of the Code has been
transferred out of the Cliffwood Group, and (ii) no member of the Cliffwood
Group has participated in or contributed to, or had an obligation to contribute
to, any multiemployer plan (as defined in ERISA Section 3(37)).
3.15.6 No member of the Cliffwood Group has incurred, and has
no reason to expect that it will incur, any material liability (i) to the
Internal Revenue Service, the U.S. Department of Labor, or the Pension Benefit
Guaranty Corporation ("PBGC"), or (ii) under any multi-employer plan, Title IV
of ERISA (including any withdrawal liability or "reportable event"), or the
Code, with respect to any Plan that any member of the Cliffwood Group maintains
or has maintained, or contributes to or had an obligation to contribute to,
during the six years preceding the Closing.
3.15.7 The current present value of all accrued benefits, both
vested and unvested, under all Plans which are subject to Title IV of ERISA does
not exceed the current fair market value of the assets of each such Plan
allocable to such accrued benefits and, for purposes of this sentence, the
assumptions used by PBGC for valuing plan assets and liabilities upon plan
termination shall be applied.
3.15.8 None of the Plans requires any member of the Cliffwood
Group to make any bonus, severance or other payment to or on behalf of any
current or former employee, officer or director of any member of the Cliffwood
Group solely by reason of the change of ownership or control contemplated by
this Agreement.
3.15.9 Each Plan may be amended or terminated after the Closing
without contravening the terms of such Plan or any applicable laws and without
material liability to any member of the Constituent Groups (as defined herein).
3.15.10 With respect to each Plan, Cliffwood has made available
to Texoil with true, complete and correct copies, to the extent applicable, of
(i) all documents pursuant to which the Plans are maintained, funded and
administered, (ii) the most recent annual report (Form 5500 series) filed with
the Internal Revenue Service (with attachments including, without limitation,
audited financial statements), and (iii) all rulings, determinations, notices
and opinions issued by any governmental entity in the last three years (and
pending requests for governmental rulings, determinations, and opinions).
11
3.16 LITIGATION. Except as set forth on SCHEDULE 3.16:
3.16.1 No member of the Cliffwood Group is engaged in or, to
Cliffwood's Knowledge, threatened with the prosecution of any claim, demand,
action, suit, charge, allegation, citation, proceeding or investigation by or
through an administrative or judicial governmental authority (a "Proceeding").
3.16.2 No member of the Cliffwood Group has, to Cliffwood's
Knowledge, committed any act which would give rise to any Proceeding which would
have a Cliffwood Material Adverse Effect.
3.16.3 No investigation of or claims against the officers and
directors of any member of the Cliffwood Group arising as a result of the status
of such officers or directors is pending, and, to Cliffwood's Knowledge, there
is no investigation of or any claim against any agent of any member of the
Cliffwood Group arising as a result of his status as an agent of such member of
the Cliffwood Group pending or threatened by any person.
3.17 ABSENCE OF SENSITIVE PAYMENTS. No member of the Cliffwood Group nor
any of its executive officers, directors, or to Cliffwood's Knowledge, agents,
or employees has:
3.17.1 made or has agreed to make any contributions, payments or
gifts of funds or property through any governmental official, employee or agent
where either the payment or purpose of such contribution, payment or gift was or
is illegal under applicable foreign or domestic law;
3.17.2 established or maintained any unrecorded fund or asset for
any purpose or has made any false or artificial entries on any of its books or
records for any reason; or
3.17.3 made or agreed to make any contribution or expenditure, or
reimbursed any political gift or contribution or any expenditure made by any
other person to candidates for public office, whether federal, state or local
where such contributions were or would be in violation of applicable foreign or
domestic law.
3.18 NO DEFAULT. No member of the Cliffwood Group is in default under,
and, to Cliffwood's Knowledge, no condition exists that with notice or lapse of
time or both would constitute a default under any order, judgment or decree of
any governmental authority.
3.19 GOOD AND MARKETABLE TITLE. Except as set forth in SCHEDULE 3.19 or
the CLIFFWOOD PROPERTY SCHEDULE, each member of the Cliffwood Group has, and
will have at the Closing, Good and Marketable Title to the Cliffwood Oil and Gas
Interests. For purposes of this Article 3, the term "Good and Marketable Title"
shall mean title to the Cliffwood Oil and Gas Interests which is free from any
reasonable doubt as to its validity and such title as a reasonably intelligent
person, who is well informed as to facts and their legal bearings, and ready and
willing to perform his contract, would be willing to accept in the exercise of
ordinary business prudence and which is free and clear of all Encumbrances other
than Permitted Encumbrances, and which (i) entitles the owner of the
12
applicable Cliffwood Oil and Gas Interests to a net revenue interest in
production from the Cliffwood ▇▇▇▇▇ (as defined below) of no less than the net
revenue interest percentages set forth with respect to the Cliffwood ▇▇▇▇▇ in
the CLIFFWOOD PROPERTY SCHEDULE and (ii) burdens the owner with working
interests in the applicable Cliffwood ▇▇▇▇▇ no greater than the working interest
percentages for the Cliffwood ▇▇▇▇▇ set forth in the CLIFFWOOD PROPERTY
SCHEDULE. As used herein, the term "Permitted Encumbrance" shall mean any or all
of the following: (i) Encumbrances that arise under operating agreements to
secure payment of amounts not yet delinquent or are being contested in good
faith and are of a type and nature customary in the oil and gas industry; (ii)
Encumbrances that arise as a result of pooling and unitization agreements,
declarations, orders or laws to secure payment of amounts not yet delinquent;
(iii) Encumbrances securing payments to mechanics and materialmen and
Encumbrances securing payment of taxes or assessments that are, in either case,
not yet delinquent or, if delinquent, are being contested in good faith in the
normal course of business; (iv) consents to assignment by governmental
authorities (a) that are obtained on or prior to the Closing Date or (b) that
are customarily obtained after the consummation of transactions of the nature
contemplated by this Agreement; (v) consents to assignment by private third
parties for which written consents have been, or will be, obtained prior to
Closing; (vi) such title defects as have been expressly waived in writing by the
party otherwise entitled to assert the title defect as a breach of this
Agreement. As used herein, the term "Cliffwood Oil and Gas Interests" shall mean
the undivided interests in the Cliffwood ▇▇▇▇▇ set out in the CLIFFWOOD PROPERTY
SCHEDULE together with (x) the Cliffwood Proprietary Data (as defined below) and
the Cliffwood Seismic Licenses (as defined below) and (y) an undivided interest
proportionate to the ownership interests of each member of the Cliffwood Group
in and to the Cliffwood Leases and Cliffwood ▇▇▇▇▇ in, to and under, or derived
from:
3.19.1 all unitization, communitization and pooling agreements
and orders covering any of the Cliffwood Leases or Cliffwood ▇▇▇▇▇ or any
portion thereof and the units and pooled areas created thereby;
3.19.2 all easements, rights of way, permits, licenses,
servitudes or other interests appertaining to the Cliffwood Leases and Cliffwood
▇▇▇▇▇;
3.19.3 all equipment and other personal property, fixtures and
improvements situated upon the Cliffwood Leases or lands pooled or unitized
therewith, or used or held for use in connection with the exploration,
development or operation of the Cliffwood Leases or the production, treatment,
processing, storage or transportation of hydrocarbons from the Cliffwood Leases;
3.19.4 all hydrocarbon sales, purchase and processing contracts
and agreements, transportation and charter agreements, farmout or farmin
agreements, joint operating agreements, utility agreements and all other
contracts or agreements of whatever kind or character affecting or relating to
the Cliffwood Leases or Cliffwood ▇▇▇▇▇; and
3.19.5 all inventories of hydrocarbons and accounts receivable in
connection with the sale of hydrocarbons.
13
As used herein, the term "Cliffwood Leases" shall mean the oil and gas
leases, oil, gas and mineral leases, farmouts, mineral interests, mineral
servitudes, royalty interest, overriding royalty interests, net profits
interests, production payments and other oil and gas and mineral interests and
estates of whatever nature described in the CLIFFWOOD PROPERTY SCHEDULE. As used
herein, the term "Cliffwood ▇▇▇▇▇" shall mean the oil and gas ▇▇▇▇▇, injection
▇▇▇▇▇ and other ▇▇▇▇▇ described in the CLIFFWOOD PROPERTY SCHEDULE.
3.20 STATUS OF THE CLIFFWOOD LEASES. To Cliffwood's Knowledge and except
as disclosed in the CLIFFWOOD PROPERTY SCHEDULE:
(i) the Cliffwood Leases have been maintained according to their
terms, in compliance with the agreements to which the Cliffwood Leases
are subject except where noncompliance would not have a Cliffwood
Material Adverse Effect;
(ii) the Cliffwood Leases are in full force and effect;
(iii) all payments due with respect to the Cliffwood Leases,
including royalties, delay rentals and shut-in royalties have been paid
in full when due;
(iv) the entire interest of each member of the Cliffwood Group in
each Cliffwood Well is in paying status and has not been suspended by
the purchaser or any other remitter of proceeds of production;
(v) no other party to any Cliffwood Lease is in breach or default
with respect to any of its obligations thereunder, except where such
breach or default would not have a Cliffwood Material Adverse Effect;
(vi) there has not occurred any event, fact or circumstance which
with the lapse of time or the giving of notice, or both, would
constitute such a breach or default of any obligation under any
Cliffwood Lease, except where such breach or default would not have a
Cliffwood Material Adverse Effect;
(vii) no lessor of any Cliffwood Lease has given or threatened to
give notice of any action to terminate, cancel, rescind or procure a
judicial reformation of any Cliffwood Lease or any provisions thereof;
(viii) there are no obligations to engage in continuous
development operations in order to maintain any Cliffwood Lease in
force, except as included in documents listed in the CLIFFWOOD PROPERTY
SCHEDULE;
14
(ix) there are no gas balancing agreements covering the Cliffwood
Leases except those described in the CLIFFWOOD PROPERTY SCHEDULE and,
except those described on the CLIFFWOOD PROPERTY SCHEDULE, no
hydrocarbon imbalances (whether production imbalance, pipeline imbalance
or otherwise) presently exist in connection with any well on the
Cliffwood Leases; and
(x) no hydrocarbons produced from the Cliffwood Leases are
subject to a sales contract or other agreement relating to the
production, gathering, transporting, processing, treating or marketing
of hydrocarbons which cannot be terminated by Cliffwood without penalty
to Cliffwood upon Cliffwood's notice within 60 days or less of such
notice, and no person has any call upon, option to purchase or other
similar rights with respect to the Cliffwood Leases or to the production
therefrom.
3.21 GAS CONTRACTS. With respect to any Cliffwood Material Contract
which is a hydrocarbon purchase and sales agreement, no member of the Cliffwood
Group is obligated by virtue of any prepayment arrangement under any Cliffwood
Material Contract containing a "take or pay" or similar provision or a
production payment or any other arrangement to deliver hydrocarbons produced
from Cliffwood Oil and Gas Interests at some future time without then or
thereafter receiving full payment therefor, except as included in documents
listed in the CLIFFWOOD PROPERTY SCHEDULE.
3.22 PREFERENTIAL RIGHTS. Each member of the Cliffwood Group shall have
obtained by Closing (i) all prerequisite waivers of preferential rights of
purchase or evidence of proper delivery and receipt of notices of such
preferential rights, evidencing the expiration of the appropriate election
period, and (ii) all necessary consents for transfer of the interests, except
those which by their nature cannot be requested or obtained until after Closing,
or Texoil shall have waived same.
