EXHIBIT 5.3
GUARANTY AGREEMENT
GUARANTY AGREEMENT dated as of December 31, 1997 among CLIFFWOOD
OIL & GAS CORP., a Texas corporation ("SUBSIDIARY"), and RIMCO PARTNERS, L.P., a
Delaware limited partnership, RIMCO PARTNERS, L.P. II, a Delaware limited
partnership, RIMCO PARTNERS, L.P. III, a Delaware limited partnership, and RIMCO
PARTNERS, L.P. IV, a Delaware limited partnership (together with their
respective successors and assigns, collectively, the "NOTEHOLDERS").
PRELIMINARY STATEMENTS
Texoil, Inc., a Nevada corporation (the "COMPANY") and the
Noteholders have entered into that certain Note Purchase Agreement, dated as of
December 31, 1997 (the "NOTE AGREEMENT") whereby the Noteholders have committed
to purchase $10,000,000 of Convertible Subordinated General Obligation Notes
issued by the Company.
It is a condition precedent to the obligation of the Noteholders
to purchase the Notes under the Note Agreement that Subsidiary shall have
executed and delivered this Agreement. The Subsidiary has determined that it
will receive a substantial benefit if the Notes are purchased by the Noteholders
from the Company under the Note Agreement.
In consideration of the mutual covenants herein contained the
Subsidiary and the Noteholders agree as follows:
ARTICLE I
DEFINITIONS, ETC.
SECTION 1.01. CERTAIN DEFINED TERMS. Capitalized terms used in
this Agreement and not otherwise defined herein shall have the respective
meanings set forth in the Note Agreement and the Annex A attached thereto (such
meanings to be equally applicable to both singular and plural forms of the terms
defined).
SECTION 1.02. COVENANT CONSTRUCTION. Each covenant contained
herein shall be construed (absent express provision to the contrary) as being
independent of each other covenant contained herein, so that compliance with any
one covenant shall not (absent such an express contrary provision) be deemed to
excuse compliance with any other covenant. Where any provision herein refers to
action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person.
SECTION 1.03. OTHER RULES OF CONSTRUCTION. The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement
as a whole and not to any particular provision of this Agreement. All references
herein to articles, sections, annexes, exhibits and schedules shall, unless the
context requires a different construction, be deemed to be references to the
articles and sections of this Agreement and the annexes, exhibits and schedules
attached hereto and made a part hereof. In this Agreement, unless a clear
contrary intention appears, the word "including" (and with correlative meaning
"include") means including, without limiting the generality of any description
preceding such term. The headings of the various articles and sections of this
Agreement are for convenience only and shall not affect the meaning of the terms
and conditions of this Agreement. No provision of this Agreement shall be
interpreted or construed against any party solely because that party or its
legal representative drafted such provision.
ARTICLE II
GUARANTY
SECTION 2.01. GUARANTY. Subsidiary hereby unconditionally and
irrevocably guarantees the full and punctual payment when due, whether at stated
maturity or earlier by acceleration or otherwise, of any and all debts,
liabilities and obligations of the Company now or hereafter existing under the
Note Agreement or the Notes whether for principal, interest (including, without
limitation, all interest that accrues after the commencement of any proceeding
by or against the Company under any bankruptcy, insolvency, liquidation,
moratorium, receivership, reorganization or other similar debtor relief law),
fees, expenses or otherwise (such obligations being the "OBLIGATIONS"), and
agrees to pay any and all reasonable costs and expenses (including counsel fees
and legal expenses) incurred by the Noteholders in connection with the
protection, defense or enforcement of any rights under this Agreement and any of
the other Transaction Documents.
SECTION 2.02. GUARANTY ABSOLUTE. Subsidiary unconditionally
guarantees that the Obligations will be paid strictly in accordance with the
terms of the Note Agreement and the Notes, regardless of any law, regulation or
order now or hereafter in effect in any jurisdiction affecting any of such terms
or the rights of the Noteholders with respect thereto. The liability of
Subsidiary under this Agreement shall be absolute and unconditional irrespective
of: (a) any lack of validity or enforceability of the Note Agreement, the Notes,
the other Transaction Documents or any other agreement or instrument relating
thereto (unless such invalidity or unenforceability results from a failure of
consideration on the part of the Noteholders); (b) any change in the time,
manner or place of payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to departure
from the Note Agreement, the Notes or the other Transaction Documents; (c) any
taking, exchange, release or non-perfection of any collateral, or any release or
amendment or waiver of or consent to departure from any other guaranty, for all
or any of the Obligations; (d) any manner of application of collateral, or
proceeds thereof, to all or any of the Obligations, or any manner of sale or
other disposition of any collateral for all or any of the Obligations or any
other assets of the Company; (e) any change, restructuring or termination of the
corporate structure or existence of the Company; or (f) any other circumstances
which might otherwise constitute a defense available to, or a discharge of, the
Company or a guarantor (except full and indefeasible payment of the
Obligations).
