EXHIBIT 10.17
EXHIBIT 10.17
THE SECURITIES REPRESENTED BY THIS NOTE AND THE COMMON STOCK ISSUABLE THEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW. THE SECURITIES
REPRESENTED BY THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANY OTHER APPLICABLE SECURITIES
LAWS.
TEXOIL, INC.
Replacement 12% Convertible Promissory Note
$_______ Houston, Texas As of September 6, 1996
Texoil, Inc., a Nevada corporation (the "COMPANY"), for value received,
hereby promises to pay to the order of ________________, an individual (together
with his registered assigns, the "PURCHASER"), the principal sum of
___________________________ AND NO\100 DOLLARS ($_______), together with accrued
interest on the amount of such principal sum, payable in accordance with the
terms set forth below.
ARTICLE I
Definitions
For all purposes of this Note, except as otherwise expressly provided or
unless the context otherwise requires: (i) The terms defined in this Article
have the meanings assigned to them in this Article and include the plural as
well as the singular; (ii) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with generally accepted
accounting principles as promulgated from time to time by the Association of
Independent Certified Public Accountants; and (iii) the words "herein" and
"hereof" and other words of similar import refer to this Note as a whole and not
to any particular Article, Section or other subdivision.
"APPLICABLE LAW" is defined in Section 7.10.
"AVERAGE PRICE" is defined in Section 4.2.
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"BOARD OF DIRECTORS" means the board of directors of the Company as
elected from time to time or any duly authorized committee of that board.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in Houston, Texas are
authorized or required by law or executive order to be closed.
"COMMON STOCK" means shares of common stock, par value $.01 per share, of
the Company.
"COMPANY FINANCIAL STATEMENTS" shall mean those audited financial
statements of the Company included in the Company's most recent annual report as
filed with the United States Securities and Exchange Commission on Form 10-KSB,
and any amendments thereto.
"CONVERSION EVENT" is defined in Section 4.2.
"CONVERSION PRICE" means the price per share determined in accordance with
Articles IV and V (as adjusted in accordance with the terms of this Note) at
which shares of Common Stock shall be delivered to Purchaser upon conversion of
this Note into Common Stock.
"CONVERTIBLE SECURITIES" is defined in Section 5.2(c).
"DEFAULT" means any event which is, or after notice or passage of time
would be, an Event of Default.
"EVENT OF DEFAULT" has the meaning specified in Section 3.1.
"INDEBTEDNESS" of any Person means all indebtedness of such Person,
whether outstanding on the date of this Note or hereafter created, incurred,
assumed or guaranteed, (i) for the principal of, premium on and interest on all
debts of the Person whether outstanding on the date of this Note or thereafter
created for money borrowed by such Person (including capitalized lease
obligations), money borrowed by others (including capitalized lease obligations)
and guaranteed, directly or indirectly, by such Person, or Purchase Money
Indebtedness for which the Person is directly or contingently liable; (ii) for
all accrued obligations of the Person in respect of any contract, agreement or
instrument imposing an obligation upon the Person to pay funds; (iii) for all
trade debt of the Person; and (iv) for all deferrals, renewals, extensions and
refundings of, and amendments, modifications and supplements to, any of the
indebtedness referred to in (i), (ii) or (iii) above.
"INTEREST" is defined in Section 7.10.
"MAJORITY NOTEHOLDERS" means the holders of at least 66% of the aggregate
outstanding principal amount of the Replacement 12% Convertible Promissory Notes
issued by the Company as
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of the date of this Note, which notes (including this Note) have an aggregate
original principal amount of $900,000.
"MATURITY DATE", when used with respect to this Note means, the earlier to
occur of (a) October 1, 2002, and (b) the date occurring 30 days after all of
the notes issued under the RIMCO Note Purchase Agreement have been paid in full
or exchanged for common stock of the Company and all commitments of the RIMCO
Noteholders to fund under the RIMCO Finance Documents have terminated.
"NO PAYMENT PERIOD" is defined in Section 7.11.
"NOTE" means this Replacement 12% Convertible Promissory Note.
"ORIGINAL PURCHASE AGREEMENT" means that Agreement of Purchase and Sale
dated as of May 6, 1996, and executed by Purchaser and Company, and which has
been amended and restated by the Purchase Agreement.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or other entity or any government or any agency or political
subdivision thereof.
"PURCHASE AGREEMENT" means that Amended and Restated Agreement of Purchase
and Sale by and between the Company and the Purchaser dated the same date as
this Note and pursuant to which this Note was issued.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness secured by property
acquired with the proceeds of such Indebtedness.
"RIMCO FINANCE DOCUMENTS" means the RIMCO Note Purchase Agreement, the
RIMCO Notes, the RIMCO Guaranty, and all pledge agreements, mortgages, or other
agreements or instruments executed in connection therewith.