3.23 BOOKS AND RECORDS. To Cliffwood's Knowledge, all lease files, land
files, well files, abstracts, title opinions, maps, electric logs, geological
and geophysical data, and all production records that relate to the Cliffwood
Oil and Gas Interests and Cliffwood ▇▇▇▇▇ of any member of the Cliffwood Group
and that are owned by or are in the possession of any member of the Cliffwood
Group are, or shall prior to the Closing Date be, located in the offices of
Cliffwood.
3.24 OPERATIONS AND EXPENDITURES. Except as listed in the CLIFFWOOD
PROPERTY SCHEDULE, there are no joint operating agreements in effect in
connection with the assets of any member of the Cliffwood Group. Except as
described in the CLIFFWOOD PROPERTY SCHEDULE, there are no outstanding calls or
payments under authorities for expenditures which are due or which any member of
the Cliffwood Group has committed to make and which have not been made.
3.25 TAX PARTNERSHIPS. None of the assets of any member of the Cliffwood
Group are subject to a tax partnership.
15
3.26 ▇▇▇▇▇. To Cliffwood's Knowledge, (i) all of the Cliffwood ▇▇▇▇▇
which have been drilled and completed on the Cliffwood Oil and Gas Interests
have been drilled and completed within the boundaries of the Cliffwood Leases or
within the limit otherwise permitted by contract, pooling or unit agreement and
by laws; and (ii) all drilling and completion, and plugging and abandonment, of
such ▇▇▇▇▇ and all development and operations on the Cliffwood Oil and Gas
Interests have been conducted in compliance with all applicable laws,
ordinances, rules, regulations and permits, and judgments, orders and decrees of
any governmental authority. To Cliffwood's Knowledge, there are no ▇▇▇▇▇ located
on the Cliffwood Leases (other than the Cliffwood ▇▇▇▇▇) which have not been
plugged and abandoned in accordance with all laws, statutes, ordinances,
decrees, requirements, orders, judgments, rules and regulations of, including
all licenses and permits issued by governmental authorities. To Cliffwood's
Knowledge, none of the Cliffwood ▇▇▇▇▇ is subject to penalty or reduced
allowables after the date hereof because of any overproduction or other
violation of applicable laws, rules, regulations or permits or judgments, orders
or decrees of any governmental authority which would prevent any of such
Cliffwood ▇▇▇▇▇ from being entitled to its full legal and regular allowable from
and after the date hereof as prescribed by any governmental authority.
3.27 SEISMIC DATA. All of the geophysical data and interpretations in
Cliffwood's possession are either owned by a member of the Cliffwood Group (the
"Cliffwood Proprietary Data") or licensed to a member of the Cliffwood Group by
others pursuant to valid and subsisting licensing agreements (the "Cliffwood
Seismic Licenses"). The seismic licenses described on the CLIFFWOOD PROPERTY
SCHEDULE are all of the material Cliffwood Seismic Licenses.
3.28 COMPLIANCE WITH LAWS. Each member of the Cliffwood Group has at all
times complied with all applicable laws in all material respects.
3.29 PROPERTY. Except as described in SCHEDULE 3.29 or the CLIFFWOOD
PROPERTY SCHEDULE, and except for property sold, used or otherwise disposed of
in the ordinary course of business for fair market value, each member of the
Cliffwood Group has good and defensible title to all their properties, interests
in properties and assets, real and personal, reflected in the September 30, 1997
unaudited consolidated financial statements referred to in Section 3.7 free and
clear of any Encumbrance, except (i) Encumbrances reflected in the consolidated
balance sheets of Cliffwood dated September 30, 1997 and (ii) liens for current
taxes not yet due and payable. All leases pursuant to which any member of the
Cliffwood Group leases, whether as lessee or lessor, any material amount of real
or personal property are valid, subsisting and effective; and there is not,
under any such lease, any existing or to Cliffwood's Knowledge any prospective
default or event of default or event which with notice or lapse of time, or
both, would constitute a default by any member of the Cliffwood Group. The
buildings and premises of each member of the Cliffwood Group that are used in
its business is in good operating condition and repair, subject only to ordinary
wear and tear. All items of equipment of each member of the Cliffwood Group are
in an operating condition and in a state of maintenance and repair so as to not
substantially interfere with the continued use thereof in the conduct of normal
operations as conducted by such member of the Cliffwood Group in the past.
16
3.30 ENVIRONMENTAL COMPLIANCE. Except as set forth on SCHEDULE 3.30, and
except to the extent that inaccuracy of any of the following, individually or in
the aggregate, could not have a Cliffwood Material Adverse Effect:
3.30.1 There are no environmental conditions or circumstances,
including, without limitation, the presence or release of any Substance of
Environmental Concern (as defined below), on any property presently or
previously owned, leased, operated or used by any member of the Cliffwood Group,
or on any property on or in which any waste generated by any member of the
Cliffwood Group was disposed;
3.30.2 Each member of the Cliffwood Group has, and within the
period of all applicable statutes of limitations has had, in full force and
effect all Environmental Permits (as defined below) required to conduct its
operations, and is, and within the period of all applicable statutes of
limitations has been, operating in compliance thereunder;
3.30.3 The operations of each member of the Cliffwood Group and
use of their respective assets are, and within the period of all applicable
statutes of limitations have been, in compliance with applicable Environmental
Law (as defined below);
3.30.4 No notice has been received by any member of the Cliffwood
Group, or to Cliffwood's Knowledge by any predecessor of any member of the
Cliffwood Group, from any entity, governmental agency or individual regarding,
nor is any member of the Cliffwood Group otherwise aware of, any existing,
pending or threatened investigation, inquiry, enforcement action, litigation or
liability, including, without limitation, any claim for remedial obligations,
response costs or contribution, relating to any Environmental Law;
3.30.5 No member of the Cliffwood Group, and to Cliffwood's
Knowledge no predecessor of any member of the Cliffwood Group, or other party
acting on behalf of any member of the Cliffwood Group has entered into or agreed
to any consent decree, order, settlement or other agreement, nor is subject to
any judgment, decree, order or other agreement, in any judicial, administrative,
arbitral, or other forum, relating to compliance with or liability under any
Environmental Law;
3.30.6 No member of the Cliffwood Group has assumed or retained
pursuant to any contract any known liabilities of any kind under any
Environmental Law;
3.30.7 To Cliffwood's Knowledge, no member of the Cliffwood Group
is aware of any reason any Environmental Permit required to conduct the current
and planned operations of any member of the Cliffwood Group pursuant to any
applicable Environmental Law could not be renewed without material expense; and
3.30.8 No friable asbestos currently exists on any property
owned, leased or operated by any member of the Cliffwood Group, nor do
polychlorinated biphenyls exist in concentrations
17
of 50 parts per million or more in electrical equipment owned or being used by
any member of the Cliffwood Group in its operations or on its properties.
3.30.9 As used herein, "Environmental Law" means any and all
laws, rules, orders, regulations, statutes, ordinances, codes, decrees, and
other legally enforceable requirements (including, without limitation, common
law) of the United States, or any State, local, municipal or other governmental
authority or quasi-governmental authority, regulating, relating to, or imposing
liability or standards of conduct concerning protection of the environment,
natural resources, human health, or employee health and safety as from time to
time has been or is now in effect. As used herein, "Environmental Permits" means
any and all permits, licenses, registrations, approvals, notifications,
exemptions and any other authorization required under any Environmental Law. As
used herein, "Substance of Environmental Concern" means any gasoline, petroleum
(including crude oil or any fraction thereof), petroleum product,
polychlorinated biphenyls, urea-formaldehyde insulation, asbestos, pollutant,
contaminant, radiation, and any other substance of any kind, whether or not any
such substance is defined as toxic or hazardous under any Environmental Law,
that is regulated pursuant to or could give rise to liability under any
Environmental Law.
3.31 TRANSACTIONS WITH MANAGEMENT. Except as set forth in SCHEDULE 3.31
OR SCHEDULE 3.2, no member of the Cliffwood Group is a party to any contract,
lease or commitment with any of its shareholders, directors, officers,
employees, or agents, or with any shareholder, director, officer, employee, or
agent of any member of the Cliffwood Group.
3.32 FULL DISCLOSURE. None of the representations and warranties made by
any member of the Cliffwood Group or made in any certificate, document,
instrument or other writing furnished or to be furnished by any member of the
Cliffwood Group or on their behalf in connection with the transactions
contemplated by this Agreement, contain or will contain any untrue statement of
material fact, or omit any material fact, the omission of which would be
misleading. Except as disclosed in this Agreement or in schedules attached
hereto, there is no fact, circumstance or condition which does or could
reasonably be expected to have a Cliffwood Material Adverse Effect.
3.33 UNTRUE STATEMENTS. This Agreement, the exhibits and appendices
hereto, the Cliffwood Financial Statements and all other documents and
information furnished by any member of the Cliffwood Group or any of their
affiliates or representatives to Texoil or its representatives pursuant to or in
connection with this Agreement does not include and will not include any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements made herein and therein not misleading.
3.34 SURVIVAL. None of the representations and warranties made herein by
Cliffwood shall survive the Closing.
18
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF TEXOIL
Except as disclosed in the TEXOIL PROPERTY SCHEDULE or other schedules
referred to in this Article 4, Texoil hereby represents and warrants to
Cliffwood as follows:
4.1 ORGANIZATION AND GOOD STANDING. Texoil is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada and has full corporate power and authority to carry on its business as it
is now being conducted. Texoil is qualified as a foreign corporation and is in
good standing under the laws of each jurisdiction in which the conduct of its
business or the ownership of its properties requires such qualification, except
where the failure to be so qualified would not have a Material Adverse Effect
with respect to Texoil (a "Texoil Material Adverse Effect").
4.2 CAPITALIZATION OF TEXOIL. The authorized capital stock of Texoil
consists of 50,000,000 shares of Texoil Common Stock of which 4,574,923 shares
are issued and outstanding as of November 1, 1997 and 10,000,000 shares of
preferred stock, par value $0.01 per share, of which 23,000 shares are issued
and outstanding. All the outstanding shares of capital stock of Texoil have been
validly issued, are fully paid and nonassessable, were issued in compliance with
all applicable state and federal laws, and were not issued in violation of any
right of first refusal, preemptive right, or similar right of any person. Except
as described in SCHEDULE 4.2, (i) no shares of capital stock of Texoil are held
in treasury and (ii) there are no other issued or outstanding securities (as
defined under the Securities Act) of Texoil. Except as described in SCHEDULE
4.2, Texoil is not subject to any commitment or obligation that would require
the issuance or sale of additional securities of Texoil at any time under
options, subscriptions, warrants, rights, conversion rights, exercise rights or
any other obligations or that requires Texoil to purchase or redeem any
securities.
4.3 TEXOIL SUBSIDIARIES. Each of the Subsidiaries of Texoil (each a
"Texoil Subsidiary") is set forth as SCHEDULE 4.3. As used herein, the term
"Texoil Group" means Texoil and all of its Subsidiaries. Except as set forth in
SCHEDULE 4.3, all of the outstanding securities of each of the Texoil
Subsidiaries are duly authorized, validly issued, fully paid and nonassessable,
are owned beneficially and of record by Texoil or a Texoil Subsidiary and Texoil
has good and marketable title thereto free and clear of any Encumbrance. Each
such Texoil Subsidiary is a corporation duly organized, validly existing, and in
good standing under the laws of the jurisdiction under which it is incorporated
and has full requisite corporate power and authority to own its property and
carry on its business as presently conducted by it and is duly qualified or
licensed to do business and in good standing as a foreign corporation authorized
to do business in all jurisdictions in which the character of the properties
owned or the nature of the business conducted makes such qualification or
licensing necessary except for those jurisdictions where the failure to be so
qualified or licensed and in good standing would not constitute a Texoil
Material Adverse Effect. Except as set forth in SCHEDULE 4.3, there are no
existing options, warrants, calls, commitments, agreements, conversion rights,
exercise rights or other securities obligating any Texoil Subsidiary to issue or
transfer any securities to any person or that require any of the Texoil
Subsidiaries to purchase or redeem any securities. Except
19
as set forth in SCHEDULE 4.3, no member of the Texoil Group directly or
indirectly owns any security issued by any corporation, partnership, joint
venture or other business association or entity.