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The obligations of Subsidiary under this Agreement shall not be
subject to reduction, termination or other impairment by reason of any setoff,
recoupment, counterclaim or defense or for any other reason (except full and
indefeasible payment of the Obligations). This Agreement is to be in addition to
and is not to prejudice or be prejudiced by any other securities or guaranties
(including any guaranty signed by Subsidiary) which the Noteholders may now or
hereafter hold from or on account of the Company and is to be binding on
Subsidiary as a continuing security notwithstanding any payments from time to
time made to the Noteholders or any settlement of account or disability or
incapacity affecting Subsidiary or any other thing whatsoever. This Agreement is
a continuing guaranty and shall remain in full force and effect until payment in
full of the Obligations and all other amounts payable under this Agreement and
the termination of the Commitments.
SECTION 2.03. WAIVER. Subsidiary hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations and this Agreement and any liability to which this Agreement applies
or may apply, and waives presentment, demand of payment, notice of intent to
accelerate, notice of acceleration, notice of dishonor or nonpayment, and any
requirement that the Noteholders institute suit, collection proceedings or take
any other action to collect the Obligations including any requirement that the
Noteholders protect, secure, perfect or insure any security interest or lien or
any property subject thereto or exhaust any right or take any action against the
Company or any other person or entity or any collateral (it being the intention
of the Noteholders and Subsidiary that this Agreement is to be a guaranty of
payment and not of collection) or that the Company or any other person be joined
in any action hereunder. Notwithstanding the provisions of SECTION 4.12,
Subsidiary hereby expressly waives each and every right to which it may be
entitled by virtue of the suretyship laws of the State of Texas, including,
without limitation, any and all rights it may have pursuant to Rule 31 or Rule
32, Texas Rules of Civil Procedure, Section 17.001 of the Texas Civil Practice
and Remedies Code and Chapter 34 of the Texas Business and Commerce Code.
Subsidiary hereby waives marshalling of assets and liabilities, sale in inverse
order of alienation, notice by the Noteholders of any indebtedness or liability
to which it applies or may apply any amounts received by the Noteholders, and of
the creation, advancement, increase, existence, extension, renewal,
rearrangement and/or modification of the Obligations.
SECTION 2.04. WAIVER OF SUBROGATION; ETC. Subsidiary will not
exercise any rights of subrogation under this Agreement, by any payment made
hereunder or otherwise, until such time as the Noteholders have received full
payment of the Obligations and the Commitments have terminated. If,
notwithstanding the preceding sentence, any amount shall be paid to Subsidiary
on account of subrogation rights at any time when all the Obligations shall not
have been paid in full, such amount shall be held in trust for the benefit of
the Noteholders and shall forthwith be paid to the Noteholders to be credited
and applied upon the Obligations in accordance with the terms of the Note
Agreement.
SECTION 2.05. INTENTIONALLY OMITTED.
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SECTION 2.06. TRANSACTION DOCUMENTS. Subsidiary acknowledges that
it has had full and complete access to the Note Agreement, the Notes and the
other Transaction Documents, has fully reviewed same and is fully aware of their
contents.
SECTION 2.07. EFFECT OF BANKRUPTCY PROCEEDING, ETC. This
Agreement shall continue to be effective, or be automatically reinstated, as the
case may be, if at any time payment, in whole or in part, of any of the sums due
any Noteholders pursuant to the terms of the Note Agreement or hereunder is
rescinded or must otherwise be restored or returned by the Noteholders upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Company or Subsidiary, or upon or as a result of the appointment of a custodian,
receiver, trustee or other officer with similar powers with respect to the
Company or Subsidiary or any substantial part of their property, or otherwise,
all as though such payments had not been made. If an Event of Default shall at
any time have occurred and be continuing and declaration of such Event of
Default shall at such time be prevented by reason of the pendency against the
Company of a case or proceeding under a bankruptcy or insolvency law, Subsidiary
agrees that, for purposes of this Agreement and its obligations hereunder, the
Note Agreement shall be deemed to have been declared in default with the same
effect as if the Note Agreement had been declared in default in accordance with
the terms thereof, and Subsidiary shall forthwith pay the amounts specified by
the Noteholders to be paid thereunder, any interest thereon and any other
amounts guaranteed hereunder without further notice or demand.