"RIMCO FINANCING" means the financing arrangement evidenced by the RIMCO
Finance Documents.
"RIMCO GUARANTY" means the Guaranty and Exchange Agreement dated the same
date as this Note, and executed by the Company (as a guarantor), Texoil Company,
and the RIMCO Noteholders.
"RIMCO NOTE PURCHASE AGREEMENT" means that Note Purchase Agreement dated
the same date as this Note, and executed among Texoil Company, the Company, and
the RIMCO Noteholders.
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"RIMCO NOTEHOLDERS" means RIMCO Partners, L.P., RIMCO Partners, L.P. II,
RIMCO Partners, L.P. III, and RIMCO Partners, L.P. IV, each, a Delaware limited
partnership, and their respective successors and assigns.
"RIMCO NOTES" means the RIMCO Tranche A Notes and the 10% Senior Secured
General Obligation Notes in the aggregate principal amount of $5,000,000 issued
by Texoil Company under the terms of the RIMCO Note Purchase Agreement.
"RIMCO TRANCHE A NOTES" means the 10% Senior Secured Exchangeable General
Obligation Notes in the aggregate principal amount of $3,000,000 issued by
Texoil Company under the terms of the RIMCO Note Purchase Agreement.
"SEC" means the United States Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act of 1933.
"SHARES" is defined in Section 4.1.
"SUBORDINATION AGREEMENT" means that certain Subordination Agreement dated
the same date as this Note, among Purchaser, Company, Texoil Company, and the
RIMCO Noteholders.
"SUBSIDIARY" means a Person in which more than 50% of the outstanding
voting stock or equity interests is owned or controlled, directly or indirectly,
by the Company or any combination of the Company and one or more other
Subsidiaries. For the purposes of this definition, "VOTING STOCK" means stock or
other interests which ordinarily has voting power for the election of directors,
and equity interests means the right to receive the profits of the Person, when
disbursed, or the assets of the Person upon liquidation or dissolution.
"TEXOIL COMPANY" means Texoil Company, a Tennessee corporation.
ARTICLE II
Payments
2.1 INTEREST. Except as provided in Section 7.11, interest shall accrue on
the outstanding principal amount of this Note at a fixed rate equal to 12% per
annum calculated on the basis of a 365- day year (or 366-day year, as the case
may be). Except as provided in Section 7.11, all past due amounts of principal
and interest shall bear interest at a rate equal to 14% per annum calculated on
the basis of a 365-day year (or 366-day year, as the case may be) until paid.
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2.2 PAYMENT OF PRINCIPAL AND INTEREST. The principal of this Note shall be
due and payable in full on the Maturity Date. Except as provided in Section
7.11, interest on the outstanding principal balance of this Note shall be due
and payable monthly as it accrues commencing October 10, 1996, and continuing on
the tenth day of each month thereafter until the Maturity Date. Payment shall be
made by delivery of checks to Purchaser at its address set out in this Note or
wire transfers pursuant to instructions from Purchaser.
2.3 MANNER OF PAYMENT UPON MATURITY. On the Maturity Date, payment of
principal and accrued and unpaid interest on this Note will be made by delivery
of checks to Purchaser at its address set out in this Note or wire transfers
pursuant to instructions from Purchaser. If the date upon which the payment of
principal and interest is required to be made pursuant to this Note occurs other
than on a Business Day, then such payment of principal and interest shall be
made on the next occurring Business Day following said payment date and shall
include interest through said next occurring Business Day.
ARTICLE III
Remedies
3.1 EVENTS OF DEFAULT. An "EVENT OF DEFAULT" occurs if:
(a) the Company fails to pay any amount under this Note when due
(except for payments which become due during a No Payment Period as provided in
Section 7.11) and such failure remains uncured for 10 days; or
(b) the Company fails to timely perform any covenant made by the
Company, and such failure remains uncured for a period of 30 days regardless
whether such covenant arises under the Purchase Agreement or this Note; or
(c) there occurs an Event of Default under, and as defined in, the
RIMCO Note Purchase Agreement or the other RIMCO Finance Documents.
3.2 ACCELERATION OF MATURITY. Subject to the terms of the Subordination
Agreement, upon the occurrence of an Event of Default, the principal of, and the
accrued and unpaid interest on, this Note may be declared due and payable only
by the prior written notice of the Majority Noteholders to the Company.
Notwithstanding the immediately preceding sentence, but subject to the terms of
the Subordination Agreement, if an Event of Default is in respect of a
bankruptcy or insolvency proceeding, the principal of this Note and all accrued
and unpaid interest shall automatically become immediately due and payable.