4.4 AUTHORITY; NO CONFLICTS.
4.4.1 Texoil has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Texoil. This Agreement has been duly executed
and delivered by Texoil and, assuming the due authorization, execution and
delivery by Cliffwood, constitutes the valid and binding obligation of Texoil,
enforceable in accordance with its terms, except as such enforceability may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to creditors rights generally and (ii) the
availability of injunctive relief and other general principles of equity.
4.4.2 Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will: (i) conflict with
or result in any violation or breach of any provision of the Articles of
Incorporation or Bylaws of any member of the Texoil Group; (ii) give rise to any
right to purchase any securities or assets of any member of the Texoil Group;
(iii) conflict with, result in a breach of, constitute a default under, without
regard to requirements of notice or the lapse of time or both, accelerate or
permit the acceleration of the performance required by, result in the loss or
modification of, or require any consent, authorization or approval under any
lease, license, franchise, permit, contract or other agreement, authorization or
instrument to which any member of the Texoil Group is a party or by which they
are bound or to which any of their properties are subject; or (iv) conflict with
or result in any violation of any judgment, order, decree, statute or law
applicable to any member of the Texoil Group or any of their properties or
assets, except in the case of (ii), (iii) or (iv) for any such conflicts,
violations, defaults, terminations, cancellations or accelerations which would
not have a Texoil Material Adverse Effect.
4.5 CONSENTS. Except for (i) filings required by the TBCA, (ii) consents
of private third parties that have been or will be obtained prior to Closing,
and (iii) filings, consents, approvals and authorizations that the failure to
obtain or make would not have a Texoil Material Adverse Effect, no filing with
or consent, approval or authorization of any governmental authority or of any
third party on the part of any member of the Texoil Group is required in
connection with the execution and delivery of this Agreement or the consummation
of any of the transactions contemplated hereby.
4.6 NO BROKERS. No member of the Texoil Group or anyone acting on their
behalf has employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finders' fees in connection with the transactions
contemplated by this Agreement.
4.7 FINANCIAL STATEMENTS. Texoil has delivered to Cliffwood copies of
its filings pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), for each of the years ending December 31, 1997, 1996, and 1995,
which contain the annual and quarterly, as applicable, consolidated balance
sheets and statements of cash flows and shareholders' equity
20
required to be included therein for the respective periods covered thereby
(collectively, the "Texoil Financial Statements"). The Texoil Financial
Statements are complete in all material respects, present fairly the financial
condition of the Texoil Group as at the dates indicated and the results of
operations for the respective periods indicated, and have been prepared in
accordance with GAAP, except as noted therein. The accounts receivable reflected
in the September 30, 1997 balance sheet, and those which have been thereafter
acquired by any member of the Texoil Group, have been collected or are not
delinquent and collectible in the aggregate recorded amounts thereof less
applicable reserves computed in accordance with GAAP, which reserves are
adequate. None of the Texoil Financial Statements include or omit an asset or a
liability of any kind or nature, the inclusion or omission of which would render
such financial statements materially misleading.
4.8 SECURITIES REPORTS AND FILINGS. Texoil has filed all forms, reports,
and documents required to be filed with the Securities and Exchange Commission
(the "SEC") since December 31, 1996 and has heretofore delivered to Cliffwood,
in the form filed with the SEC, all such reports, proxy statements, registration
statements and other forms filed with the SEC pursuant to the Securities Act or
the Exchange Act (collectively, "Texoil SEC Reports"). The Texoil SEC Reports
were prepared in substantial compliance with the requirements of the Securities
Act or the Exchange Act, as the case may be, and at the time they were filed,
were complete and accurate in all material respects and did not include an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. No Texoil Subsidiary is required to
file any forms, reports, or other documents with the SEC.
4.8.1 Texoil's Common Stock is currently listed on the Nasdaq
SmallCap Market. Texoil has filed all forms, reports and documents required to
be filed since December 31, 1996 to maintain such listing. Except as set forth
on SCHEDULE 4.8, Texoil has not received any notification that Texoil has failed
to maintain, or otherwise satisfy, the minimum standards necessary to maintain
such listing and, to Texoil's knowledge, there has not occurred any event, fact
or circumstance which with the lapse of time or the giving of notice, or both,
would cause Texoil's Common Stock to no longer be listed on the Nasdaq SmallCap
Market.
4.9 ABSENCE OF CHANGES. Since September 30, 1997, there has not been
any:
4.9.1 transaction by any member of the Texoil Group except in the
ordinary course of business as conducted on that date except as otherwise
provided on SCHEDULE 4.9;
4.9.2 capital expenditure by any member of the Texoil Group
exceeding $2,000,000 in the aggregate;
4.9.3 Texoil Material Adverse Effect;
4.9.4 destruction, damage to, or loss of any asset of any member
of the Texoil Group, whether or not covered by insurance, that could have a
Texoil Material Adverse Effect;
21
4.9.5 labor difficulties or other event or condition of any
character that could have a Texoil Material Adverse Effect;
4.9.6 change in accounting methods or practices including,
without limitation, any change in depreciation or amortization policies or rates
by any member of the Texoil Group;
4.9.7 re-valuation by any member of the Texoil Group of any of
its assets;
4.9.8 declaration, setting aside or payment of a dividend or
other distribution in respect to the capital stock of any member of the Texoil
Group or any direct or indirect redemption, purchase or other acquisition by any
member of the Texoil Group of any securities;
4.9.9 material increase in the salary or other compensation
payable or to become payable by any member of the Texoil Group to any of their
officers, directors or employees, or any declaration, payment or commitment or
obligation of any kind for the payment by any member of the Texoil Group of a
bonus or other additional salary or compensation to any such person;
4.9.10 sale or transfer of any asset of any member of the Texoil
Group, except in the ordinary course of business;
4.9.11 amendment or termination of any material contract, to
which any member of the Texoil Group is a party, except in the ordinary course
of business;
4.9.12 loan by any member of the Texoil Group to any person or
entity or guaranty by any member of the Texoil Group of any loan, except as
otherwise disclosed herein;
4.9.13 Encumbrance of any asset of any member of the Texoil
Group;
4.9.14 waiver or release of any material right or claim of any
member of the Texoil Group;
4.9.15 other event or condition of any character that has or
might reasonably have a Texoil Material Adverse Effect;
4.9.16 issuance or sale by any member of the Texoil Group of any
securities; or
4.9.17 agreement or understanding by any member of the Texoil
Group to do any of the things described in the preceding clauses 4.9.1 through
4.9.16, except as otherwise contemplated or disclosed by this Agreement.
4.10 ABSENCE OF UNDISCLOSED LIABILITIES. No member of the Texoil Group
has any debt, liability, or obligation of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, that is not reflected
or reserved against in the Texoil Financial Statements, except for those
incurred after September 30, 1997 that: (i) were incurred in the ordinary course
of
22
business, (ii) are usual and normal in amount both individually and in the
aggregate, and (iii) do not exceed $1,000,000 in the aggregate.
4.11 TAX RETURNS. Within the times and in the manner prescribed by law,
each member of the Texoil Group has filed all required federal, state and local
tax returns and paid all taxes, assessments and penalties due and payable,
except as set forth in SCHEDULE 4.11. No federal tax return of any member of the
Texoil Group has been audited by the Internal Revenue Service, and no notice of
any proposed audit has been received by any member of the Texoil Group. The
provisions for taxes reflected in the Texoil Financial Statements are adequate
for any and all federal, state, county and local taxes for the periods covered
by the Texoil Financial Statements and for all prior periods, whether or not
disputed. There are no present disputes with any governmental authority as to
taxes of any nature payable by any member of the Texoil Group. Each member of
the Texoil Group has made all withholdings of taxes required to be made under
all federal, state, county, local and other tax laws and regulations. No member
of the Texoil has granted any extension to any taxing authority of the
limitation period during which any tax liability may be asserted thereby.
4.12 INTELLECTUAL PROPERTY. Except as set forth in SCHEDULE 4.12 or in
the TEXOIL PROPERTY SCHEDULE, there are no Encumbrances on any patents, patent
applications, trademarks and service marks, including registrations and
applications therefor, trade names, copyrights and written know-how, trade
secrets, and all other similar proprietary data owned by any member of the
Cliffwood Group or regarding which any such member has rights or licenses
(collectively, the "Texoil Intellectual Property") that are material to the
business of the Texoil Group. SCHEDULE 4.12 and the TEXOIL PROPERTY SCHEDULE
together set forth all Texoil Intellectual Property that is material to the
business of the Texoil Group. Except as set forth in SCHEDULE 4.12 or the TEXOIL
PROPERTY SCHEDULE, no member of the Texoil Group has granted to any other person
or entity any license to use any Texoil Intellectual Property. No member of the
Texoil Group has received any notice of infringement, misappropriation, or
conflict with the intellectual property rights of others in connection with the
use by any member of the Texoil Group of the Texoil Intellectual Property.
4.13 CONTRACTS AND PERMITS. Except for contracts which provide for
consideration with a fair market value of less than $25,000, SCHEDULE 4.13 and
TEXOIL PROPERTY SCHEDULE together set forth a complete and current list of all
contracts (other than Texoil Employment Agreements, as defined below), leases,
oil and gas leases, licenses (including without limitation Texoil Seismic
Licenses, as defined below) and permits of each member of the Texoil Group (the
"Texoil Permits"), all such contracts, together with the Texoil Employment
Agreements, the Texoil Leases (as defined herein), the Texoil Seismic Leases and
Texoil Permits being referred to herein as the "Texoil Material Contracts." Each
of the Texoil Material Contracts is valid and binding upon each party thereto
and is in full force and effect according to its terms, and there have been no
amendments, modifications or supplements thereto other than such as are
specifically described on SCHEDULE 4.13 or the TEXOIL PROPERTY SCHEDULE. Except
as set forth on SCHEDULE 4.13 or the TEXOIL PROPERTY SCHEDULE, there is no
default or claim of default under any Texoil Material Contract and no event has
occurred which, with the passage of time or the giving of notice, would
constitute a default by any member of the Texoil Group, or any other party
thereto, under any Texoil Material Contract or
23
would permit modification, acceleration or termination of any Texoil Material
Contract, or result in the creation of any Encumbrance on any assets of any
member of the Texoil Group, except for such defaults or creation of Encumbrances
which would not have a Texoil Material Adverse Effect. Except as indicated on
SCHEDULE 4.13 or TEXOIL PROPERTY SCHEDULE, no Texoil Material Contract will
require the consent of or notice to any party thereto with respect to any of the
transactions contemplated hereby, except to the extent that the failure to
obtain such consent or provide notice will not have a Texoil Material Adverse
Effect. None of the material permits require the payments of any further fees
except as listed on SCHEDULE 4.13 or TEXOIL PROPERTY SCHEDULE, nor, to Texoil's
Knowledge, do any facts or circumstances exist which would indicate that any
member of the Texoil Group will not be entitled to renew any material permit
upon its expiration or would be required to pay an extraordinary fee or charge
in connection therewith. Except for the permits listed on SCHEDULE 4.13 or the
TEXOIL PROPERTY SCHEDULE, no permit is required for the operation of the
businesses of any member of the Texoil Group as presently conducted except for
such permits the absence of which would not have a Texoil Material Adverse
Effect.