SECTION 2.08. NO WAIVER; REMEDIES. No failure on the part of the
Noteholders to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 2.09. FURTHER ASSURANCES. Subsidiary hereby agrees to
execute and deliver all such instruments and take all such action as the
Noteholders may from time to time reasonably request in order to fully
effectuate the purpose of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SUBSIDIARY
Subsidiary represents and warrants to the Noteholders that:
SECTION 3.01. ORGANIZATION; POWER AND AUTHORITY. Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Texas, and is duly qualified as a foreign corporation and is in
good standing in each jurisdiction in which such qualification is required by
law, other than those jurisdictions as to which the failure to be so qualified
or in good standing would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Subsidiary has the corporate power
and authority to own or hold
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under lease the properties it purports to own or hold under lease, to transact
the business it transacts and proposes to transact, to execute and deliver this
Agreement and the other Transaction Documents to which it is a party and to
perform the provisions hereof and thereof.
SECTION 3.02. AUTHORIZATION, ETC. This Agreement and the other
Transaction Documents to which it is a party have been duly authorized by all
necessary corporate action on the part of Subsidiary, and this Agreement
constitutes, and upon execution and delivery thereof each other Transaction
Document to which it is a party will constitute, a legal, valid and binding
obligation of Subsidiary enforceable against Subsidiary in accordance with its
terms, except as such enforceability may be limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and (b) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
SECTION 3.03. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC. The
execution, delivery and performance by Subsidiary of this Agreement and the
other Transaction Documents to which it is a party will not (a) contravene,
result in any breach of, or constitute a default under, or result in the
creation of any Lien in respect of any property of Subsidiary under, any
indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease,
corporate charter or by-laws, or any other agreement or instrument to which
Subsidiary is bound or by which or any of its respective properties may be bound
or affected (except for Liens created under the Transaction Documents) the
consequence of which would have a Material Adverse Effect on Subsidiary, (b)
conflict with or result in a breach of any of the terms, conditions or
provisions of any order, judgment, decree, or ruling of any court, arbitrator or
Governmental Authority in respect of a proceeding to which Subsidiary is a party
or (c) to the knowledge of Subsidiary, violate any provision of any statute or
other rule or regulation of any Governmental Authority applicable to Subsidiary.
SECTION 3.04. GOVERNMENTAL AUTHORIZATIONS, ETC. No consent,
approval or authorization of, or registration, filing or declaration with, any
Governmental Authority is required in connection with the execution, delivery or
performance by Subsidiary of this Agreement or the other Transaction Documents
to which it is a party that has not been obtained.
SECTION 3.05. NOTE AGREEMENT. Subsidiary represents and warrants
that the representations and warranties contained in the Note Agreement or any
other Transaction Documents that relate to the Subsidiary are true and correct
on and as of the date hereof in all material respects as though made as of the
date hereof.
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ARTICLE IV
MISCELLANEOUS
SECTION 4.01. TRANSACTION EXPENSES. Whether or not the
transactions contemplated hereby are consummated, Subsidiary will pay all
reasonable costs and expenses (including reasonable attorneys' fees of a special
counsel and any local or other counsel) incurred by the Noteholders or holder of
a Note in connection with such transactions and in connection with any
amendments, waivers or consents under or in respect of this Agreement or the
other Transaction Documents (whether or not such amendment, waiver or consent
becomes effective), including, without limitation: (a) the reasonable costs and
expenses incurred in enforcing or defending (or determining whether or how to
enforce or defend) any rights under this Agreement or the other Transaction
Documents or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement or the other
Transaction Documents, or by reason of being a holder of any Note, (b) the
reasonable costs and expenses of negotiation, preparation and execution of this
Agreement and the other Transaction Documents and (c) the reasonable costs and
expenses, including reasonable financial advisors' fees, incurred in connection
with the insolvency or bankruptcy of Subsidiary in connection with any proposed
or finalized workout or restructuring of the transactions contemplated hereby
and by the Note Agreement. Subsidiary will pay, and will save the Noteholders
and each other holder of a Note harmless from, all claims in respect of any
fees, costs or expenses, if any, of brokers and finders (other than those
retained by the Noteholders). The obligations of Subsidiary under this SECTION
4.01 will survive the payment or transfer of any Note, the enforcement,
amendment or waiver of any provision of this Agreement or the other Transaction
Documents, and the termination of this Agreement.
SECTION 4.02. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the other Transaction Documents, the purchase or
transfer by the Noteholders of any Note or portion thereof or interest therein
and the payment of any Note, and may be relied upon by any subsequent holder of
a Note, regardless of any investigation made at any time by or on behalf of the
Noteholders or any other holder of a Note. All statements contained in any
certificate or other instrument delivered by or on behalf of Subsidiary pursuant
to this Agreement shall be deemed representations and warranties of Subsidiary
under this Agreement.