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ARTICLE IV
Conversion of Note
4.1 CONVERSION PRIVILEGE AND CONVERSION PRICE. Subject to and upon
compliance with the provisions of this Article, at the option of Purchaser, all
or any part of this Note may be converted at any time, at the amount of
principal and accrued interest hereof, into fully paid and nonassessable shares
of Common Stock (the "SHARES"), calculated as to each conversion to the nearest
1/100 of a share at the Conversion Price, determined as hereinafter provided, in
effect at the time of conversion. The Conversion Price shall be initially $.80
per share of Common Stock. The principal amount of this Note shall be reduced by
the amount so converted as if payment or prepayment in such amount has occurred.
4.2 REQUIRED CONVERSION. If at any time after the amounts advanced under
the RIMCO Tranche A Notes equals or exceeds $2,800,000, the average closing
price per share of Common Stock (as reported by the principal securities
exchange or trading market, as the case may be, on which the Common Stock is
then traded) during a period of 20 consecutive trading days (such 20-day average
being referred to herein as the "AVERAGE PRICE") equals or exceeds $3.00 per
share (a "CONVERSION EVENT"), the Company may, at its option exercisable in its
sole discretion at any time during the 30-day period following such Conversion
Event, convert all (but not less than all) of this Note into Shares at the
Conversion Price then in effect. Such conversion shall be deemed to have been
effected immediately upon the mailing of notice by the Company to Purchaser by
first class mail, postage pre-paid, which notice to be effective must be
deposited in the mail on or prior to the close of business on the 30th day
following the Conversion Event, whereupon the person or persons entitled to
receive the Shares shall be treated for all purposes as the record holder of
such Shares and the Note shall be deemed to represent only the right to receive
certificates representing the number of Shares. If the Company does not exchange
the Note in accordance with this Section within the 30-day period following any
Conversion Event, then a new period of trading days shall begin for purposes of
determining whether the Company may exchange the Notes pursuant to this Section.
ARTICLE V
Adjustment of Conversion Price
5.1 ANTI-DILUTION PROVISIONS. The Conversion Price shall be subject to
adjustment from time to time as provided herein. Upon each adjustment of the
Conversion Price, the Purchaser shall thereafter be entitled to purchase, at the
adjusted Conversion Price, the number of shares of Common Stock which equal the
product of (i) the Conversion Price in effect immediately prior to such
adjustment multiplied by (ii) the maximum number of shares the Purchaser could
have purchased by
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converting the entire Outstanding Balance at the Conversion Price immediately
prior to such adjustment, AND dividing that product by the adjusted Conversion
Price.
5.2 ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF COMMON STOCK.
(a) If the Company issues or sells any Common Stock for no
consideration or for a consideration per share less than the Conversion Price,
the Conversion Price shall be reduced (but not increased, except as otherwise
specifically provided herein) to the price (calculated to the nearest one-tenth
of a cent) determined by dividing (i) an amount equal to the sum of (1) the
product of the total number of shares of Common Stock outstanding immediately
prior to such issue or sale multiplied by the then existing Conversion Price
PLUS (2) the consideration received by the Company upon such issue or sale by
(ii) the total number of shares of Common Stock outstanding immediately after
such issue or sale.
(b) No adjustment shall be made in the Conversion Price in the event
that the Company issues, in one or more transactions, (i) Common Stock upon
exercise of any options issued to officers, directors or employees of the
Company pursuant to a stock option plan or an employment, severance or
consulting agreement as now or hereafter in effect, in each case approved by the
Board of Directors; (ii) Common Stock upon conversion of this Note or any other
note issued under the Purchase Agreement; (iii) Common Stock upon exercise of
any stock purchase warrant or option (other than the options referred to in
clause (i) above) or other convertible security, note or other instrument
outstanding or issued on the date hereof; (iv) Common Stock issued as
consideration in acquisitions; or (v) without duplication, Common Stock issued
upon the exercise of any warrant, option or other right set out on SCHEDULE
5.2(B). In addition, for purposes of calculating any adjustment of the
Conversion Price, all of the shares of Common Stock issuable pursuant to any of
the foregoing shall be assumed to be outstanding prior to the event causing such
adjustment to be made.
(c) In case at any time after the date hereof the Company shall in
any manner grant (whether directly or by assumption in a merger or otherwise)
any rights to subscribe for or to purchase Common Stock or any options (except
for options issued to or reserved for issuance to, officers, directors or
employees of the Company pursuant to a stock option plan or an employment,
severance or consulting agreement in effect as of the date hereof) for the
purchase of Common Stock or any stock or securities convertible into or
exchangeable for Common Stock (such convertible or exchangeable stock or
securities being herein called "CONVERTIBLE SECURITIES"), whether or not such
rights or options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for which shares
of Common Stock are issuable upon the exercise of such rights or options or upon
conversion or exchange of such Convertible Securities (determined by dividing
(i) the total amount, if any, received or receivable by the Company as
consideration for the granting of such rights or options, PLUS the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the exercise of such rights or options,
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OR PLUS, in the case of such rights or options that relate to Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable upon the issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (ii) the maximum number of shares of Common
Stock issuable upon the exercise of such rights or options or upon the
conversion or exchange of all such Convertible Securities issuable upon the
exercise of such rights or options) SHALL BE LESS THAN the Conversion Price in
effect as of the date of granting such rights or options, then the maximum
number of shares of Common Stock issuable upon the exercise of such rights or
options or upon conversion or exchange of all such Convertible Securities
issuable upon the exercise of such rights or options shall be deemed to be
outstanding as of the date of the granting of such rights or options and to have
been issued for such price per share, with the effect on the Conversion Price
specified herein. Except as provided herein, no further adjustment of the
Conversion Price shall be made upon the actual issuance of such Common Stock or
of such Convertible Securities upon exercise of such rights or options or upon
the actual issuance of such Common Stock upon conversion or exchange of such
Convertible Securities.