4.14 INSURANCE POLICIES. A description of all insurance policies held by
each member of the Texoil Group concerning its businesses and properties is set
forth on SCHEDULE 4.14. All of these policies are in the respective principal
amounts as set forth on SCHEDULE 4.14. Each member of the Texoil Group has
maintained and now maintains (i) insurance on all of its material assets and
businesses of a type customarily insured, covering property damage and loss of
income by fire or other casualty and (ii) adequate insurance protection against
all liabilities, claims, and risks against which it is customary to insure.
4.15 EMPLOYEES. SCHEDULE 4.15 contains a correct and current list of all
contracts with respect to employment and collective bargaining agreements to
which any member of the Texoil Group is a party or by which any member of the
Texoil Group is bound (the "Texoil Employment Agreements"); all such contracts
are in full force and effect, and no member of the Texoil Group nor any other
party is in default under any of them. There have been no claims of defaults,
and there are no facts or conditions which if continued or on notice will result
in a default under such contracts. Each member of the Texoil Group has paid all
salaries and wages accrued to or for the benefit of its respective employees and
has complied in all respects with all applicable laws relating to the employment
of labor, including those relating to wages, hours, collective bargaining and
the payment and withholding of taxes, and has withheld and paid to the
appropriate governmental authority, or is holding for payment not yet due to
such authority, all amounts required by law or agreement to be withheld from the
wages or salaries of such employees. Except as set forth on SCHEDULE 4.15, there
has been no material adverse change in the relationship of any member of the
Texoil Group with its employees, including any threatened union organization,
any strike, work stoppage or labor disturbance by any such employees or any
other third party employees performing services, and no member of the Texoil
Group is aware of any indication that such a change or event is likely. A
complete and correct list of the names and addresses of all officers, directors,
and employees, of each member of the Texoil Group, stating the rates of
compensation payable to each is set forth on SCHEDULE 4.15.
24
4.16 EMPLOYEE BENEFIT MATTERS.
4.16.1 SCHEDULE 4.16 sets forth a brief description of all Plans
of the Texoil Group. Except as set forth in SCHEDULE 4.16, no member of the
Texoil Group maintains any Plans. For purposes of this Section 4.16, all
references to the Texoil Group shall be deemed to refer to each member of the
Texoil Group and any trade or business, whether or not incorporated, which
together with Texoil would be deemed or treated as a "single employer" within
the meaning of Section 414 of the Code or ERISA Section 4001. None of the Plans
(i) is subject to Title IV of ERISA or the minimum funding requirements of
Section 412 of the Code or Section 302 of ERISA, (ii) is a plan of the type
described in Section 4063 of ERISA or Section 413(c) of the Code, (iii) is a
"multi-employer plan" (as defined in Section 3(37) of ERISA), (iv) provides for
medical, dental, life, disability or other insurance benefits to current or
future retired employees or former employees of any member of the Texoil Group
(other than as required for group health plan continuation coverage under Code
Section 4980B or similar state law), (v) obligates any member of the Texoil
Group to pay any severance or similar benefits solely as a result of a change in
control or ownership within the meaning of Code Section 280G, or (vi) is a
"voluntary employees' beneficiary association" within the meaning of Code
Section 501(c)(9).
4.16.2 Each Plan is, in all material respects, in compliance, and
has been administered, maintained and funded in all material respects in
accordance, with the applicable provisions of ERISA and the Code and all other
applicable laws, rules and regulations. To the best knowledge of each member of
the Texoil Group, no member of the Texoil Group or any fiduciary to any Plan,
with respect to any Plan, has (i) engaged in any prohibited transaction under
ERISA or the Code, (ii) breached any fiduciary duty owed by it, or (iii) failed
to file and distribute, timely and properly, all reports and information
required to be filed or distributed in accordance with ERISA or the Code. There
are also no pending or threatened, actions, suits, investigations, arbitrations
or claims with respect to any Plan (other than routine claims for benefits)
which could reasonably be expected to result in material liability to any member
of the Texoil Group, and there are no changes in contributions or benefit levels
that have been implemented, or negotiated and not yet implemented, with respect
to any Plan that has not been disclosed in SCHEDULE 4.16.
4.16.3 All contributions or premiums which are due on or before
the Closing with respect to the Plans have been or will be timely paid by each
member of the Texoil Group.
4.16.4 Each Plan which is intended to be qualified under Code
Section 401(a), (i) has been timely amended to reflect all requirements of the
TRA 86 and all subsequent legislation which is required to be adopted prior to
the Closing and (ii) has received from the Internal Revenue Service a favorable
determination letter which considers the terms of the Plan as amended for such
tax law changes. Nothing has occurred since the date of such determination
letter that would adversely affect the qualified status of each such Plan or the
tax-exempt status of any related trust.
25
4.16.5 During the six years preceding the Closing Date, (i) no
under-funded pension plan subject to Section 412 of the Code has been
transferred out of the Texoil Group, and (ii) no member of the Texoil Group has
participated in or contributed to, or had an obligation to contribute to, any
multi-employer plan (as defined in ERISA Section 3(37)).
4.16.6 No member of the Texoil Group has incurred, and has no
reason to expect that it will incur, any material liability (i) to the Internal
Revenue Service, the U.S. Department of Labor, or the PBGC, or (ii) under any
multi-employer plan, Title IV of ERISA (including any withdrawal liability or
"reportable event"), or the Code, with respect to any Plan that any member of
the Texoil Group maintains or has maintained, or contributes to or had an
obligation to contribute to, during the six years preceding the Closing.
4.16.7 The current present value of all accrued benefits, both
vested and unvested, under all Plans which are subject to Title IV of ERISA does
not exceed the current fair market value of the assets of each such Plan
allocable to such accrued benefits and, for purposes of this sentence, the
assumptions used by PBGC for valuing plan assets and liabilities upon plan
termination shall be applied.
4.16.8 None of the Plans requires any member of the Texoil Group
to make any bonus, severance or other payment to or on behalf of any current or
former employee, officer or director of any member of the Texoil Group solely by
reason of the change of ownership or control contemplated by this Agreement.
4.16.9 Each Plan may be amended or terminated after the Closing
without contravening the terms of such Plan or any applicable laws and without
material liability to any member of the Constituent Groups.
4.16.10 With respect to each Plan, Texoil has made available to
Cliffwood with true, complete and correct copies, to the extent applicable, of
(i) all documents pursuant to which the Plans are maintained, funded and
administered, (ii) the most recent annual report (Form 5500 series) filed with
the Internal Revenue Service (with attachments including, without limitation,
audited financial statements), and (iii) all rulings, determinations, notices
and opinions issued by any governmental entity in the last three years (and
pending requests for governmental rulings, determinations, and opinions).
4.17 LITIGATION. Except as set forth on SCHEDULE 4.17:
4.17.1 No member of the Texoil Group is engaged in or, to
Texoil's Knowledge (as defined herein), threatened with any Proceeding.
4.17.2 No member of the Texoil Group has, to Texoil's Knowledge,
committed any act which would give rise to any Proceeding which would have a
Texoil Material Adverse Effect.
26
4.17.3 No investigation of or claims against the officers and
directors of any member of the Texoil Group arising as a result of the status of
such officers or directors is pending, and, to Texoil's Knowledge, there is no
investigation of or any claim against any agent of any member of the Texoil
Group arising as a result of his status as an agent of such member of the Texoil
Group pending or threatened by any person.
4.18 ABSENCE OF SENSITIVE PAYMENTS. No member of the Texoil Group nor
any of its executive officers, directors, or, to Texoil's Knowledge, agents, or
employees has:
4.18.1 made or has agreed to make any contributions, payments or
gifts of funds or property through any governmental official, employee or agent
where either the payment or purpose of such contribution, payment or gift was or
is illegal under applicable foreign or domestic law;
4.18.2 established or maintained any unrecorded fund or asset for
any purpose or has made any false or artificial entries on any of its books or
records for any reason; or
4.18.3 made or agreed to make any contribution or expenditure, or
reimbursed any political gift or contribution or any expenditure made by any
other person to candidates for public office, whether federal, state or local
where such contributions were or would be in violation of applicable foreign or
domestic law.
4.19 NO DEFAULT. No member of the Texoil Group is in default under, and,
to Texoil's Knowledge, no condition exists that with notice or lapse of time or
both would constitute a default under any order, judgment or decree of any
governmental authority.
4.20 GOOD AND MARKETABLE TITLE. Except as set forth in SCHEDULE 4.20 or
the TEXOIL PROPERTY SCHEDULE, each member of the Texoil Group has, and will have
at the Closing, Good and Marketable Title to the Texoil Oil and Gas Interests.
For purposes of this Article 4, the term "Good and Marketable Title" shall mean
title to the Texoil Oil and Gas Interests which is free from any reasonable
doubt as to its validity and such title as a reasonably intelligent person, who
is well informed as to facts and their legal bearings, and ready and willing to
perform his contract, would be willing to accept in the exercise of ordinary
business prudence and which is free and clear of all Encumbrances other than
Permitted Encumbrances, and which (i) entitles the owner of the applicable
Texoil Oil and Gas Interests to a net revenue interest in production from the
Texoil ▇▇▇▇▇ (as defined below) of no less than the net revenue interest
percentages set forth with respect to the Texoil ▇▇▇▇▇ set forth in the TEXOIL
PROPERTY SCHEDULE, and (ii) burdens the owner with working interests in the
applicable Texoil ▇▇▇▇▇ no greater than the working interest percentages set
forth for the Texoil ▇▇▇▇▇ set forth in the TEXOIL PROPERTY SCHEDULE. As used
herein, the term "Texoil Oil and Gas Interests" shall mean the undivided
interests in the Texoil ▇▇▇▇▇ set out in the TEXOIL PROPERTY SCHEDULE together
with (x) the Texoil Proprietary Data (as defined herein) and the Texoil Seismic
Licenses (as defined herein) and (y) an undivided interest proportionate to the
ownership interests of each member of the Texoil Group in and to the Texoil
Leases and Texoil ▇▇▇▇▇ in, to and under, or derived from:
27
4.20.1 all unitization, communitization and pooling agreements
and orders covering any of the Texoil Leases or Texoil ▇▇▇▇▇ or any portion
thereof and the units and pooled areas created thereby;
4.20.2 all easements, rights of way, permits, licenses,
servitudes or other interests appertaining to the Texoil Leases and Texoil
▇▇▇▇▇;
4.20.3 all equipment and other personal property, fixtures and
improvements situated upon the Texoil Leases or lands pooled or unitized
therewith, or used or held for use in connection with the exploration,
development or operation of the Texoil Leases or the production, treatment,
processing, storage or transportation of hydrocarbons from the Texoil Leases;
4.20.4 all hydrocarbon sales, purchase and processing contracts
and agreements, transportation and charter agreements, farmout or farmin
agreements, joint operating agreements, utility agreements and all other
contracts or agreements of whatever kind or character affecting or relating to
the Texoil Leases or Texoil ▇▇▇▇▇; and
4.20.5 all inventories of hydrocarbons and accounts receivable in
connection with the sale of hydrocarbons.
As used herein, the term "Texoil Leases" shall mean the oil and gas
leases, oil, gas and mineral leases, farmouts, mineral interests, mineral
servitudes, royalty interest, overriding royalty interests, net profits
interests, production payments and other oil and gas and mineral interests and
estates of whatever nature described in the TEXOIL PROPERTY SCHEDULE. As used
herein, the term "Texoil ▇▇▇▇▇" shall mean the oil and gas ▇▇▇▇▇, injection
▇▇▇▇▇ and other ▇▇▇▇▇ described in the TEXOIL PROPERTY SCHEDULE.
