MAY 1998 AGREEMENT
IN RESPECT OF
AGREEMENT OF LIMITED PARTNERSHIP
CLIFFWOOD ACQUISITION - 1996 LIMITED PARTNERSHIP
THIS MAY AGREEMENT IN RESPECT OF AGREEMENT OF LIMITED PARTNERSHIP is
made and entered into this 4th day of May, 1998, by and among Cliffwood Oil &
Gas Corp., a Texas corporation, EnCap Equity 1996 Limited Partnership, a Texas
limited partnership, and Energy Capital Investment Company PLC, an English
investment company.
RECITALS:
A. Cliffwood Energy Company, a California corporation ("CEG"), and the
Limited Partners have heretofore executed and delivered that certain Agreement
of Limited Partnership dated as of September 27, 1996, establishing Cliffwood
Acquisition - 1996 Limited Partnership the " PARTNERSHIP AGREEMENT").
B. CEG has heretofore assigned its interest as a general partner in the
Partnership to the General Partner and the General Partner has been admitted to
the Partnership as a substitute general partner in place of CEG.
C. The General Partner, on behalf of the Partnership, proposes to
execute and deliver that certain Acquisition and Distribution Agreement dated as
of even date herewith (the "A&D AGREEMENT"), by and between the Partnership,
Texoil, Inc. ("TEXOIL"), and the General Partner (in its separate corporate
capacity). Under the terms of the A&D Agreement, the Partnership would (x) make
an in-kind distribution to the General Partner of the General Partner's interest
in the Properties (which, for purposes hereof, shall constitute 10% of the
Partnership's interest in the Properties) and (y) sell to Texoil the
Partnership's entire interest in the Properties less the interest described in
CLAUSE (X) above (with the Partnership being directed by Texoil to transfer and
assign the interest described in this CLAUSE (Y) to the General Partner).
D. The parties hereto desire to enter into this Agreement for the
purpose of (i) authorizing the execution and delivery by the General Partner of
the Purchase Agreement on behalf of the Partnership and authorizing the
consummation by the Partnership of the Transaction and (ii) setting forth their
agreement with respect to (x) the manner in which the cash and shares of stock
received by the Partnership under the A&D Agreement will be shared by the
parties and (iii) the conduct of the Partnership's affairs after the
consummation of the Transaction and (y) certain other matters affecting the
Partnership.
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AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing Recitals and the
mutual covenants and agreements contained herein and in the Partnership
Agreement, the parties hereto do hereby agree as follows:
SECTION 1. DEFINED TERMS, REFERENCES AND CONSTRUCTION.
(a) When used in this Agreement, the following terms shall have the
respective meanings assigned to them below in this SUBSECTION (A) or in the
sections, subsections or other subdivisions referred to below in this SUBSECTION
(A):
"A&D AGREEMENT" shall have the meaning assigned to it in
PARAGRAPH B of the Recitals.
"AGREEMENT" shall mean this May 1998 Agreement in Respect of
Agreement of Limited Partnership.
"CASH PORTION" shall have the meaning assigned to it in the A&D
Agreement.
"CLOSING" shall have the meaning assigned to it in the A&D
Agreement.
"CONVEYANCING DOCUMENTS" shall mean (i) the Assignment and Bill
of Sale, substantially in the form attached to the A&D Agreement in all
material respects, and (ii) the other documents and instruments to
executed and delivered at the Closing in connection with the sale,
assignment and transfer of the Properties and related obliga tions,
substantially in the form previously furnished to the Limited Partners
and its counsel in all material respects.
"PARTNERSHIP AGREEMENT" shall have the meaning assigned to it in
PARAGRAPH A of the Recitals.
"PURCHASE SHARES" shall have the meaning assigned to it in the
A&D Agree ment.
"PURCHASED PORTION" shall have the meaning assigned to it in the
A&D Agreement.
"TEXOIL" shall have the meaning assigned to it in PARAGRAPH B of
the Recitals.
"TRANSACTION" shall mean the transaction contemplated under the
A&D Agreement.
(b) All other terms not otherwise defined herein shall have the
respective meanings assigned to them in the Partnership Agreement.