(d) If: (i) the purchase price provided for in any right or option,
(ii) the additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities, or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock
shall be decreased (other than by reason of provisions designed to protect
against dilution), the Conversion Price then in effect shall be decreased to the
Conversion Price that would have been in effect had such rights, options or
Convertible Securities provided for such changed purchase price, additional
consideration or conversion rate at the time initially issued.
(e) In case at any time Common Stock or Convertible Securities or
any rights or options to purchase Common Stock or Convertible Securities shall
be issued or sold for cash, the total amount of cash consideration shall be
deemed to be the amount received by the Company. If at any time any Common
Stock, Convertible Securities or any rights or options to purchase any such
Common Stock or Convertible Securities shall be issued or sold for consideration
other than cash, the amount of the consideration other than cash received by the
Company shall be deemed to be the fair value of such consideration, as
determined reasonably and in good faith by the Board of Directors of the
Company. If at any time any Common Stock, Convertible Securities or any rights
or options to purchase any Common Stock or Convertible Securities shall be
issued in connection with any merger or consolidation in which the Company is
the surviving corporation, the amount of consideration received therefor shall
be deemed to be the fair value, as determined reasonably and in good faith by
the Board of Directors of the Company, of such portion of the assets and
business of the nonsurviving corporation as such Board of Directors may
determine to be attributable to such Common Stock, Convertible Securities,
rights or options as the case may be. In case at any time any rights or options
to purchase any shares of Common Stock or Convertible Securities shall be issued
in connection with the issuance and sale of other securities of the Company,
together consisting of one integral transaction in which no consideration is
allocated to such rights
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or options by the parties, such rights or options shall be deemed to have been
issued without consideration.
(f) In the case the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them (i) to receive a dividend or
other distribution payable in Common Stock or Convertible Securities, or (ii) to
subscribe for or purchase Common Stock or Convertible Securities, then such
record date shall be deemed to be the date of the issuance or sale of the Common
Stock or Convertible Securities deemed to have been issued or sold as a result
of the declaration of such dividend or the making of such other distribution or
the date of the granting of such right of subscription or purchase, as the case
may be.
(g) The number of shares of Common Stock outstanding at any given
time shall not include shares owned directly by the Company in treasury, and the
disposition of any such shares shall be considered an issuance or sale of Common
Stock.
5.3 STOCK DIVIDENDS. In case the Company shall declare a dividend or make
any other distribution upon any shares of the Company, payable in Common Stock
or Convertible Securities, any Common Stock or Convertible Securities, as the
case may be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
5.4 STOCK SPLITS AND REVERSE SPLITS. In the event that the Company shall
at any time subdivide its outstanding shares of Common Stock into a greater
number of shares, the Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of Shares into which
this Note may be converted immediately prior to such subdivision shall be
proportionately increased, and conversely, in the event that the outstanding
shares of Common Stock shall at any time be combined into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
shall be proportionately increased and the number of Shares into which this Note
may be converted immediately prior to such combination shall be proportionately
reduced.
5.5 REORGANIZATIONS AND ASSET SALES. If any capital reorganization or
reclassification of the capital stock of the Company, or any consolidation,
merger or share exchange of the Company with another Person, or the sale,
transfer or other disposition of all or substantially all of its assets to
another Person shall be effected in such a way that holders of Common Stock
shall be entitled to receive capital stock, securities or assets with respect to
or in exchange for their shares, then the following provisions shall apply:
(a) As a condition of such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer or other disposition,
lawful and adequate provisions shall be made whereby the Purchaser shall
thereafter have the right to purchase and receive upon the terms and conditions
specified in this Note, such shares of capital stock, securities or assets as
may be
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issued or payable with respect to or in exchange for a number of outstanding
shares of such Common Stock equal to the number of Shares immediately
theretofore so receivable had such reorganization, reclassification,
consolidation, merger, share exchange or sale not taken place, and in any such
case appropriate provision reasonably satisfactory to Purchaser shall be made
with respect to the rights and interests of Purchaser to the end that the
provisions hereof (including, without limitation, provisions for adjustments of
the Conversion Price and of the number of Shares receivable upon the exercise)
shall thereafter be applicable, as nearly as possible, in relation to any shares
of capital stock, securities or assets thereafter deliverable upon the exercise
of Note.
