Exhibit 10.1
July 30, 1996
Texoil, Inc.
1600 Smith, Suite 4000
Houston, TX 77002
Attention: Mr. Ruben Medrano
Gentlemen:
Resource Investors Management Company Limited Partnership ("RIMCO"), on behalf
of RIMCO Partners, L.P., RIMCO Partners, L.P. II, RIMCO Partners, L.P. III and
RIMCO Partners, L.P. IV (the "Purchasers"), hereby agrees to purchase, and
Texoil, Inc. (the "Company"), hereby agrees to sell at private sale, at par, up
to $3.0 million in principal amount of the Company's 10% Senior Secured
Convertible General Obligation Notes and up to $5.0 million in principal amount
of the Company's 10% Senior Secured General Obligation Notes (collectively
referred to as the "Notes").
The Notes will be secured by a first mortgage to all of the right, title and
interest in and to all of the Company's current and future oil, gas and mineral
properties. This agreement to purchase and sell such Notes is contingent upon
the Company having good and marketable title to these properties. This agreement
is also contingent upon the renegotiation of the terms of Company's existing
shareholder debt and completion of appropriate documentation fully satisfactory
in form and substance to each of us and our respective counsel. It is hereby
agreed that such existing shareholder debt and documentation shall contain terms
as described in the attached Summaries of Principal Terms, and in addition,
representations, business covenants and other provisions customary to similar
transactions.
The commitment represented by this letter is made subject to, and in reliance
upon, the accuracy of information previously supplied to RIMCO, and the
understanding that there is no information that has not been supplied to RIMCO
in writing that might have a material adverse affect on the Company's business
or financial condition. The commitment hereunder is further conditioned upon the
absence of any material adverse change prior to closing in the value or
condition of the collateral to be pledged as security for the Notes.
Texoil, Inc.
July 30, 1996
Page 2 of 3
It is understood that the law firm of Andrews & Kurth, L.L.C. will act as
counsel for the Purchasers in this matter. Whether or not the proposed
transaction is consummated, you hereby agree to pay all of the Purchasers'
out-of-pocket expenses in connection with the consummation of the sale and
purchase of the Notes, including without limitation, the reasonable fees and
expenses of the Purchasers' counsel and title consultant.
It is mutually understood and agreed that this letter shall be construed and the
relations between the parties determined in accordance with the law of the state
of Texas. It is also mutually understood and agreed that the Note purchase
agreements and other resulting transaction documents shall be deemed to be
contracts made under and shall be construed in accordance with and governed by
the law of the state of New York. It is further understood and agreed that any
action relating to this letter shall be instituted and prosecuted in the United
States District Court for the Southern District of Texas situated in Harris
County, Texas, to whose jurisdiction the parties hereto agree whatever their
domicile may be.
JURY TRIAL WAIVED. RIMCO and the Company hereby agree that they shall and hereby
do waive trial by jury in any action, proceeding or counterclaim, whether at law
or at equity, brought by either of them, or in any matter whatsoever which
arises out of or is connected in any way with this commitment letter or its
performance.
The commitment represented by this letter shall automatically expire on August
5, 1996 if we have not received a copy of this letter duly executed by you on or
prior to such date. The expiration date of this commitment may not be extended
except by a written instrument executed by a duly authorized officer of RIMCO.
RIMCO shall have the option to immediately terminate this commitment letter by
giving written notice thereof by registered or certified mail to the Company if
the Company fails to satisfy or perform any of the terms, conditions or
provisions of this commitment letter, or supplies RIMCO with any false or
misleading information.
Texoil, Inc.
July 30, 1996
Page 3 of 3
This commitment shall be terminated if the closing of the transaction
contemplated hereby has not been consummated on or before September 30, 1996,
except that your obligation to pay all expenses of the Purchasers' counsel and
title consultant as described above shall survive any such termination.
If all of the foregoing is acceptable to you, please so indicate by signing and
returning one copy of this letter to Gary Milavec c/o RIMCO, 600 Travis, Suite
6875, Houston, TX 77002.
Very truly yours,
RESOURCE INVESTORS MANAGEMENT COMPANY
LIMITED PARTNERSHIP
By: /S/ GARY MILAVEC
Its: Senior Vice President
TEXOIL, INC.
By: /S/ RUBEN MEDRANO
Its: President
Date: AUGUST, 1, 1996
SUMMARY OF PROPOSED TERMS - ISSUE #1
Issue #1: Senior Secured Convertible General
Obligation Notes (the "Convertible
Notes").
Issuer: Texoil, Inc. ("Texoil").
