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RIO GRANDE, INC. AND RIO GRANDE DRILLING COMPANY
$2,000,000
11.50% Subordinated Notes due September 30, 2000
Warrants to Acquire Up to 1,388,160 Shares of
Common Stock, par value $.01
___________
NOTE PURCHASE AGREEMENT
___________
Dated September 27, 1995
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TABLE OF CONTENTS
Section Page
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1. AUTHORIZATION OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. SALE AND PURCHASE OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4 SUBORDINATION OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4.1 Agreement of Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4.2 Effect of Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.3 Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.4 Reliance of Subsequent Holders of Senior Indebtedness . . . . . . . . . . . . . . 4
5. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.2 Performance; No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.3 Compliance Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.4 Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.5 Purchase Permitted By Applicable Law, etc. . . . . . . . . . . . . . . . . . . . . 5
5.6 Proceedings and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES . . . . . . . . . . . . . . . . . . . . . 6
6.1 Organization; Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . 6
6.2 Authorization, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.3 Organization and Ownership of Shares of Subsidiaries;
Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.4 Compliance with Laws, Other Instruments, etc. . . . . . . . . . . . . . . . . . . 7
6.5 Governmental Authorizations, etc. . . . . . . . . . . . . . . . . . . . . . . . . 7
6.6 Litigation; Observance of Agreements, Statutes and Orders . . . . . . . . . . . . 7
6.7 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.8 Title to Property; Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.9 Licenses, Permits, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.10 Existing Indebtedness, Future Liens . . . . . . . . . . . . . . . . . . . . . . . 9
7. REPRESENTATIONS OF THE PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.1 Purchase for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.2 Residence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.3 Purchaser Questionnaire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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8. INSPECTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9. PREPAYMENT OF THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.1 Required Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.2 Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.3 Allocation of Partial Prepayments . . . . . . . . . . . . . . . . . . . . . . . 11
9.4 Maturity; Surrender, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.5 Purchase of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10.1 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10.2 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.3 Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.4 Payment of Taxes and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.5 Corporate Existence, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.6 Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.7 Compliance Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.8 Notice of Default and Material Adverse Effect . . . . . . . . . . . . . . . . . 13
10.9 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
11. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
11.1 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . 14
11.2 Merger, Consolidation, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
11.3 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
11.4 Change of Management and Business . . . . . . . . . . . . . . . . . . . . . . . 15
11.5 Dividends, Distributions and Redemptions . . . . . . . . . . . . . . . . . . . . 16
11.6 Recourse Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
12. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
13. REMEDIES ON DEFAULT, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
13.1 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
13.2 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
13.3 Rescission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
13.4 No Waivers or Election of Remedies, Expenses, etc. . . . . . . . . . . . . . . . 19
14. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES . . . . . . . . . . . . . . . . . . . . . 20
14.1 Registration of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.2 Transfer and Exchange of Notes. . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 Replacement of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
15. PAYMENTS ON NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
15.1 Place of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
15.2 Home Office Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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16. EXPENSES, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
16.1 Transaction Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
16.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
17. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
18. AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
18.1 Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
18.2 Solicitation of Holders of Notes. . . . . . . . . . . . . . . . . . . . . . . . 23
18.3 Binding Effect, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
18.4 Notes held by Companies, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 24
19. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
20. REPRODUCTION OF DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
21. CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
22. SUBSTITUTION OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
23. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
23.1 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
23.2 Payments Due on Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . 26
23.3 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
23.4 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
23.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
23.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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SCHEDULE A -- INFORMATION RELATING TO PURCHASERS
SCHEDULE B -- DEFINED TERMS
EXHIBIT 1 -- Form of 11.50% Subordinated Note due
September 30, 2000
EXHIBIT 2 -- Form of Common Stock Purchase Warrant
EXHIBIT 10.7 -- Form of Compliance Certificate
EXHIBIT 11.3 -- Permitted Liens
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RIO GRANDE, INC. AND RIO GRANDE DRILLING COMPANY
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
11.50% Subordinated Notes due September 30, 2000
Warrants to Acquire 1,388,160 Shares of Common Stock, par value $.01
September 27, 1995
Note Purchasers listed on Exhibit A
Ladies and Gentlemen:
Rio Grande, Inc. ("RGI"), a Delaware corporation, and Rio Grande
Drilling Company ("RGDC"), a Texas corporation (the "COMPANIES"), agree with
you as follows:
1. AUTHORIZATION OF SECURITIES.
The Companies will authorize the issue and sale of $2 million
aggregate principal amount of their Subordinated Notes due September 30, 2000
(singularly, a "NOTE" and collectively, the "NOTES", such term to include any
such notes issued in substitution therefor pursuant to Section 14 of this
Agreement), and the issue and sale of Warrants entitling the Holders of the
Notes to purchase initially an aggregate of 1,388,160 shares of Common Stock at
a price per share of $.40. The Notes shall be substantially in the form set
out in Exhibit 1, with such changes therefrom, if any, as may be approved by
you and the Companies, and the Warrants shall be in substantially the form of
Exhibit 2, with such changes therefrom, if any, as may be approved by you and
the Companies. Certain capitalized terms used in this Agreement are defined in
Schedule B; references to a "Schedule" or an "Exhibit" are, unless otherwise
specified, to a Schedule or an Exhibit attached to this Agreement.
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Companies
will issue and sell to you and you will purchase from the Companies, at the
Closing provided for in Section 3, Notes in the aggregate principal amount of
$2 Million at the purchase price of 100% of the principal amount thereof.
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3. CLOSING.
The sale and purchase of the Notes to be purchased by you shall be at
the offices of ▇▇▇ & ▇▇▇▇▇ Incorporated, Suite 1800, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m. Central Daylight Time, at a closing (the
"CLOSING") on September 27, 1995 or on such other Business Day thereafter on or
prior to October 31, 1995 as may be agreed upon by the Companies and you. At
the Closing, the Companies will deliver to you the Notes to be purchased by
each of you in the form of a single Note (or such greater number of Notes in
denominations of at least $25,000.00 as each of you may request) dated the date
of the Closing and registered in your respective names (or in the name of your
respective nominees) in consideration of your payment to the Companies of the
aggregate principal amount of the Notes. If at the Closing the Companies shall
fail to tender such Notes to you as provided above in this Section 3, or any of
the conditions specified in Section 5 shall not have been fulfilled to your
satisfaction, you shall, at your election, be relieved of all further
obligations under this Agreement, without thereby waiving any rights you may
have by reason of such failure or such nonfulfillment.
4. SUBORDINATION OF NOTES
The Notes referenced herein are expressly subordinated to Senior
Indebtedness of the Companies, as follows:
4.1. AGREEMENT OF SUBORDINATION.
Payment of the principal of and interest on the Notes is hereby
expressly subordinated, to the extent and in the manner in this Section
hereinafter set forth, in right of payment to the prior payment in full of all
Senior Indebtedness of the Companies. No payment on account of the principal
of or interest on any of the Notes shall be made, and no holder of a Note shall
be entitled to receive any such payment if (i) full payment for amounts then
due for principal of and interest on Senior Indebtedness has not been made, or
(ii) at the time of such payment or immediately after giving effect thereto
there shall exist under any Senior Indebtedness or any agreement pursuant to
which any Senior Indebtedness is issued any default or any condition, event or
act, which, with notice or lapse of time, or both, would constitute a default.
Each Holder of a Note, for itself and its successors and assigns, expressly for
the benefit of the present and future holders of Senior Indebtedness, by
purchasing this Note, agrees to and shall be bound by the subordination
provisions of this Section, and agrees to execute and deliver to holders of
Senior Indebtedness, upon written request, separate subordination agreements
consistent with the provisions of this Section.