(b) In the event of a merger, share exchange or consolidation of the
Company with or into another Person as a result of which a number of shares of
common stock or its equivalent of the successor Person greater or lesser than
the number of shares of Common Stock outstanding immediately prior to such
merger, share exchange or consolidation are issuable to holders of Common Stock,
then the Conversion Price in effect immediately prior to such merger, share
exchange or consolidation shall be adjusted in the same manner as though there
were a subdivision or combination of the outstanding shares of Common Stock.
(c) The Company shall not effect any such consolidation, merger,
share exchange, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the successor Person (if other than
the Company) resulting from such consolidation, share exchange or merger or the
Person purchasing or otherwise acquiring such assets shall have assumed by
written instrument executed and mailed or delivered to the Purchaser at the last
address of Purchaser appearing on the books of the Company the obligation to
deliver to Purchaser such shares of capital stock, securities or assets as, in
accordance with the foregoing provisions, Purchaser may be entitled to receive,
and all other liabilities and obligations of the Company hereunder. Upon written
request by the Purchaser, such successor Person will issue a new Note revised to
reflect the modifications in this Note effected pursuant to this Section 5.5.
(d) If a purchase, tender or exchange offer is made to and accepted
by the holders of 50% or more of the outstanding shares of Common Stock, the
Company shall not effect any consolidation, merger, share exchange or sale,
transfer or other disposition of all or substantially all of the Company's
assets with the Person having made such offer or with any affiliate of such
Person, unless prior to the consummation of such consolidation, merger, share
exchange, sale, transfer or other disposition the Purchaser shall have been
given a reasonable opportunity to then elect to receive upon the conversion of
the Note either the capital stock, securities or assets then issuable with
respect to the Common Stock or the capital stock, securities or assets, or the
equivalent, issued to previous holders of the Common Stock in accordance with
such offer.
5.6 ADJUSTMENT FOR ASSET DISTRIBUTION. If the Company declares a dividend
or other distribution payable to all holders of shares of Common Stock in
evidences of indebtedness of the Company or other assets of the Company
(including, cash (other than regular cash dividends declared
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by the Board of Directors), capital stock (other than Common Stock, Convertible
Securities or options or rights thereto) or other property), the Conversion
Price in effect immediately prior to such declaration of such dividend or other
distribution shall be reduced by an amount equal to the amount of such dividend
or distribution payable per share of Common Stock, in the case of a cash
dividend or distribution, or by the fair value of such dividend or distribution
per share of Common Stock (as reasonably determined in good faith by the Board
of Directors of the Company), in the case of any other dividend or distribution.
Such reduction shall be made whenever any such dividend or distribution is made
and shall be effective as of the date as of which a record is taken for purpose
of such dividend or distribution or, if a record is not taken, the date as of
which holders of record of Common Stock entitled to such dividend or
distribution are determined.
5.7 DE MINIMIS ADJUSTMENTS. No adjustment in the number of shares of
Common Stock purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one share of Common Stock
purchasable upon conversion of the Note and no adjustment in the Conversion
Price shall be required unless such adjustment would require an increase or
decrease of at least $.01 in the Conversion Price; provided, however, that any
adjustments which are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations shall be made to the
nearest full share or nearest one hundredth of a dollar, as applicable.
5.8 NOTICE OF ADJUSTMENT. Whenever the Conversion Price or the number of
Shares issuable upon the conversion of the Note shall be adjusted as herein
provided, or the rights of the Purchaser shall change by reason of other events
specified herein, the Company shall compute the adjusted Conversion Price and
the adjusted number of Shares in accordance with the provisions hereof and shall
prepare an Officer's Certificate setting forth the adjusted Conversion Price and
the adjusted number of Shares issuable upon the conversion of the Note or
specifying the other shares of stock, securities or assets receivable as a
result of such change in rights, and showing in reasonable detail the facts and
calculations upon which such adjustments or other changes are based. The Company
shall cause to be mailed to the Purchaser copies of such Officer's Certificate
together with a notice stating that the Conversion Price and the number of
Shares purchasable upon conversion of the Note have been adjusted and setting
forth the adjusted Conversion Price and the adjusted number of Shares
purchasable upon conversion of the Note.