Purchasers: Resource Investors Management
Company, through one or more of its
affiliated entities ("RIMCO").
Interest Rate: 10% per annum, payable monthly.
Commitment Amount: $3,000,000.
Commitment Period: One year.
Maturity: Three years.
Security: All of Texoil's, or its wholly owned
subsidiary's, existing and future
oil and gas assets (the
"Properties").
Use of Proceeds: Primarily to fund Texoil's share of
land costs and drilling and
completion costs for the first wells
to-be-drilled in the Raceland and
Green's Lake 3-D seismic
exploration/ exploitation projects,
to fund Texoil's share of remaining
3-D acquisition costs at Raceland
and to repay $200,000 of existing
shareholder debt.
Payments: Prior to Maturity, payments of
interest will be due and payable
monthly. All outstanding principal
plus any accrued and unpaid interest
will be due and payable at Maturity.
Texoil shall not have the right or
option to prepay, at any time, all
or any part of the Convertible
Notes.
Conversion: The Convertible Notes are
convertible at any time prior to
Maturity, in whole or in part, into
Texoil Common Stock at a per share
price equal to $.80, subject to
adjustment. Should Texoil's Common
Stock close at a price per share
equal to or greater than $3.00 for
any consecutive twenty day period
after $2.8 million of the Commitment
Amount has been funded, Texoil can
force the Purchasers to convert the
Convertible Notes into Common Stock.
If Texoil elects not to force
conversion within 30 days, the 20
day consecutive trading period count
will begin anew.
Registration Rights: The shares subject to issuance upon
conversion of the Convertible Notes
shall be registered under the
Securities Act of 1933 within 45
days of such conversion pursuant to
a Registration Statement which shall
cover the possible resale of such
shares by the Purchasers should they
so elect to do so.
Directors: Issuer will expand its Board by one
and will fill the vacancy so created
with a person specified by the
Purchasers and the Purchasers shall
have the right to nominate the
successor to such director as long
as the Convertible Notes are
outstanding or the Purchasers own at
least 5.0% of the outstanding shares
of Texoil's Common Stock.
SUMMARY OF PROPOSED TERMS - ISSUE #2
Issue #2: Senior Secured General
Obligation Notes (the "Senior
Notes"; the Convertible Notes and
the Senior Notes are collectively
referred to as the "Notes").
Issuer: Texoil, Inc. ("Texoil").
Purchasers: Resource Investors Management
Company, through one or more of its
affiliated entities ("RIMCO").
Interest Rate: 10% per annum, payable monthly.
Commitment Amount: $5,000,000.
Commitment Period: Three years from closing.
Maturity: Six years from closing.
Security: All of Texoil's existing and future
oil and gas assets (the
"Properties").
Use of Proceeds: To fund Texoil's share of future
land costs and drilling and
completion costs for wells to-be-
drilled in the Raceland, Green's
Lake, and Laurel Grove 3-D seismic
exploration/ exploitation projects,
and to fund additional 3-D projects
at the Purchasers' sole discretion.
Fundings: Advances for future drilling and
completion costs will be contingent
on maintaining a Borrowing Base in
excess of 1.3x the outstanding
principal balance of the Notes.
Advances for upfront land costs or
other costs associated with
additional 3-D projects are subject
to the Purchasers' sole discretion
even if the Borrowing Base is in
excess of 1.3x the outstanding
principal balance of the Notes.
In addition, in no event shall
advances under the Senior Notes be
made until $2.8 million principal
amount of the Convertible Notes has
been advanced.
Payments: Payments of accrued interest and
principal on the Senior Notes will
be paid monthly from a minimum of
75% of Net Revenues attributable to
the Properties. Should the
Borrowing Base ever be less than
1.2x the outstanding principal
balance of the Notes, payments will
be made from up to 100% of Net
Revenues, at the Purchasers' sole
discretion. Payments will always be
applied first to accrued interest
and then to the outstanding
principal balance. In any event,
all outstanding principal plus any
accrued and unpaid interest will be
due and payable at Maturity.
Texoil shall have the right or
option to prepay, at any time and
without penalty, all or any part of
the Senior Notes.
Equity Participation: Texoil will assign to the Purchasers
a 1.0% of 8/8ths overriding royalty
interest, proportionately reduced,
in all wells drilled and/or
completed with proceeds from the
Senior Notes.
Directors: Should the aggregate principal
amount of the Notes exceed $5.0
million, the Purchasers reserve the
right to one additional Board seat.