4.21 STATUS OF THE TEXOIL LEASES. To Texoil's Knowledge and except as
disclosed in the TEXOIL PROPERTY SCHEDULE:
(i) the Texoil Leases have been maintained according to their
terms, in compliance with the agreements to which the Texoil Leases are
subject;
(ii) the Texoil Leases are in full force and effect, except where
non-compliance would not have a Texoil Material Adverse Effect;
(iii) all payments due with respect to the Texoil Leases,
including royalties, delay rentals and shut-in royalties have been paid
in full when due;
(iv) the entire interest of each member of the Texoil Group in
each Texoil Well is in paying status and has not been suspended by the
purchaser or any other remitter of proceeds of production;
28
(v) no other party to any Texoil Lease is in breach or default
with respect to any of its obligations thereunder, except where such
breach or default would not have a Texoil Material Adverse Effect;
(vi) there has not occurred any event, fact or circumstance which
with the lapse of time or the giving of notice, or both, would
constitute such a breach or default of any obligation under any Texoil
Lease, except where such breach or default would not have a Texoil
Material Adverse Effect;
(vii) no lessor of any Texoil Lease has given or threatened to
give notice of any action to terminate, cancel, rescind or procure a
judicial reformation of any Texoil Lease or any provisions thereof;
(viii) there are no obligations to engage in continuous
development operations in order to maintain any Texoil Lease in force
except as included in the documents listed in the TEXOIL PROPERTY
SCHEDULE;
(ix) there are no gas balancing agreements covering the Texoil
Leases except those described in the TEXOIL PROPERTY SCHEDULE and,
except those described on the TEXOIL PROPERTY SCHEDULE, no hydrocarbon
imbalances (whether production imbalance, pipeline imbalance or
otherwise) presently exist in connection with any well on the Texoil
Leases; and
(x) no hydrocarbons produced from the Texoil Leases are subject
to a sales contract or other agreement relating to the production,
gathering, transporting, processing, treating or marketing of
hydrocarbons which cannot be terminated by Texoil without penalty to
Texoil upon Texoil's notice within 60 days or less of such notice, and
no person has any call upon, option to purchase or other similar rights
with respect to the Texoil Leases or to the production therefrom.
4.22 GAS CONTRACTS. With respect to any Texoil Material Contract which
is a hydrocarbon purchase and sales agreement, no member of the Texoil Group is
obligated by virtue of any prepayment arrangement under any Texoil Material
Contract containing a "take or pay" or similar provision or a production payment
or any other arrangement to deliver hydrocarbons produced from Texoil Oil and
Gas Interests at some future time without then or thereafter receiving full
payment therefor, except as included in documents listed in the TEXOIL PROPERTY
SCHEDULE.
4.23 PREFERENTIAL RIGHTS. Each member of the Texoil Group shall have
obtained by Closing (i) all prerequisite waivers of preferential rights of
purchase or evidence of proper delivery and receipt of notices of such
preferential rights, evidencing the expiration of the appropriate election
period, and (ii) all necessary consents for transfer of the interests, except
those which by their nature cannot be requested or obtained until after Closing,
or Cliffwood and Texoil shall have waived same.
29
4.24 BOOKS AND RECORDS. To Texoil's Knowledge, all lease files, land
files, well files, abstracts, title opinions, maps, electric logs, geological
and geophysical data, and all production records that relate to the Texoil Oil
and Gas Interests and Texoil ▇▇▇▇▇ of any member of the Texoil Group and that
are owned by or are in the possession of any member of the Texoil Group are, or
shall prior to the Closing Date be, located in the offices of Texoil.
4.25 OPERATIONS AND EXPENDITURES. Except as listed on the TEXOIL
PROPERTY SCHEDULE, there are no joint operating agreements in effect in
connection with the assets of any member of the Texoil Group. Except as set out
on set forth on the TEXOIL PROPERTY SCHEDULE, as of the Effective Time there are
no outstanding calls or payments under authorities for expenditures which are
due or which any member of the Texoil Group has committed to make and which have
not been made.
4.26 TAX PARTNERSHIPS. None of the assets of any member of the Texoil
Group are subject to a tax partnership.
4.27 ▇▇▇▇▇. To Texoil's Knowledge, (i) all of the Texoil ▇▇▇▇▇ which
have been drilled and completed on the Texoil Oil and Gas Interests have been
drilled and completed within the boundaries of the Texoil Leases or within the
limit otherwise permitted by contract, pooling or unit agreement and by laws;
(ii) and all drilling and completion, and plugging and abandonment, of such
▇▇▇▇▇ and all development and operations on the Texoil Oil and Gas Interests
have been conducted in compliance with all applicable laws, ordinances, rules,
regulations and permits, and judgments, orders and decrees of any governmental
authority. To Texoil's Knowledge, there are no ▇▇▇▇▇ located on the Texoil
Leases (other than the Texoil ▇▇▇▇▇) which have not been plugged and abandoned
in accordance with all laws, statutes, ordinances, decrees, requirements,
orders, judgments, rules and regulations of, including all licenses and permits
issued by governmental authorities. To Texoil's Knowledge, none of the Texoil
▇▇▇▇▇ is subject to penalty or reduced allowables after the date hereof because
of any overproduction or other violation of applicable laws, rules, regulations
or permits or judgments, orders or decrees of any governmental authority which
would prevent any of such Texoil ▇▇▇▇▇ from being entitled to its full legal and
regular allowable from and after the date hereof as prescribed by any
governmental authority.
4.28 SEISMIC DATA. All of the geophysical data and interpretations in
Texoil's possession are either owned by a member of the Texoil Group (the
"Texoil Proprietary Data") or licensed to a member of the Texoil Group by others
pursuant to valid and subsisting licensing agreements (the "Texoil Seismic
Licenses"). The seismic licenses described on the TEXOIL PROPERTY SCHEDULE are
all of the material Texoil Seismic Licenses.
4.29 COMPLIANCE WITH LAWS. Each member of the Texoil Group has at all
times complied with all applicable laws in all material respects.
4.30 PROPERTY. Except as described in SCHEDULE 4.30 or the TEXOIL
PROPERTY SCHEDULE, and except for property sold, used or otherwise disposed of
in the ordinary course of business for fair market value, each member of the
Texoil Group has good and defensible title to all their properties, interests in
properties and assets, real and personal, reflected in the September 30, 1997
unaudited
30
consolidated financial statements referred to in Section 4.7 free and clear of
any Encumbrance, except (i) Encumbrances reflected in the consolidated balance
sheets of Texoil dated September 30, 1997, and (ii) liens for current taxes not
yet due and payable. All leases pursuant to which any member of the Texoil Group
leases, whether as lessee or lessor, any material amount of real or personal
property are valid, subsisting and effective; and there is not, under any such
lease, any existing or, to Texoil's Knowledge, any prospective default or event
of default or event which with notice or lapse of time, or both, would
constitute a default by any member of the Texoil Group, except for such defaults
which would not have a Texoil Material Adverse Effect. The buildings and
premises of each member of the Texoil Group that are used in its business is in
good operating condition and repair, subject only to ordinary wear and tear. All
items of equipment of each member of the Texoil Group are in an operating
condition and in a state of maintenance and repair so as to not substantially
interfere with the continued use thereof in the conduct of normal operations as
conducted by such member of the Texoil Group in the past.
4.31 ENVIRONMENTAL COMPLIANCE. Except as set forth on SCHEDULE 4.31, and
except to the extent that inaccuracy of any of the following, individually or in
the aggregate, could not have a Texoil Material Adverse Effect:
4.31.1 There are no environmental conditions or circumstances,
including, without limitation, the presence or release of any Substance of
Environmental Concern, on any property presently or previously owned, leased,
operated or used by any member of the Texoil Group, or on any property on or in
which any waste generated by any member of the Texoil Group was disposed;
4.31.2 Each member of the Texoil Group has, and within the period
of all applicable statutes of limitations has had, in full force and effect all
Environmental Permits required to conduct its operations, and is, and within the
period of all applicable statutes of limitations has been, operating in
compliance thereunder;
4.31.3 The operations of each member of the Texoil Group and use
of their respective assets are, and within the period of all applicable statutes
of limitations have been, in compliance with applicable Environmental Law;
4.31.4 No notice has been received by any member of the Texoil
Group, or to Texoil's Knowledge by any predecessor of any member of the Texoil
Group, from any entity, governmental agency or individual regarding, nor is any
member of the Texoil Group otherwise aware of, any existing, pending or
threatened investigation, inquiry, enforcement action, litigation or liability,
including, without limitation, any claim for remedial obligations, response
costs or contribution, relating to any Environmental Law;
4.31.5 No member of the Texoil Group, and to Texoil's Knowledge
no predecessor of any member of the Texoil Group, or other party acting on
behalf of any member of the Texoil Group has entered into or agreed to any
consent decree, order, settlement or other agreement, nor is subject to any
judgment, decree, order or other agreement, in any judicial, administrative,
arbitral, or other forum, relating to compliance with or liability under any
Environmental Law;
31
4.31.6 No member of the Texoil Group has assumed or retained
pursuant to any contract any known liabilities of any kind under any
Environmental Law;
4.31.7 To Texoil's Knowledge, no member of the Texoil Group is
aware of any reason any Environmental Permit required to conduct the current and
planned operations of any member of the Texoil Group pursuant to any applicable
Environmental Law could not be renewed without material expense; and
4.31.8 No friable asbestos currently exists on any property
owned, leased or operated by any member of the Texoil Group, nor do
polychlorinated biphenyls exist in concentrations of 50 parts per million or
more in electrical equipment owned or being used by any member of the Texoil
Group in its operations or on its properties.
4.32 TRANSACTIONS WITH MANAGEMENT. Except as set forth in SCHEDULE 4.32
OR SCHEDULE 4.2, no member of the Texoil Group is a party to any contract, lease
or commitment with any of its shareholders, directors, officers, employees, or
agents, or with any shareholder, director, officer, employee, or agent of any
member of the Texoil Group.
4.33 FULL DISCLOSURE. None of the representations and warranties made by
any member of the Texoil Group or made in any certificate, document, instrument
or other writing furnished or to be furnished by any member of the Texoil Group
or on their behalf in connection with the transactions contemplated by this
Agreement, contain or will contain any untrue statement of material fact, or
omit any material fact, the omission of which would be misleading. Except as
disclosed in this Agreement or in schedules attached hereto, there is no fact,
circumstance or condition which does or could reasonably be expected to have a
Texoil Material Adverse Effect.
4.34 UNTRUE STATEMENTS. This Agreement, the exhibits and appendices
hereto, the Texoil Financial Statements and all other documents and information
furnished by any member of the Texoil Group or any of their affiliates or
representatives to Cliffwood or its representatives pursuant to or in connection
with this Agreement does not include and will not include any untrue statement
of a material fact or omit to state any material fact necessary to make the
statements made herein and therein not misleading.
4.35 SURVIVAL. None of the representations and warranties made herein by
Texoil shall survive the Closing.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF TEXOIL SUB
Texoil Sub represents and warrants to Cliffwood as follows:
5.1 ORGANIZATION AND QUALIFICATION. Texoil Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas.
32
5.2 NO OPERATIONS. Texoil Sub has been formed for the sole purpose of
effecting the Merger and, except as contemplated by this Agreement, Texoil Sub
has not conducted any business activities and does not have any material
liabilities or obligations.