5.9 NOTIFICATIONS TO PURCHASER. In case at any time the Company proposes:
(a) to declare any dividend upon its Common Stock payable in capital
stock or make any special dividend or other distribution (other than cash
dividends) to the holders of its Common Stock;
(b) to offer for subscription pro rata to all of the holders of its
Common Stock any additional shares of capital stock of any class or other
rights;
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(c) to effect any capital reorganization, or reclassification of the
capital stock of the Company, or consolidation, merger or share exchange of the
Company with another Person, or sale, transfer or other disposition of all or
substantially all of its assets; or
(d) to effect a voluntary or involuntary dissolution, liquidation or
winding up of the Company,
then, in any one or more of such cases, the Company shall give the Purchaser (i)
at least 10 days (but not more than 90 days) prior written notice of the date on
which the books of the Company shall close or a record shall be taken for such
dividend, distribution or subscription rights or for determining rights to vote
in respect of any such issuance, reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer, disposition, dissolution,
liquidation or winding up, and (ii) in the case of any such issuance,
reorganization, reclassification, consolidation, merger, share exchange, sale,
transfer, disposition, dissolution, liquidation or winding up, at least 10 days
(but not more than 90 days) prior written notice of the date when the same shall
take place. Such notice in accordance with the foregoing clause (i) shall also
specify, in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled thereto, and
such notice in accordance with the foregoing clause (ii) shall also specify the
date on which the holders of Common Stock shall be entitled to exchange their
Common Stock, as the case may be, for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, share
exchange, sale, transfer, disposition, dissolution, liquidation or winding up,
as the case may be.
5.10 COMPANY TO PREVENT DILUTION. If any event or condition occurs as to
which other provisions of this Article are not strictly applicable or if
strictly applicable would not fairly protect the exercise or purchase rights of
the Note evidenced hereby in accordance with the essential intent and principles
of such provisions, or that might materially and adversely affect the exercise
or purchase rights of the Purchaser under any provisions of this Note, then the
Company shall make such adjustments in the application of such provisions, in
accordance with such essential intent and principles, so as to protect such
exercise and purchase rights as aforesaid, and any adjustments necessary with
respect to the Conversion Price and the number of Shares purchasable hereunder
so as to preserve the rights of the Purchaser hereunder. In no event shall any
such adjustment have the effect of increasing the Conversion Price as otherwise
determined pursuant to this Article except in the event of a combination of
shares.
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Exhibit 10.17 - Page 12
ARTICLE VI
Covenants
The Company covenants and agrees that, so long as this Note is
outstanding:
6.1 USE OF PROCEEDS. The Company will use the proceeds of this Note to pay
the Company's working interest share of certain costs of conducting seismic and
other operations for the Raceland, Greens Lake and Laurel Grove prospects, the
payment of preferred dividends, general corporate purposes, and the reduction of
Indebtedness of the Company and its Subsidiaries.
6.2 PAYMENT OF PRINCIPAL AND ACCRUED INTEREST. The Company will duly and
punctually pay or cause to be paid the principal sum of this Note, together with
interest accrued thereon from the date hereof to the date of payment, in
accordance with the terms hereof.
6.3 CORPORATE EXISTENCE. The Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, rights (charter and statutory) and franchises; provided, however,
that the Company shall not be required to preserve any such right or franchise
if it shall reasonably determine that the preservation thereof is no longer
desirable in the conduct of its business.
6.4 TAXES; CLAIMS; ETC. The Company will promptly pay and discharge all
lawful taxes, assessments, and governmental charges or levies imposed upon it or
upon its income or profits, or upon any of its properties, real, Personal, or
mixed, before the same shall become in default, as well as all lawful claims for
labor, materials, and supplies or otherwise which, if unpaid, might become a
lien or charge upon such properties or any part thereof, and which lien or
charges will have a material adverse effect on the business of the Company;
PROVIDED, however, that the Company shall not be required to pay or cause to be
paid any such tax, assessment, charge, levy, or claim prior to institution of
foreclosure proceedings if the validity thereof shall concurrently be contested
in good faith by appropriate proceedings and if the Company shall have
established reserves deemed by the Company adequate with respect to such tax,
assessment, charge, levy, or claim.
6.5 MAINTENANCE OF EXISTENCE AND PROPERTIES. The Company will, and will
cause each Subsidiary to, keep its material properties in good repair, working
order, and condition, ordinary wear and tear excepted, so that the business
carried on may be properly conducted at all times in accordance with prudent
business management.
6.6 SEC REPORTS. The Company will deliver to the Purchaser within 20 days
after it files them with the SEC, copies of its annual and quarterly reports and
of the information, documents, and other reports (or copies of such portions of
any of the foregoing as the SEC may by rules and regulations prescribe) which
the Company is required to file with the SEC pursuant to Section 13 or
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Exhibit 10.17 - Page 13
15(d) of the Securities Exchange Act of 1934. The Company will timely comply
with its reporting and filing obligations under the applicable federal
securities laws.