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(c) All references in this Agreement to sections, subsections and other
subdivisions refer to corresponding sections, subsections and other subdivisions
of this Agreement unless expressly provided otherwise. Titles appearing at the
beginning of any of such subdivisions are for convenience only and shall not
constitute part of such subdivisions and shall be disregarded in construing the
language contained in such subdivisions. The words "this Agreement", "this
instrument", "herein", "hereof", "hereby", "hereunder" and words of similar
import refer to this Agreement as a whole and not to any particular subdivision
unless expressly so limited. Words in the singular form shall be construed to
include the plural and VICE VERSA, unless the context otherwise requires. The
word "includes" and its derivatives means "includes, but is not limited to" and
corresponding derivative expressions.
SECTION 2. AUTHORIZATION OF THE EXECUTION AND DELIVERY OF THE A&D
AGREEMENT; AUTHORIZATION OF THE CONSUMMATION OF THE TRANSACTION UNDER THE A&D
AGREEMENT.
(a) Notwithstanding Section 6.2(d) or anything else in the Partnership
Agreement to the contrary (and in reliance on the representation and warranty of
the General Partner set forth in SECTION 9(A)(VII)), the Limited Partners hereby
consent to and approve the execution and delivery of the A&D Agreement by the
General Partner on behalf of the Partnership.
(b) Subject to the terms hereof, the Limited Partners hereby consent to
and approve the consummation by the Partnership of the Transaction and agree
that the General Partner shall have the power and authority to cause the
Partnership to consummate the Transaction (including the power and authority to
execute and deliver the Conveyancing Documents).
(c) The Limited Partners agree to transfer and assign to Texoil the
instruments described in Section 9.14(c) of the A&D Agreement (provided that
Texoil performs its obligations under the A&D Agreement, including Section 9.13
thereof).
(d) Pursuant to Section 9.13 of the A&D Agreement, the General Partner
agrees that it will request that Texoil issue stock certificates representing
the Purchase Shares in the names of the Limited Partners, with each Limited
Partner receiving the number of Purchase Shares set forth opposite its name in
SECTION 3.
(e) Promptly after the Closing, the General Partner agrees to provide
the Limited Partners with a complete set of all the documents and other
instruments executed by the General Partner and Texoil at the Closing.
SECTION 3. ALLOCATIONS AND DISTRIBUTIONS ATTRIBUTABLE TO THE PURCHASED
PORTION. Notwithstanding anything in the Partnership Agreement to the contrary
(including Article IV thereof), (a) all revenues of the Partnership relating to
the Purchased Portion (including for this purpose the Purchase Shares), as well
as all related items of Partnership income, gain and amount realized for Federal
income tax purposes shall be allocated 100% to the Limited Partners (and, as
between the Limited Partners, in the percentages set forth in Section 4.5 of the
Partnership Agreement) and (b) immediately (i) after the Closing, the
Partnership will distribute solely to the Limited Partners the Cash Portion, and
(ii) after the issuance to the
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Partnership of the Purchase Shares under the A&D Agreement, the Partnership will
solely distribute to the Limited Partners such Purchase Shares, as follows:
LIMITED PARTNER CASH PURCHASE SHARES
--------------- ---- ---------------
EnCap LP $3,348,750 673,500
Energy PLC $1,116,250 224,500
SECTION 4. CERTAIN RESTRICTIONS. Without limiting Section 6.2(d) or any
other provision of the Partnership Agreement or this Agreement, it is hereby
agreed that the General Partner shall not do, perform or authorize any of the
following without the prior written consent of the Limited Partners:
(a) alter, supplement, modify or amend the A&D Agreement in any material
respect, waive any of the Partnership's rights or any of Texoil's or the General
Partner's duties and obligations thereunder in any material respect, or make any
material election, determination or agreement thereunder; or
(b) alter, supplement, modify or amend any Conveyance Document in any
material respect, waive any of the Partnership's rights or any of Texoil's or
the General Partner's duties and obligations thereunder in any material respect,
or make any material election, determination or agreement thereunder.
SECTION 5. AGREEMENT REGARDING THE CONTINUED EXISTENCE OF THE
PARTNERSHIP.
(a) Notwithstanding Section 10.1(d) of the Partnership Agreement or
anything else therein or in the Act to the contrary, the parties hereto agree
that the Partnership shall not dissolve upon the consummation of the Transaction
and that the Partnership shall continue to exist and conduct business.
(b) Without limiting SUBSECTION (A) above, the parties hereto agree that
immediately after the consummation of the Transaction, the parties hereto shall
execute and deliver an amended and restated agreement of limited partnership to
govern the Partnership in a form mutually acceptable to them, which shall be
conclusively evidenced by their execution and delivery thereof; provided, that
the terms and provisions of this Agreement shall not be superseded by the
execution and delivery by the parties of any such agreement.