Issuer, at Purchasers' request, will
expand its Board by one and will
fill the vacancy so created with a
person specified by the Purchasers
and the Purchasers shall have the
right to nominate the successor to
such director as long as the
aggregate principal amount of the
Notes is in excess of $2.5 million.
SUMMARY OF PROPOSED TERMS - BOTH ISSUES
Negative Covenants: Without the prior written consent of
RIMCO, Texoil will not:
(a) permit the Borrowing Base to
fall below 1.15x the
outstanding balance of the
Notes commencing with the
reserve report effective as
of December 31, 1997;
(b) permit current assets to be less
than current liabilities
excluding the current portion of
the Notes;
(c) declare or pay any common stock
dividends or redeem any of its
common stock;
(d) declare or pay any dividends on
its preferred stock unless the
Borrowing Base is greater than
150% of the outstanding balance
of the Notes. In no event shall
dividends be permitted until
receipt of the first annual
reserve report, and thereafter
shall only be permitted
quarterly if the Borrowing Base
requirement continues to be met;
(e) make any principal payments on
the "New" Shareholder Debt;
(f) make any principal payments on
the "Bridge" Shareholder Debt 1)
prior to the latter of January
1, 1997 or $2.8 million
principal amount of the
Convertible Secured Notes having
been advanced, 2) with proceeds
from the Notes, and 3) unless
the Company maintains a cash
balance of at least $150,000
after taking into account such
principal payment;
(g) permit any additional liens on
the Properties except in the
ordinary course of business;
(h) incur any debt except for
borrowings under the Notes;
(i) sell or dispose of any of the
Properties unless the Notes are
repaid in full;
(j) merge or consolidate with any
other company unless the Notes
are repaid in full; or
(k) violate such other warranties,
representations and covenants as
are usual and customary.
Non-compliance with any of the above
Negative Covenants or with the
covenants of other debt issues shall
constitute an event of default, in
which case RIMCO may declare the
entire principal amount of the Notes
and accrued and unpaid interest
thereon immediately due and payable.
Definitions: BORROWING BASE: The Borrowing Base
shall be the present worth,
discounted at 10%, of future net
revenues relating to the Properties'
proved developed producing oil and
gas reserves utilizing constant oil
and gas prices. Value is not
ascribed to other categories of
proved reserves, probable reserves,
possible reserves, acreage, or
production equipment. If the
Company's independent reserve
engineer determines a Borrowing Base
value more than 10% greater than the
value determined in good faith by
RIMCO's reserve engineer, then the
two engineers shall choose a third
engineer and the value of the
Borrowing Base shall be determined
by averaging the lowest two values.
Such average shall be the Borrowing
Base until the next redetermination
date.
The Borrowing Base shall be
redetermined at the end of each
calendar year, beginning with the
year ending December 31, 1996, or
more often as reasonably requested
by either RIMCO or the Company, by
an independent engineering firm
acceptable to RIMCO.
The Borrowing Base at all times
shall be redetermined by:
(a) Adjusting reserves for
cumulative production since the
effective date of the last
reserve report;
(b) Adjusting prices to reflect the
average monthly price received
for the previous six months;
(c) Adjusting reserves to reflect
revisions to volume estimates
since the effective date of the
last reserve report; and
(d) Adjusting projected operating
expenses to reflect actual
expense levels incurred since
the effective date of the last
report.
NET REVENUES: Gross production
proceeds attributable to the
Properties less royalties,
overriding royalties, severance
taxes, and direct lease operating
expenses including fixed overhead.
However, such expenses shall not
include leasehold, legal,
recompletion, deepening, drilling,
sidetracking, completion, or
plugging expenses.
Documentation and
Reports: Texoil will supply the following:
(a) Documentation and warranties
acceptable to RIMCO at closing;
(b) An annual reserve report on the
Properties effective as of each
December 31 beginning with the
year ending December 31, 1996,
prepared by an independent
engineering firm acceptable to
RIMCO, within 60 days of year
end;
(c) Annual audited consolidated
financial statements according
to GAAP beginning with the
fiscal year ending December 31,
1996 within 90 days of the
fiscal year end, together with
an auditor's compliance
certificate including the
appropriate computations;
(d) Unaudited quarterly financial
statements within 45 days of the
end of each fiscal quarter
together with an officer's
compliance certificate including
the appropriate calculations and
accounts payable and receivable
aging reports;
(e) Unaudited monthly financial
statements within 20 days of the
end of each month;
(f) A monthly lease operating
statement for each of its
Properties; and
(g) Such other information as RIMCO
shall reasonably request.
Legal Expenses: Fees and expenses of Purchasers
independent legal counsel and title
consultant will be paid by Texoil at
closing.