6.7 NOTICE OF DEFAULTS. The Company will promptly notify the Purchaser in
writing of the occurrence of (i) any Event of Default under this Note, and (ii)
any event of default (or if any event of default would result upon any payment
with respect to this Note) with respect to any Indebtedness as such event of
default is defined therein or in the instrument under which it is outstanding,
permitting the holder to accelerate the maturity of such Indebtedness.
6.8 MERGERS AND ACQUISITIONS. Without the consent of the Majority
Noteholders, the Company or any Subsidiary will not dissolve, liquidate,
consolidate or merge with or sell or transfer all or a substantial portion of
its assets to any Person.
6.9 COMPLIANCE WITH LAWS. The Company will promptly comply with all laws,
ordinances and governmental rules and regulations to which it is subject.
ARTICLE VII
Miscellaneous
7.1 COLLECTION FEES. If this Note is placed in the hands of an attorney
for collection, and if it is collected through any legal proceedings at law or
in equity or in bankruptcy, receivership or other court proceedings, the Company
hereby undertakes to pay all costs and expenses of collection including, but not
limited to, court costs and the reasonable attorney's fees of Purchaser.
7.2 CONSENT TO AMENDMENTS. This Note may be amended, and the Company may
take any action herein prohibited, or omit to perform any act herein required to
be performed by it, if and only if the Company shall obtain the written consent
to such amendment, action or omission to act from the Majority Noteholders.
7.3 BENEFITS OF NOTE. Nothing in this Note, express or implied, shall give
to any Person, other than the Company, Purchaser, and their successors any
benefit or any legal or equitable right, remedy or claim under or in respect of
this Note.
7.4 SUCCESSORS AND ASSIGNS. All covenants and agreements in this Note
contained by or on behalf of the Company and the Purchaser shall bind and inure
to the benefit of the respective successors and assigns of the Company and the
Purchaser.
7.5 RESTRICTIONS ON TRANSFER. Subject to the provisions of this Section,
this Note is transferable in the same manner and with the same effect as in the
case of a negotiable instrument payable to a specified Person.
::ODMA\PCDOCS\DOCS\88117\1
Exhibit 10.17 - Page 14
7.6 NOTICE; ADDRESS OF PARTIES. All notices or other communications which
are required or may be given under this Note shall be in writing and shall be
deemed to have been duly given when delivered, transmitted by telecopier (with
receipt confirmed) or mailed by registered or certified first class mail,
postage prepaid, return receipt requested to the parties hereto at the address
set forth below (as the same may be changed from time to time by notice
similarly given) or the last known business or residence address of such other
person as may be designated by either party hereto in writing.
(a) If to Company:
Texoil, Inc.
1600 Smith Street, Suite 4000
Houston, Texas 77002
Fax: (713) 652-9601
Attn.: President
with a copy to:
Porter & Hedges, L.L.P.
700 Louisiana Street, 35th Floor
Houston, Texas 77002-2764
Fax: (713) 228-1331
Attn.: Nick D. Nicholas
(b) If to Purchaser:
Fax:
with a copy to:
Pillsbury, Madison & Sutro, L.L.P.
101 West Broadway, Suite 1800
San Diego, California 92101-8219
Fax: (619) 236-1995
Attn.: David R. Snyder
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Exhibit 10.17 - Page 15
Shannon, Martin, Finkelstein & Sayre, P.C.
1200 Smith Street, Suite 1300
Houston, Texas 77002
Fax: (713) 752-0337
Attn.: Nancy F. Martin
7.7 SEVERABILITY CLAUSE. In case any provision in this Note shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions in such jurisdiction shall not in
any way be affected or impaired thereby; provided, however, such construction
does not destroy the essence of the bargain provided for hereunder.
7.8 GOVERNING LAW. This Note shall be governed by, and construed in
accordance with, the internal laws of the State of Texas (without regard to
principles of choice of law).
7.9 WAIVERS. The Company waives any right to notice of default or demand,
notice of intent to accelerate, notice of acceleration, and any other notice not
specifically required under this Note. Failure to exercise any remedy under this
Note does not constitute a waiver of such remedy.
7.10 USURY. It is the intention of the parties hereto to conform strictly
to the applicable laws of the State of Texas and the United States of America,
and judicial or administrative interpretations or determinations thereof
regarding the contracting for, charging and receiving of interest for the use,
forbearance, and detention of money (referred to as "APPLICABLE LAW"). The
Purchaser shall have no right to claim, to charge or to receive any interest in
excess of the maximum rate of interest, if any, permitted to be charged on that
portion of the amount representing principal which is outstanding and unpaid
from time to time by Applicable Law. Determination of the rate of interest for
the purpose of determining whether this Note is usurious under Applicable Law
shall be made by amortizing, prorating, allocating and spreading in equal parts
during the period of the actual time of this Note, all interest or other sums
deemed to be interest (referred to in this Section as "INTEREST") at any time
contracted for, charged or received from the Company in connection with this
Note. Any Interest contracted for, charged or received in excess of the maximum
rate allowed by Applicable Law shall be deemed a result of a mathematical error
and a mistake. If this Note is paid in part prior to the end of the full stated
term of this Note and the Interest received for the actual period of existence
of this Note exceeds the maximum rate allowed by Applicable Law, Purchaser shall
credit the amount of the excess against any amount owing under this Note or, if
this Note has been paid in full, or in the event that it has been accelerated
prior to maturity, Purchaser shall refund to the Company the amount of such
excess, and shall not be subject to any of the penalties provided by Applicable
Law for contracting for, charging or receiving Interest in excess of the maximum
rate allowed by Applicable Law. Any such excess which is unpaid shall be
canceled.