SECTION 6. EFFECTIVENESS OF AGREEMENT; APPROVALS. This Agreement shall
be expressly conditioned upon and effective if, and only if, the Transaction is
consummated.
SECTION 7. REPRESENTATIONS AND WARRANTIES.
(a) The General Partner represents and warrants to the Limited Partners
as follows:
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(i) The General Partner is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas.
(ii) The General Partner has the requisite power and authority to
execute and deliver this Agreement and to perform its obligations
hereunder.
(iii) The execution, delivery and performance by the General
Partner of this Agreement has been duly and validly authorized by all
requisite corporate action.
(iv) The execution, delivery and performance by the General
Partner of this Agreement is within its corporate powers and will not
(A) be in contravention of or violate any provisions of its applicable
charter or other governing documents, as amended to the date hereof, or
(B) be in contravention of or result in any breach or constitute a
default under any applicable law, rule, regulation, judgment, license,
permit or order or any loan, note or other agreement or instrument to
which the General Partner is a party or by which it or any of its
properties are bound.
(v) When delivered to the Limited Partners, this Agreement will
have been duly and validly executed and will be binding upon the General
Partner and enforceable in accordance with the terms hereof, except as
limited by bankruptcy, insolvency or similar law of general application
relating to the enforcement of creditors' rights.
(vi) No consent, approval, authorization or order of any court or
governmen tal agency or authority or of any third party which has not
been obtained is required in connection with the execution, delivery and
performance by the General Partner of this Agreement.
(vii) The General Partner has furnished the Limited Partners with
a true, correct and complete copy of the A&D Agreement and related
documents.
(viii) All Partnership debts and liabilities have been paid in
full or adequate provision has been made therefor.
(b) Each Limited Partner represents and warrants to the General Partner
as follows:
(i) It is duly organized and validly existing under the laws of
the jurisdic tion of its formation.
(ii) It has all requisite power and authority to execute and
deliver this Agreement and to perform its obligations hereunder.
(iii) The execution, delivery and performance of this Agreement
are within its powers and do not (A) contravene or violate any
provisions of its charter or other governing documents, as amended to
the date hereof, or (B) contravene or result in any breach of or
constitute a default under any applicable law, rule or regulation or any
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loan, note or other agreement or instrument to which it is a party or by
which it or any of its properties are bound.
(iv) When delivered to the General Partner, this Agreement will
be duly and validly executed by such Limited Partner and will be binding
upon it in accordance with the terms hereof, except as limited by
bankruptcy, insolvency or similar law of general application relating to
the enforcement of creditors' rights.
(c) All representations, warranties and covenants made by the General
Partner or the Limited Partners in this Agreement or any other document
contemplated thereby or hereby shall be considered to have been relied upon by
the other parties hereto and shall survive the execution and delivery of this
Agreement or such other document, regardless of any investiga tion made by or on
behalf of any such party.
SECTION 8. RATIFICATION. The Partnership Agreement, to the extent
amended by this Agreement, is hereby ratified and confirmed.
SECTION 9. COUNTERPARTS. This Agreement shall be executed in multiple
counter parts, with each such counterpart constituting an original, and all of
such counterparts constituting but one and the same instrument.
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IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the day and year first above written.
GENERAL PARTNER:
CLIFFWOOD OIL & GAS CORP.
By:____________________________
Frank A. Lodzinski, President
SIGNATURE PAGE--MAY 1998 AGREEMENT IN RESPECT OF AGREEMENT OF LIMITED
PARTNERSHIP OF CLIFFWOOD ACQUISITION - 1996 LIMITED PARTNERSHIP.
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the day and year first above written.
LIMITED PARTNER:
ENERGY CAPITAL INVESTMENT
COMPANY PLC
By:__________________________
Gary R. Petersen, Director
SIGNATURE PAGE--MAY 1998 AGREEMENT IN RESPECT OF AGREEMENT OF LIMITED
PARTNERSHIP OF CLIFFWOOD ACQUISITION - 1996 LIMITED PARTNERSHIP.
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the day and year first above written.
LIMITED PARTNER:
ENCAP EQUITY 1996 LIMITED
PARTNERSHIP
By: ENCAP INVESTMENTS L.C.
By:__________________________
Robert L. Zorich, Managing
Director
SIGNATURE PAGE--MAY 1998 AGREEMENT IN RESPECT OF AGREEMENT OF LIMITED
PARTNERSHIP OF CLIFFWOOD ACQUISITION - 1996 LIMITED PARTNERSHIP.