5.3 CAPITALIZATION. The authorized capital stock of Texoil Sub consists
of 1,000 shares of Texoil Sub Common Stock. As of the date hereof, 1,000 shares
of Texoil Sub Common Stock are validly issued and outstanding, fully paid and
nonassessable and are owned of record and beneficially by Texoil, and no shares
of Texoil Sub Common Stock are held in the treasury of Texoil Sub. Texoil Sub
has no commitments to issue or sell any shares of its capital stock or any
securities or obligations convertible into or exchangeable for, or giving any
person any right to subscribe for or acquire from Texoil Sub, any shares of its
capital stock, and no securities or obligations evidencing any such rights are
outstanding.
5.4 AUTHORITY RELATIVE TO AGREEMENT. Texoil Sub has all requisite
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder. The execution and delivery of this Agreement by Texoil
Sub and the consummation by Texoil Sub of the transactions contemplated hereby
have been duly authorized by the Board of Directors of Texoil Sub and by Texoil
as its sole stockholder, and no other corporate proceedings on the part of
Texoil Sub are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Texoil Sub and constitutes the legal, valid and binding obligation of Texoil
Sub, enforceable against Texoil Sub in accordance with its terms.
5.5 NON-CONTRAVENTION. The execution and delivery of this Agreement by
Texoil Sub and the consummation by Texoil Sub of the transactions contemplated
hereby will not (i) conflict with any provision of the Articles of Incorporation
or Bylaws of Texoil Sub or (ii) result (with the giving of notice or the lapse
of time or both) in any violation of or default or loss of a benefit under, or
permit the acceleration of any obligation under, any mortgage, indenture, lease,
agreement, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Texoil Sub or its properties, other than any such
violation, default, loss or acceleration that would not constitute a Material
Adverse Effect on the ability of Texoil Sub to consummate the transactions
contemplated hereby.
5.6 GOVERNMENTAL CONSENTS. No consent, approval, order or authorization
of, or registration, declaration or filing with, any federal, state, local or
foreign governmental or regulatory authority is required to be made or obtained
by Texoil Sub in connection with the execution and delivery of this Agreement by
Texoil Sub or the consummation by Texoil Sub of the transactions contemplated
hereby, except for (i) filings required by the TBCA and (ii) such consents,
approvals, orders or authorizations which if not obtained, or registrations,
declarations or filings which if not made, would not constitute a Material
Adverse Effect on the ability of Texoil Sub to consummate the transactions
contemplated hereby.
5.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. No representations and
warranties made by Texoil Sub herein shall survive the Closing.
33
ARTICLE 6
ADDITIONAL COVENANTS AND UNDERTAKINGS
6.1 STOCKHOLDER APPROVAL. As soon as reasonably practicable following
the date of this Agreement, Cliffwood shall take all action necessary in
accordance with the TBCA, its Articles of Incorporation and Bylaws to obtain the
consent of its stockholders for the consummation of the Merger, whether by
stockholder meeting or otherwise. The Board of Directors of Cliffwood will upon
execution of this Agreement, subject to its fiduciary duties, recommended that
Cliffwood's stockholders approve the Merger contemplated by this Agreement. The
Board of Directors of Cliffwood shall, subject to its fiduciary duties, use its
reasonable best efforts to secure from stockholders of Cliffwood such approval.
6.2 FURTHER ASSURANCES AND ASSISTANCE. Texoil, Texoil Sub and Cliffwood
agree that each will execute and deliver to the other any and all documents, in
addition to those expressly provided for herein, that may be necessary or
appropriate to implement the provisions of this Agreement, whether before, at or
after the Closing. The parties agree to cooperate with each other to any extent
reasonably required in order to accomplish fully the transactions herein
contemplated.
6.3 ACCESS TO INFORMATION. Each of the Cliffwood Group and the Texoil
Group (the "Constituent Groups") from and after the date of this Agreement and
until the Closing Date, shall give the other Constituent Group and its employees
and counsel full and complete access upon reasonable notice during normal
business hours, to all officers, employees, offices, properties, agreements,
records and affairs of each member of such Constituent Group or otherwise
relating to its business, will provide the other Constituent Group with all
regularly prepared financial statements of each member of such Constituent
Group, and will provide copies of such information concerning each member of
such Constituent Group and its business as the other Constituent Group may
reasonably request; provided, however, that the foregoing shall not permit the
other Constituent Group or any agent thereto to (i) disrupt the business of any
member of such Constituent Group or (ii) contact any employee of any member of
such Constituent Group without providing reasonable prior notice to such
Constituent Group and allowing a representative of such Constituent Group to be
present. The other Constituent Group shall return all copies so made to such
Constituent Group if the Closing does not occur.
6.4 CONDUCT OF BUSINESS PRIOR TO CLOSING. Except for: (i) the sale by
Texoil of up to 12.5% of the working interest in Raceland project; (ii) the sale
by Cliffwood of certain producing assets in Rocky Mountain states to Prima
Exploration, Inc. for consideration of $1,325,000; and (iii) as otherwise
contemplated or disclosed by this Agreement, from and after the date hereof
until the Effective Time, each member of the Constituent Groups shall use its
reasonable best efforts to conduct its business in the ordinary course and,
after the date hereof, each of the Constituent Groups shall act as follows:
6.4.1 No Constituent Group will adopt any change in any method of
accounting or accounting practice, except as contemplated or required by GAAP;
34
6.4.2 No member of the Constituent Groups will make any material
amendment to its certificate or articles of incorporation or bylaws;
6.4.3 Except for the disposition of obsolete equipment in the
ordinary course of business or as contemplated under this Agreement, no member
of either Constituent Group will sell, mortgage, pledge or otherwise dispose of
any material assets or properties owned or used in the operation of their
business;
6.4.4 No member of either Constituent Group will merge or
consolidate with, or agree to merge or consolidate with, or purchase or agree to
purchase all or substantially all of the assets of, or otherwise acquire, any
other business entity;
6.4.5 Except as provided pursuant to the terms of any outstanding
stock options and warrants or as contemplated under this Agreement, no member of
either Constituent Group will authorize for issuance, issue or sell any
additional shares of its capital stock or any other securities;
6.4.6 Except as otherwise contemplated under this Agreement, no
member of either Constituent Group will incur, or agree to incur, any debt for
borrowed money other than borrowings under existing revolving credit facilities
not to exceed $1,000,000;
6.4.7 Neither Cliffwood nor Texoil will declare, set aside, or
pay, directly or indirectly, any dividend, cash or stock, or other distribution
in respect to its securities;
6.4.8 Except with respect to increases in the salary of employees
who are not executive officers or directors that arise pursuant to normal merit
reviews in the ordinary course of business, no member of either Constituent
Group will make or adopt any agreement or plan, including any severance plan to
increase in the compensation or severances payable to any of its employees,
officers or directors;
6.4.9 No member of either Constituent Group shall make or cause
to be made any amendment to any bonus, insurance, pension, compensation, or
other benefit plan for, with, or covering any of its employees, officers, or
directors;
6.4.10 Each member of each Constituent Group will use reasonable
efforts to preserve its business relationships, directors, officers, employees
or agents, suppliers, customers, and others having business relations with such
Constituent Group;
6.4.11 Each member of each Constituent Group will develop,
maintain and operate the oil and gas properties which are operated by them in a
good and workmanlike manner;
6.4.12 Each member of each Constituent Group shall use all
reasonable efforts to cause the oil and gas properties which are not operated by
them to be developed, maintained and operated in substantially the same manner
as heretofore unless it is economically prudent to do so;
35
6.4.13 Each member of each Constituent Group shall maintain
insurance coverage substantially similar to that now in effect with respect to
the Constituent Group;
6.4.14 Each Constituent Group shall use all reasonable efforts to
keep its material contracts in full force and effect in all material respects,
unless any such material contract terminates pursuant to its own terms or in the
ordinary course of business;
6.4.15 Each Constituent Group shall perform and comply with all
of the covenants and conditions contained in its material contracts in all
material respects;
6.4.16 Each Constituent Group shall in all material respects
comply with all laws and any governmental authority having jurisdiction over its
assets or business; and
6.4.17 Each Constituent Group shall otherwise carry on its
business in substantially the same manner as heretofore conducted.
6.5 INQUIRIES AND NEGOTIATIONS. Each Constituent Group shall immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any person or entity conducted heretofore in respect of the
acquisition of all or any substantial part of the business and properties of
such Constituent Group, whether by sale of assets or shares of capital stock, or
by merger, consolidation, recapitalization, liquidation or similar transaction
(each, an "Acquisition Transaction"). Each member of each Constituent Group
shall not, and shall not permit its officers, employees, representatives or
agents to, directly or indirectly, (i) solicit or initiate discussions or
negotiations with, or provide any non-public information to, any person other
than the other Constituent Group or its affiliates concerning an Acquisition
Transaction or (ii) otherwise solicit, initiate or encourage inquiries or the
submissions or any proposal contemplating an Acquisition Transaction. Each
Constituent Group shall promptly communicate to the other Constituent Group the
terms of any inquiry or proposal which it may receive in respect of an
Acquisition Transaction. Such Constituent Group's notification under this
Section 6.5 shall include the identity of the person making such proposal or any
other such information with respect thereto as the other Constituent Group may
reasonably request. Nothing contained in this Agreement shall be construed to
prohibit a Constituent Group from (a), if advised in writing by counsel to be
required by fiduciary obligations under applicable law, providing non-public
information to, and participating in negotiations with, a person or entity who
has made a bona fide offer to effect an Acquisition Transaction and (b)
accepting an offer for an Acquisition Transaction which the Board of Directors
of the parent entity of a Constituent Group believes is more favorable to such
Constituent Group's stockholders than the Merger contemplated hereby; provided,
however, in the event that an offer for an Acquisition Transaction is accepted
by a Constituent Group pursuant to this Section, the parent entity of such
Constituent Group shall pay to the parent entity of the other Constituent Group,
within 10 days of such acceptance, the sum of $400,000 (the "Break-up Fee"). The
Break-up Fee shall not be payable in the event that: (i) Texoil does not receive
the fairness opinion of Rauscher, Pierce, Refsnes, Inc. contemplated by Article
7; (ii) litigation is initiated against any party hereto by a third party not
acting in concert with a party to this Agreement in which an injunction against,
or damages for, the Merger is sought to be obtained; (iii) Resource Investors
Management Company Limited
36
Partnership and its affiliates (collectively, "RIMCO") do not provide the new
financing to Texoil contemplated by Article 7; (iv) an event occurs or a
condition exists that has a Material Adverse Effect on the Cliffwood Group or
the Texoil Group.
6.6 EXPENSES. Each party to this Agreement will pay its own fees,
expenses and disbursements and those of its counsel in connection with the
subject matter of this Agreement, including the negotiations with respect hereto
and the preparation of any documents, and all other costs and expenses incurred
by it in the performance and compliance with all conditions and obligations to
be performed by it pursuant to this Agreement or as contemplated hereby.
6.7 OPTIONS AND WARRANTS OF CLIFFWOOD. At and conditioned upon the
Closing, Texoil will issue to each holder of options or warrants issued by
Cliffwood and exercisable for Old Cliffwood Common Stock (the "Cliffwood Options
and Warrants"), options or warrants of Texoil with similar terms and exercisable
for the number of shares of Texoil Common Stock each such holder of Cliffwood
Options and Warrants would be entitled to receive under this Agreement if each
such holder exercised its rights under the Cliffwood Options and Warrants prior
to Merger to receive the maximum number of shares of Old Cliffwood Common Stock
(and each such holder's rights under the Cliffwood Options and Warrants were
100% vested prior to the Merger unless within 30 days of the Closing Date the
Board of Directors of Texoil elects to maintain the vesting schedule under the
Cliffwood Options and Warrants and give written notice thereof to the holders of
the Cliffwood Options and Warrants).
