SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 12, 1999
TEXOIL, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 0-12633 88-0177083
(State of Incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
110 CYPRESS STATION DRIVE
SUITE 220
HOUSTON, TX 77090
(Address of principal executive offices)
(281) 537-9920
(Issuer's telephone number)
(NOT APPLICABLE)
(Former name or former address, if changed since last report)
ITEM 5. PREFERRED STOCK PURCHASE AGREEMENT
On October 12, 1999, Quantum Energy Partners, LP ("Quantum"), V&C Energy
Limited Partnership ("V&C"), EnCap Equity 1996 Limited Partnership ("EnCap"),
Energy Capital Investment Company, PLC ("Energy Capital"), and certain other
individual investors (all collectively referred to as "Investors") have entered
into a Preferred Stock Purchase Agreement with Texoil to purchase 2,750,000
shares of Series A Convertible Stock at a purchase price of $8.00 per share. The
Series A Preferred Stock is convertible into common stock (subject to
anti-dilution adjustments) on a 2 for 1 basis. This will result in an investment
of $22,000,000 in preferred equity. According to NASD rules, the Company is
required to obtain shareholder approval of this sale, because it could result in
the issuance, through conversion, of more than 20% of the current voting stock.
The issuance of 5,500,000 shares of Common Stock today would constitute 45.6% of
the issued and outstanding Common Stock. The net proceeds will be applied to the
repayment of outstanding indebtedness of Texoil, including the redemption of the
$10,000,000 convertible notes held by RIMCO. The Agreement would also result in
adding three Class B Directors with three votes to the Board of Directors.
The following is a summary of the principal terms of the Agreement. A
complete copy of the Agreement is included as "Exhibit 7.1" to this Form 8-K.
The Registration Rights Agreement, Indemnification Agreement and Employment
Agreements referred to below are an integral part of this financing and are
included as exhibits to the Agreement.
o PURCHASE AND SALE OF SECURITIES - each of the investors will
purchase the number of shares specified in the Agreement for
cash. The issuance will total 2,750,000 shares of Series A
Preferred at $8.00 per share, for an aggregate consideration of
$22,000,000.
- Holders of the Series A Preferred Stock are entitled to
receive dividends at a rate of 9% per annum payable
quarterly. Dividends may be paid in cash or in additional
shares of Series A Preferred priced at the original issue
price. The single largest purchaser of Series A Preferred
intends to elect to receive its dividends in kind, which
is expected to result in a minimum issuance of
approximately 352,700 additional shares of Series A
Preferred.
- The Investors, in their sole election, may convert each
share of Series A Preferred into two shares of Common
Stock at any time. Alternatively Certificate of
Designation provides an automatic conversion after
December 31, 2002, into Class B Common Stock upon reaching
a "net equity value" goal of $121,500,000 and a net equity
value per share of at least $10.00 (both according to
formulas set forth therein). These conversion rates are
subject to
adjustment for anti-dilution rights and in the event of a
recombination, reclassification of the Common Stock, as
specified in the Certificate of Designation.
o VOTING RIGHTS - The holders of Series A Preferred will be
entitled to vote as a separate class and be entitled to elect
and have the voting power of the Class B Directors. Upon
conversion, the Series A Preferred Stock will vote according
to the number of common shares into which it will convert. Class
B Common Stock will have exactly the same voting rights as
Common Stock except for certain rights to elect Class B
Directors.
o BOARD OF DIRECTORS - The number of Board seats will be increased
to a total of nine with holders of the Series A Preferred having
the right to elect three members of the Board who have three
votes, being the smallest number that constitutes one-third of
the voting power of the Board. Common Shareholders retain the
right (subject to the classification provision) to vote for six
directors. This allocation of votes may reverse pursuant to a
"Trigger Event", as defined in the agreements, which generally
cannot occur before January 1, 2005. In that event, the holders
of Series A Preferred or Class B Common could be entitled to
have six votes out of nine Board votes.
o REGISTRATION RIGHTS - Holders of the Series A Preferred are
entitled to three demand registrations giving Investors the
right to have their securities registered with the Securities
and Exchange Commission and have certain "piggy-back rights" to
have their securities included in other registrations of
Texoil's securities.
o PARTICIPATION OF MAJOR SHAREHOLDERS, OFFICERS AND DIRECTORS -
Frank A. Lodzinski, President and Chief Executive Officer,and
Michael A. Vlasic, a Director, both through their interest in
the V&C Energy Limited Partnership; Energy Capital Investment
Company, PLC and EnCap Equity 1996 Limited Partnership,
affiliates of EnCap Investments L.L.C.; Thomas A. Reiser,
Director, and Jerry M. Crews, Executive Vice President and
Director, are all current holders of Texoil Common Stock and
will participate in the Preferred Stock purchase, purchasing
843,750 shares thereof. Collectively, these investors currently
own 32.2% of the issued and outstanding Common Stock of Texoil
and will vote in favor of the Preferred Stock Purchase Agreement
and the related issuance of the Series A Preferred Stock.
o EMPLOYMENT AGREEMENT - Frank A. Lodzinski would enter into an
Employment Agreement and continue as President and Chief
Executive Officer of Texoil. Jerry M. Crews, Francis M. Mury and
Peggy C. Simpson would also enter into Employment Agreements and
remain Officers of the Company. Mr. Lodzinski, by contract and
by the proposed classification provisions will, notwithstanding
his employment contract, be entitled to remain on the Board
until 2002.
o REPRESENTATIONS AND WARRANTIES - The Agreement contains
customary representations and warranties regarding corporate
authority, standing, existence as well as representations and
warranties regarding financial condition, capitalization,
obligations, employee matters, material contracts, title to
properties, environmental matters, regulation, year 2000
compliance, ownership of data and other matters relevant to the
Company and Investors.
o INDEMNIFICATION - The Investors have required that the Company
enter into an Indemnification Agreement with each Class B
Director of the Company to grant rights beyond those available
under the applicable Nevada law, and the Company intends to
offer the same arrangement to all of its Directors, if
practicable. In addition to these Indemnification Contracts, the
Investors have also required an amendment to the Articles of
Incorporation (see Proposal 3 below), as well as to the Bylaws
of Texoil. The Purchase Agreement also contain mutual
indemnification provisions in the event of breach of the
Agreement by either party. In addition, the Company has
indemnified Investors for a period of one year for certain
matters related to environmental conditions and title to
properties; damages, if any, could result in a change in the
conversion price.
o GOVERNING LAW - This Agreement is to be governed by and
construed in accordance with the laws of the state of Texas.
o CONDUCT OF BUSINESS AFTER CLOSING - The holders of Series A
Preferred have certain approval rights related to (i) the
issuance of any securities that have preference over, or parity
with, the Series A Preferred, (ii) issuance of capital stock (or
convertible securities) for a consideration less than 150% of
the conversion price then in effect, (iii) redemptions or
repurchase of capital stock, (iv) dividends and (v) amendments
to the rights of Series A holders, and (vi) amendments to the
Articles of Incorporation, Bylaws or the Certificate.
This Form 8-K contains forward-looking statements within the meaning of Section
27A of The Securities Act of 1933 and Section 21E of The Securities Act of 1934.
Texoil believes that its expectations are based on reasonable business
assumptions, however, no assurance can be given that the Company's goals will be
achieved.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibit 7.1 - Preferred Stock Purchase Agreement
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.
DATE: OCTOBER 12, 1999 TEXOIL, INC.
By: /s/ FRANK A. LODZINSKI
Frank A. Lodzinski
President and
Principal Financial Officer