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Exhibit 10.17 - Page 16
7.11 SUBORDINATION AND RIMCO FINANCING. This Note is subject to the terms
of the Subordination Agreement and to the RIMCO Finance Documents. If at any
time, under the terms of the Subordination Agreement or the RIMCO Finance
Documents, Company is precluded from paying (and Purchaser is precluded from
receiving) any payments under the terms of this Note ("NO PAYMENT PERIOD"), each
payment which becomes due during such period shall not thereafter accrue
interest, shall not be deemed to be past due under Section 2.1, and shall be
deemed to be due on the Maturity Date. If Company again is permitted to make
scheduled payments under the terms of this Note, Company is not obligated to pay
the installments which became due during the No Payment Period. Instead, Company
shall begin paying installments with the next installment due after the No
Payment Period ends and the scheduled payments that were not paid during the No
Payment Period shall be due and payable at the Maturity Date. Installments which
become due during a No Payment Period shall not thereafter accrue interest.
7.12 REPLACEMENT NOTE. This Note is issued in replacement of, but not as a
novation of, that certain 12% Convertible Promissory Note dated as of May 6,
1996, in the original principal amount of $_______, and issued by the Company to
Purchaser under the terms of the Original Purchase Agreement.
THE RIGHTS AND OBLIGATIONS OF THE COMPANY AND THE PURCHASER SHALL BE
DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS AND INSTRUMENTS AND ANY
PRIOR ORAL AGREEMENTS BETWEEN THE PURCHASER AND THE COMPANY ARE SUPERSEDED BY
AND MERGED INTO SUCH WRITINGS. THIS NOTE (AS AMENDED IN WRITING FROM TIME TO
TIME) AND THE OTHER WRITTEN AGREEMENTS EXECUTED BY THE COMPANY AND PURCHASER (OR
BY THE COMPANY FOR THE BENEFIT OF PURCHASER) REPRESENT THE FINAL AGREEMENT
BETWEEN THE COMPANY AND THE PURCHASER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed on the date first above written.
TEXOIL, INC.
By:
Ruben Medrano
President
Attachments:
Schedule 5.2(b) - Capitalization
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Exhibit 10.17 - Page 17
SCHEDULE 5.2(B)
CAPITALIZATION SCHEDULE
AS OF JULY 31, 1996
Common
Shares PROCEEDS
Expiration After TO
NUMBER CLASS DATE CONVERSION TEXOIL
- ------ ----- ---- ---------- ------
4,058,648(4) Common 4,058,648 -0-
98,423(5) Employee Salary Compensation-- 98,423 -0-
'95 Plan
29,463(6) Employee Salary Compensation-- 29,463 -0-
'96 Plan
23,000 Class "A" Preferred 766,667 -0-
750,000 Class "A" Warrants ($3.50) 05-26-99 750,000 $2,625,000
750,000 Class "B" Warrants ($4.50) 05-26-99 750,000 3,375,000
300,000 Underwriter Warrants ($3.88) 05-26-99 300,000 1,162,500
281,384 Options to J. Graves ($.45) 12-31-99 281,384 126,623
281,384 Options to J. Richardson ($.45) 12-31-99 281,384 126,623
20,000 Employee Options ($3.00) RM 20,000 60,000
5,000 Option to Marc Countiss ($3.50) 09-15-00 5,000 17,500
1,100,000 Convertible May 96 Notes ($.80) 1,375,000 -0-
1,100,000 Convertible May 96 Note 5 years 1,100,000 1,441,000
Warrants ($1.31) - to be
eliminated at Closing.
50,000 Option to Bill Seagle ($1.56) 50,000 78,000
30,000 Option to Ruben Medrano ($1.31) 30,000 39,300
20,000 Option to J. D. Hughes ($1.25) - 20,000 25,000
to be issued upon Closing.
TOTAL FULLY DILUTED 9,915,969 $9,076,546
========= ==========
- --------
4. Number accurate as of March 31, 1995 (see first quarter 1995 10-QSB)
5. Includes shares issued from April 1995 through February 1996
6. Includes shares to be issued from March 1996 through July 1996