6.8 INDEMNIFICATION OF RESIGNING TEXOIL OFFICERS AND DIRECTORS. Texoil
shall provide to each officer and director of Texoil in office on the day
immediately preceding the Closing Date indemnification and insurance coverage
for the actions of such persons their capacity as officers and directors
substantially identical to that provided to officers and directors of Texoil in
office in comparable positions after the Closing Date; PROVIDED, HOWEVER, that
such insurance coverage need be provided only if, and to the extent that, Texoil
elects in its sole discretion to purchase such insurance and it is available on
commercially reasonable terms and PROVIDED, FURTHER, that such insurance
coverage, if any, need be provided only through the fourth anniversary of the
Closing Date. Notwithstanding any provision in this Agreement to the contrary,
the obligations contained in this Section shall be enforceable by each person
who was an officer or director of Texoil immediately prior to the Closing Date
as a third party beneficiary.
6.9 CERTAIN REGISTRATION RIGHTS
6.9.1 By June 30, 1998, Texoil shall (i) prepare and file with
the Commission a registration statement (the "Shelf Registration Statement")
covering the number of shares of Texoil Common Stock set forth below with
respect to each Holder (as defined below) and the number of shares of Texoil
Common Stock issuable upon exercise of options and warrants owned by such Holder
as set forth below with respect to each Holder (collectively, the "Registrable
Stock") covering the nonunderwritten secondary offering and resale by each
Holder of such Texoil Common Stock on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act, and (ii) use reasonable efforts to cause the
Shelf Registration Statement to become effective as soon as possible
37
after the filing thereof so as to permit the secondary offering and resale of
such Registrable Stock by the Holders or any of them. Texoil shall be required
to file the Shelf Registration Statement with respect to any particular shares
of Registrable Stock, however, only if: (i) Texoil is eligible under the then
applicable rules and interpretations of the Commission to cause the Shelf
Registration Statement regarding such shares of Registrable Stock to be filed
and become effective on Form S-3 and (ii) such shares of Registrable Stock are
not covered by a registration statement on form S-8 that may be used by the
Holder of such Registrable Stock for nonunderwritten secondary offerings and
resales of such Registrable Stock.
6.9.2 Notwithstanding the provisions of the foregoing paragraph
6.9.1, if Texoil determines in good faith that: (i) the secondary offering and
resale of Registrable Stock by the Holders as contemplated by the foregoing
paragraph 6.9.1, would materially and adversely affect a pending or proposed
public offering of securities of Texoil, an acquisition, merger,
recapitalization, consolidation, reorganization or similar transaction relating
to Texoil (or any subsidiary) or negotiations, discussions or pending proposals
with respect thereto or require premature disclosure of information to the
potential detriment of Texoil; or (ii) the Shelf Registration Statement contains
or will contain a material misstatement of fact or omits a material fact
required to make a statement in the Shelf Registration Statement not misleading,
then upon written notice of such determination to each of the Holders, Texoil
shall be entitled to require the suspension by the Holders of any distribution
of Registrable Stock under the Shelf Registration Statement for a period of time
which, for purposes of this paragraph 6.9.1, shall not exceed 90 days in any
twelve month period. Such written notice need contain only a general statement
of the reasons of such suspension. Texoil shall promptly notify each of the
Holders of the expiration or earlier termination of such suspension.
6.9.3 Notwithstanding the provisions of paragraph 6.9.1, if
Texoil shall file a registration statement with respect to an offering by it
through an underwriter or group of underwriters (an "Underwritten Registration
Statement") of Texoil Common Stock or securities convertible into or
exchangeable or exercisable for Texoil Common Stock, and the managing
underwriter or underwriters advise Texoil that a sale or distribution of the
Registrable Stock covered by the Shelf Registration Statement would adversely
affect such offering, then upon written notice to each of the Holders, the
Holders shall suspend the distribution of any shares of Registrable Stock
pursuant to the Shelf Registration Statement during a period specified by or on
behalf of such underwriters, which period shall not be greater than 14 days
prior to or 120 days following the effective date of such Underwritten
Registration Statement. The period following the effective date of such
Underwritten Registration Statement shall be subject to early termination by the
managing underwriter or underwriters.
6.9.4 If and when Texoil is required by the provisions of this
Section to use its reasonable efforts to effect the registration of any
Registrable Stock under the Securities Act, Texoil will:
6.9.4.1as expeditiously as reasonably practicable, prepare
and file with the Commission a registration statement on the appropriate
form with respect to such Registrable Stock and use reasonable efforts
to cause such registration statement to become effective and
38
remain effective until the second anniversary of the Closing Date or
such shorter period of time until the transfer or sale of all
Registrable Stock so registered has been completed; PROVIDED, HOWEVER,
that if Rule 144 or Rule 145 as promulgated under the Securities Act or
any successor or similar rule or statute shall permit the sale by a
Holder at any time over a period of 90 consecutive days of all the
shares of Registrable Stock, then the rights of the Holder as to
registration provided for in this Section with respect to all of that
Holder's Registrable Stock shall terminate immediately.
6.9.4.2as expeditiously as reasonably practicable, prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective and to
comply with the provisions of the Securities Act with respect to the
disposition of such Registrable Stock in accordance with the intended
method of distribution set forth in such registration statement;
6.9.4.3as expeditiously as reasonably practicable, furnish
to each of the Holders offering Registrable Stock registered, or to be
registered under the Securities Act, such number of copies of
prospectuses and preliminary prospectuses in conformity with the
requirements of the Securities Act, and such other documents as such
Holder may reasonably request, in order to facilitate the public sale or
other disposition of such Registrable Stock owned by such Holder;
PROVIDED, HOWEVER, that the obligation of Texoil to deliver copies of
prospectuses or preliminary prospectuses to such Holders shall be
subject to the receipt by Texoil of reasonable assurances from such
Holders that they will comply with the applicable provisions of the
Securities Act and of such other securities laws as may be applicable in
connection with any use by it of any prospectuses or preliminary
prospectus;
6.9.4.4as expeditiously as reasonably practicable, list
the shares of Registrable Stock registered, or to be registered under
the Securities Act, for trading on such registered securities exchanges
or other national securities market systems as the Texoil Common Stock
shall be then listed for trading;
6.9.4.5as expeditiously as practicable, use its reasonable
efforts to register or qualify the Registrable Stock under such other
securities laws of such United States jurisdictions as the Holders
making such request shall reasonably request (considering the nature and
size of the offering) and do any and all other acts and things which may
be necessary or desirable to enable the Holders making such request to
consummate the public sale or other disposition in such jurisdictions of
Registrable Stock owned by such Holders; PROVIDED, HOWEVER, that Texoil
shall not be required to qualify to transact business as a foreign
corporation in any jurisdiction in which it would otherwise not be
required to be so qualified or to take any action which would subject it
to general service of process or to taxation in any jurisdiction in
which it is not then so subject; and
6.9.4.6bear all Registration Expenses (as defined below)
in connection with all registrations hereunder; PROVIDED, HOWEVER, that
all Selling Expenses (as defined below)
39
with respect to Registrable Stock held by the Holders and all fees and
disbursements of counsel for the Holders in connection with each
registration pursuant to this Section shall be borne by such Holders pro
rata in proportion to the number of shares of Registrable Stock covered
thereby being sold or in such proportion as they may agree. All (i)
registration and filing fees; (ii) printing expenses; (iii) fees and
disbursements of counsel for Texoil; (iv) blue sky fees and expenses;
and (v) fees and expenses of accountants for Texoil are herein referred
to as "Registration Expenses." All underwriting fees and discounts and
brokerage and selling commissions and fees and expenses of the counsel
for the Holders and any underwriter's counsel applicable to the sales in
connection with any such registration are herein referred to as "Selling
Expenses."
6.9.5 As used in this section, "Holder" shall mean each person
listed below and "Holders" shall mean all such persons. The shares of
Registrable Stock with respect to each Holder shall include only the shares of
presently outstanding Texoil Common Stock and the shares of Texoil Common Stock
issuable upon exercise of the options and warrants as indicated opposite the
name of each Holder (in each case including any shares of Texoil Common Stock or
other securities received by the Holders on account of any stock split, stock
dividend or merger of Texoil) in Exhibit 6.9.
6.9.6 Notwithstanding anything in this Agreement to the contrary,
the obligations contained in this Section 6.9 shall be enforceable by each
Holder as a third party beneficiary of this Agreement.
ARTICLE 7
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARTIES TO CLOSE
7.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF TEXOIL. The obligation of
Texoil to consummate the Closing is subject to the fulfillment or waiver, on or
prior to the Closing Date, of each of the following conditions precedent:
7.1.1 Cliffwood shall have complied in all material respects with
its agreements and covenants contained herein to be performed at or prior to the
Closing, and the representations and warranties of Cliffwood contained herein
shall be true and correct in all material respects on and as of the Closing Date
with the same effect as though made on and as of the Closing Date, and Texoil
shall have received an officer's certificate of Cliffwood in form and substance
satisfactory to Texoil, dated as of the Closing Date, certifying as to the
fulfillment of the conditions set forth in this Section 7.1.1.
7.1.2 No statute, rule or regulation, or order of any court or
administrative agency shall be in effect which restrains or prohibits Texoil
from consummating the transactions contemplated hereby.
7.1.3 There shall not have occurred any change or event which
will cause or can reasonably be expected to cause a Cliffwood Material Adverse
Effect.
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7.1.4 The form and substance of all certificates, instruments,
opinions and other documents delivered to Texoil under this Agreement shall be
satisfactory in all reasonable respects to Texoil and its counsel.
7.1.5 Each of Cliffwood's shareholders and each holder of
Cliffwood Options and Warrants will fully complete, execute and deliver a
Consent and Investment Questionnaire in the form attached hereto as Exhibit A,
each such questionnaire to be satisfactory in form and substance to Texoil.
7.1.6 The Board of Directors of Texoil shall have received a
favorable fairness opinion from Rauscher, Pierce, Refsnes, Inc. or another
investment banking firm mutually agreeable to the Constituent Groups.
7.1.7 An officer of Cliffwood will execute and deliver an
Officer's Certificate in a form mutually agreeable to Cliffwood and Texoil.
7.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF CLIFFWOOD. The obligation
of Cliffwood to consummate the Closing is subject to the fulfillment or waiver,
on or prior to the Closing Date, of each of the following conditions precedent:
7.2.1 Each of Texoil and Texoil Sub shall have complied in all
material respects with its agreements and covenants contained herein to be
performed at or prior to the Closing, and the representations and warranties of
Texoil and Texoil Sub contained herein shall be true and correct in all material
respects on and as of the Closing Date with the same effect as though made on
and as of the Closing Date and Cliffwood shall have received officer's
certificates of Texoil and, dated as of the Closing Date, certifying as to the
fulfillment of the conditions set forth in this Section 7.2.1.
7.2.2 No statute, rule, or regulation or order of any court or
administrative agency shall be in effect which restrains or prohibits Cliffwood
or Cliffwood's shareholders from consummating the transactions contemplated
hereby.
7.2.3 There shall not have occurred any change or event which
will cause or can reasonably be expected to cause a Texoil Material Adverse
Effect.
7.2.4 The form and substance of all certificates, instruments,
opinions and other documents delivered to Cliffwood under this Agreement shall
be satisfactory in all reasonable respects to Cliffwood and its counsel.
7.2.5 An officer of Texoil and Texoil Sub will execute and
deliver an Officer's Certificate in a form mutually agreeable to Cliffwood and
Texoil.