SECTION 4.03. AMENDMENT AND WAIVER. This Agreement may be
amended, and the observance of any term hereof may be waived (either
retroactively or prospectively), with (and only with) the written consent of the
Required Holders, except that no amendment or waiver may, without the written
consent of the holder of each Note at the time outstanding affected thereby,
release Subsidiary from its obligations hereunder. Any amendment or waiver
consented to as provided in this SECTION 4.03 applies equally to all holders of
Notes and is binding upon them and upon each future holder of any Note and upon
Subsidiary and the Company without regard to whether such Note has been marked
to indicate such amendment or waiver. No such amendment or waiver will extend to
or affect any obligation, covenant or agreement not expressly amended or waived
or impair any right consequent thereon. No course of dealing between Subsidiary
or the
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Company and the holder of any Note nor any delay in exercising any rights
hereunder or under any Note shall operate as a waiver of any rights of any
holder of such Note.
SECTION 4.04. NOTICES. All notices and communications provided
for hereunder shall be in writing and sent (a) by telecopy if the sender on the
same day sends a confirming copy of such notice by a recognized overnight
delivery service (charges prepaid), or (b) by registered or certified mail with
return receipt requested (postage prepaid), or (c) by a recognized overnight
delivery service (with charges prepaid). Any such notice must be sent: (i) if to
a Noteholder, to its address specified for such communications in Schedule A to
the Note Agreement, or at such other address as it shall have specified to
Subsidiary in writing, (ii) if to Subsidiary, to Subsidiary at 1600 Smith
Street, Suite 4000, Houston, Texas 77002, Telecopy No.: 713-652-9601, or at such
other address as Subsidiary shall have specified to the holder of each Note in
writing. Notices under this SECTION 4.04 will be deemed given only when actually
received.
SECTION 4.05. LIMITATION ON INTEREST. Each provision in this
Agreement and each other Transaction Document is expressly limited so that in no
event whatsoever shall the amount paid, or otherwise agreed to be paid, by
Subsidiary for the use, forbearance or detention of the money to be loaned to
the Company under the Notes or any other Transaction Document or otherwise
(including any sums paid as required by any covenant or obligation contained
herein or in any other Transaction Document which is for the use, forbearance or
detention of such money), exceed that amount of money which would cause the
effective rate of interest thereon to exceed the Highest Lawful Rate, and all
amounts owed under this Agreement and each other Transaction Document shall be
held to be subject to reduction to the effect that such amounts so paid or
agreed to be paid which are for the use, forbearance or detention of money under
this Agreement or such Transaction Document shall in no event exceed that amount
of money which would cause the effective rate of interest thereon to exceed the
Highest Lawful Rate.
SECTION 4.06. SUCCESSORS AND ASSIGNS. All covenants and other
agreements contained in this Agreement by or on behalf of any of the parties
hereto bind and inure to the benefit of their respective successors and assigns
(including, without limitation, any subsequent holder of a Note) whether so
expressed or not.
SECTION 4.07. SEVERABILITY. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall (to the full
extent permitted by law) not invalidate or render unenforceable such provision
in any other jurisdiction.
SECTION 4.08. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies hereof, each signed by less than all, but together signed by
all, of the parties hereto.
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SECTION 4.09. FINAL AGREEMENT OF THE PARTIES. THIS AGREEMENT AND
THE OTHER TRANSACTION DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
SECTION 4.10. JURY WAIVER. SUBSIDIARY AND THE NOTEHOLDERS
HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 4.11. CHOICE OF FORUM. SUBSIDIARY AND THE NOTEHOLDERS
AGREE THAT ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE BROUGHT IN THE FEDERAL OR STATE
COURTS OF HARRIS COUNTY, TEXAS.
SECTION 4.12. GOVERNING LAW. This Agreement shall be construed
and enforced in accordance with, and the rights of the parties shall be governed
by, the law of the State of New York excluding choice-of-law principles of the
law of such State that would require the application of the laws of a
jurisdiction other than such State.
SECTION 4.13. SUBORDINATION AGREEMENT. Each Noteholder
acknowledges that its rights hereunder are subject to the rights of the "Senior
Creditors" under that certain Subordination Agreement dated of even date
herewith by and among Comerica Bank - Texas, as Agent, the Noteholders, the
Company, Cliffwood Oil & Gas Corp., Cliffwood Energy Company and Cliffwood
Production Co.; provided that nothing in such Subordination Agreement shall
limit, release, impair or waive any liability or obligation of Subsidiary
hereunder.
IN WITNESS WHEREOF, Subsidiary and the Noteholders have caused
this Agreement to be executed by their respective representatives thereunto duly
authorized effective as of the date first above written.
CLIFFWOOD OIL & GAS CORP.
By: /S/ FRANK A. LODZINSKI
Frank A. Lodzinski
President
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RIMCO PARTNERS, L.P.
RIMCO PARTNERS, L.P. II,
RIMCO PARTNERS, L.P. III, AND
RIMCO PARTNERS, L.P. IV
By: RESOURCE INVESTORS MANAGEMENT COMPANY
LIMITED PARTNERSHIP, their general
partner
By: RIMCO ASSOCIATES, INC.,
its general partner
By: /S/ A. L. JORDEN
A. L. Jorden
Vice President
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