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7.3 CONDITIONS TO THE OBLIGATIONS OF CLIFFWOOD, TEXOIL AND TEXOIL SUB.
The obligation of Cliffwood, Texoil and Texoil Sub to consummate the Closing is
subject to the fulfillment or waiver, on or prior to the Closing Date, of each
of the following conditions precedent:
7.3.1 Each of the following securities issued by Texoil shall
have been converted into shares of Texoil Common Stock in accordance with the
terms of such security: (i) the Series A Preferred Stock of Texoil; (ii) the
$4.5 million aggregate principal amount of convertible notes issued to RIMCO;
and (iii) $600,000 aggregate principal amount of convertible notes issued by
Texoil to current directors of Texoil and their affiliates.
7.3.2 At or contemporaneously with the Closing, the notes issued
by Texoil in the aggregate original principal amount of $1,050,000 to current
directors of Texoil and their affiliates shall have been paid.
7.3.3 No more than 10% of the stockholders of Cliffwood shall
have exercised dissenters' rights pursuant to the TBCA regarding the Merger.
7.3.4 ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ shall have entered into an Employment
Agreement with Texoil in substantially the form attached hereto as Exhibit B.
7.3.5 Cliffwood shall have unrestricted cash and current
borrowing capacity under its line of credit with its commercial banks and other
credit facilities totaling at least $3.0 million.
7.3.6 RIMCO shall make up to $10.0 million of new financing
available to Texoil, conditioned upon the Closing, in the form of convertible
subordinated notes with terms mutually agreeable to Texoil and RIMCO.
7.3.7 This Agreement and the Merger shall have been approved by
the stockholders of Cliffwood.
7.3.8 The holder of all Cliffwood Options and Warrants shall have
canceled all such Cliffwood Options and Warrants in exchange for Texoil options
and warrants as contemplated by Article 6.
7.3.9 The Board of Directors of Texoil shall have elected to the
Board of Directors of Texoil, conditioned upon the Closing, the persons set
forth in SCHEDULE 7.3.9, which shall comprise all of the members of the Board of
Directors of Texoil after the Effective Time.
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ARTICLE 8
TERMINATION
8.1 METHODS OF TERMINATION. This Agreement may be terminated by
Cliffwood or Texoil if (i) the Closing does not occur prior to February 1, 1998,
or (ii) either Cliffwood or Texoil if the other Constituent Group consummates an
Acquisition Transaction with a third party, or (iii) the board of directors of
either Cliffwood or Texoil elects to terminate this Agreement.
8.2 TERMINATION BY BOARD OF DIRECTORS. An election by any of the parties
hereto to terminate this Agreement and abandon the Merger as provided in Section
8.1 shall be communicated by its president or chief executive officer.
8.3 EFFECT OF TERMINATION. Upon termination of this Agreement as a
result of Cliffwood's failure to meet any of the conditions listed in Sections
7.1, 7.3.3, 7.3.4, 7.3.5, 7.3.7 and 7.3.8, herein, Texoil shall be entitled to
exercise any rights and remedies at law or in equity to which it may be
entitled. Upon termination of this Agreement as a result of Texoil's failure to
meet any of the conditions listed in Sections 7.2, 7.3.1, 7.3.2, 7.3.4, 7.3.6
and 7.3.9, herein, Cliffwood shall be entitled to exercise any rights and
remedies at law or in equity to which it may be entitled.
8.4 WAIVER OF CONDITIONS. Subject to the requirements of any applicable
law, any of the terms or conditions of this Agreement may be waived at any time
by the party which is entitled to the benefit thereof, but only by written
instrument signed by its board of directors, the executive committee of its
board of directors, or its president or chief executive officer. Without
limiting the generality of the preceding sentence, the closing of the
transactions contemplated hereby shall not in any way be deemed a waiver of, or
otherwise preclude the assertion of, any breach or default occurring on or
before the Effective Time.
8.5 EXPENSE ON TERMINATION. If the Merger contemplated hereby is
terminated pursuant to a vote of the board of directors of either Cliffwood or
Texoil, expenses of the non-terminating party will be paid by the terminating
party.
ARTICLE 9
MISCELLANEOUS
9.1 NOTICE. All notices, requests, consents, demands and other
communications required or contemplated under this Agreement shall be in writing
and (i) personally delivered or sent via telecopy (receipt confirmed), or (ii)
sent by Federal Express or other reputable overnight delivery service, shipping
prepaid, as follows:
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If to Texoil or Texoil Sub to:
Texoil, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇
with a copy to:
▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
If to Cliffwood to:
Cliffwood Oil & Gas Corp.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
with a copy to:
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ & Westheimer, P.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
or to such other persons or addresses as any person or entity may request by
notice given as aforesaid. Notices shall be deemed given and received at the
time of personal delivery or completed telecopying or if sent by Federal Express
or such other overnight delivery service one business day after such sending.
9.2 SCHEDULES AND EXHIBITS. All schedules and exhibits attached to this
Agreement constitute an integral part of this Agreement as if fully rewritten
herein. Matters disclosed by a party in any single Schedule to this Agreement
shall be deemed also to be disclosed with respect to all other Schedules
required of the party to which the matter disclosed is pertinent.
9.3 EXECUTION IN COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
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9.4 ENTIRE AGREEMENT. This Agreement and the documents to be delivered
hereunder and thereunder constitute the entire understanding and agreement
between the parties hereto concerning the subject matter hereof. All
negotiations and writings between the parties hereto are merged into this
Agreement, and there are no representations, warranties, covenants,
understandings, or agreements, oral or otherwise, in relation thereto between
the parties other than those incorporated herein or to be delivered hereunder.
9.5 APPLICABLE LAW AND VENUE. All questions concerning the construction,
validity and interpretation of this Agreement shall be governed by the internal
laws, and not the law of conflicts, of the State of Texas. Except where
arbitration is expressly provided for in this agreement, all controversies which
may arise out of or in connection with this agreement, particularly with respect
to the performance, interpretation, breach, or enforcement of this agreement,
shall be brought and resolved solely and exclusively in the state or federal
courts of ▇▇▇▇▇▇ County, Texas, and each party hereto consents to service,
jurisdiction, and venue of such courts for such purpose, and each hereby
irrevocably waives any other venue to which it might be entitled by virtue of
domicile, residence, jurisdiction of formation or otherwise. Each party hereto
acknowledges and agrees that it has consulted legal counsel in connection with
the negotiation of this Agreement and that it has bargaining power equal to that
of the other parties hereto in connection with the negotiation and execution of
this Agreement. Accordingly, the rule of contract construction that an agreement
shall be interpreted and construed against the draftsman shall have no
application in the interpretation or construction of this Agreement.
9.6 MODIFICATION. This Agreement shall not be modified or amended except
in writing signed by each of the parties hereto. After approval of the Merger by
the stockholders of Cliffwood, no amendment may be made which decreases the
Merger Consideration or otherwise materially adversely affects the stockholders
of Cliffwood without the further approval of the stockholders of Cliffwood.
9.7 SUCCESSORS AND ASSIGNS. Neither this Agreement nor any of the rights
and obligations hereunder shall be assigned, delegated, sold, transferred,
sublicensed, or otherwise disposed of by operation of law or otherwise, without
the prior written consent of each of the other parties hereto. In the event of
such permitted assignment or other transfer, all of the rights, obligations,
liabilities, and other terms and provisions of this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by and against the respective
successors and assigns of the parties hereto, whether so expressed or not.
9.8 AMENDMENTS AND WAIVERS. This Agreement may be amended, modified, or
superseded only by written instrument executed by all parties hereto. The
failure of any party at any time or times to require performance of any
provision hereof shall in no manner affect the right to enforce the same. No
waiver by any party of any condition, or of the breach of any term, provision,
covenant, representation, or warranty contained in this Agreement in one or more
instances shall be deemed to be or construed as a further or continuing waiver
of any such condition or breach or a waiver of any other condition or the breach
of any other term, provision, covenant, representation, or warranty.
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9.9 SEVERABILITY. The provisions of this Agreement shall be deemed
severable, and if any part of any provision is held to be illegal, void,
voidable, invalid, nonbinding or unenforceable in its entirety or partially or
as to any party, for any reason, such provision may be changed, consistent with
the intent of the parties hereto, to the extent reasonably necessary to make the
provision, as so changed, legal, valid, binding, and enforceable. If any
provision of this Agreement is held to be illegal, void, voidable, invalid,
nonbinding or unenforceable in its entirety or partially or as to any party, for
any reason, and if such provision cannot be changed consistent with the intent
of the parties hereto to make it fully legal, valid, binding and enforceable,
then such provisions shall be stricken from this Agreement, and the remaining
provisions of this Agreement shall not in any way be affected or impaired, but
shall remain in full force and effect.
9.10 ANNOUNCEMENTS. From the date of this Agreement, all further public
announcements relating to this Agreement or the transactions contemplated hereby
will be made only as agreed upon jointly by Texoil and Cliffwood, except that
nothing herein shall prevent Texoil from making any disclosure in connection
with the transactions contemplated by this Agreement if required by applicable
law or otherwise as a result of its being a public company, provided that prior
notice of such disclosure is given to Cliffwood.
9.11 KNOWLEDGE, HEADINGS, GENDER, AND CERTAIN REFERENCES. A
representation or statement made herein to Cliffwood's Knowledge refers to the
knowledge or belief of the directors, officers, employees, agents, and
independent accountants of any member of the Cliffwood Group, regardless of
whether the knowledge of such person was obtained outside the course and scope
of his employment by or duties to any member of the Cliffwood Group, and
regardless of whether any such person's interests are adverse to any member of
the Cliffwood Group in respect of the matters as to which his knowledge is
attributed to Cliffwood. A representation or statement made herein to Texoil's
Knowledge refers to the knowledge or belief of the directors, officers,
employees, agents, and independent accountants of any member of the Texoil
Group, regardless of whether the knowledge of such person was obtained outside
the course and scope of his employment by or duties to any member of the Texoil
Group, and regardless of whether any such person's interests are adverse to any
member of the Texoil Group in respect of the matters as to which his knowledge
is attributed to Texoil. The headings contained in this Agreement have been
inserted for the convenience of reference only, and neither such headings nor
the placement of any term hereof under any particular heading shall in any way
restrict or modify any of the terms or provisions hereof. Whenever from the
context it appears appropriate, each term stated in either the singular or the
plural shall include both the singular and the plural, and pronouns stated in
the masculine or the neuter gender shall include the masculine, the feminine and
the neuter gender. The terms "hereof," "herein," "herewith," or "hereunder"
refer to this Agreement as a whole and not to any particular Article, Section,
or paragraph hereof. The term "include" and derivatives thereof are used in an
illustrative sense and not in a limiting sense. The term "or" is not exclusive.
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9.12 RIGHTS OF PARTIES. Except as expressly provided in this Agreement,
no provision of this Agreement (whether express or implied) is intended or shall
be construed to confer any rights or remedies under or by reason of this
Agreement on any persons other than the parties to it and their respective
successors and assigns, nor shall any provision give any third persons any right
of subrogation or action over or against any party to this Agreement. Without
limiting the generality of the foregoing, it is expressly understood that this
Agreement does not create any third party beneficiary rights, except as
expressly herein provided.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date and year first written above.
CLIFFWOOD OIL & GAS CORP.
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Name:▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: PRESIDENT
TEXOIL, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
Name:▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: PRESIDENT AND CHIEF EXECUTIVE OFFICER
TEXOIL ACQUISITION, INC.
By: /S/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
Name:▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: PRESIDENT AND CHIEF EXECUTIVE OFFICER
48