In the event of any insolvency or bankruptcy proceedings, and any
receivership, liquidation, reorganization or other similar proceedings in
connection therewith, relative to either of the Companies or to their
creditors, as such, or to the Companies' property, or in the event of any
proceedings for voluntary liquidation, dissolution, or other winding up of
either of the Companies, whether or not involving insolvency or
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bankruptcy, the holders of Senior Indebtedness shall be entitled to receive
payment in full of all principal, premium, if any, and interest on all Senior
Indebtedness (pro rata to such holders on the basis of the respective amounts
of Senior Indebtedness held by such holders) before any Holder of a Note is
entitled to receive any payment on account of principal or interest upon a
Note, and to that end the holders of Senior Indebtedness shall be entitled to
receive for application to the payment of the Senior Indebtedness any payment
or distribution of any kind or character, whether in cash, property or
securities (other than shares of stock of either of the Companies as
reorganized or readjusted or securities of either of the Companies or any other
corporation provided for by a plan of reorganization or readjustment,
distributions on account of which or the payment of which are subordinated to
the payment of all Senior Indebtedness which may at the time be outstanding)
which may be payable or deliverable in any such proceedings in respect of the
Notes.
In the event that any Note is declared due and payable before its
expressed maturity for any reason (under circumstances when the provisions of
the preceding paragraph shall not be applicable), the holders of Senior
Indebtedness shall be entitled to receive payment in full of all principal,
premium, if any, and interest on all Senior Indebtedness before the Holders of
Notes are entitled to receive any payment on account of the principal or
interest upon the Notes.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of either of the Companies, whether in cash, property or
securities (other than shares of stock of either of the Companies as
reorganized or readjusted or securities of either of the Companies or any other
corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinated to the payment of all Senior Indebtedness
which may at the time be outstanding), shall be received by the Holders of the
Notes before all Senior Indebtedness is paid in full, or provision made for its
payment in cash, such payment or distribution shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of such Senior
Indebtedness or their representative or representatives, or to the trustee or
trustees under any indenture under which any instruments evidencing any of such
Senior Indentures may have been issued, for application to the payment of all
Senior Indebtedness remaining unpaid to the extent necessary to pay all such
Senior Indebtedness after giving effect to any concurrent payment or
distribution, or provision for payment thereof in cash, to the holders of such
Senior Indebtedness.
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4.2. EFFECT OF SUBORDINATION.
No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the
Companies or by any act or failure to act, in good faith, by any such holder,
or by the noncompliance by the Companies with the terms, provisions and
covenants of this Agreement regardless of any knowledge thereof which any such
holder may have or otherwise be charged with. Nothing contained in this
Section or elsewhere in this Agreement or in the Notes is intended to or shall
impair, as between the Companies, their creditors other than the holders of
Senior Indebtedness, and the Holders of the Notes, the obligation of the
Companies, which is absolute and unconditional, to pay to the Holders of the
Notes the principal of (and premium, if any) and the interest on the Notes in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders of the Notes and the creditors of the Companies other
than the holders of Senior Indebtedness, nor shall anything herein or therein
prevent the Holder of any Note from exercising all remedies otherwise permitted
by applicable law upon default under this Agreement, subject to the rights, if
any, under this Section of the holders of Senior Indebtedness, in respect of
cash, property or securities of the Companies received upon the exercise of any
such remedy.
4.3. SUBROGATION.
Subject to the payment in full of all Senior Indebtedness, the rights
of the Holders of the Notes shall be subrogated to the rights of the holders of
Senior Indebtedness to receive payments or distributions of cash, property, or
securities of the Companies applicable to the Senior Indebtedness until the
principal amount of (and premium, if any) and interest on the Notes shall be
paid in full; and, for the purposes of such subrogation, no payments or
distributions to the holders of the Senior Indebtedness of any cash, property
or securities to which the Holders of the Notes would be entitled except for
the provisions of this Section, and no payment over pursuant to the provisions
of this Section to or for the benefit of the holders of Senior Indebtedness by
Holders of the Notes, shall, as between the Companies, their creditors other
than holders of Senior Indebtedness, and the Holders of the Notes be deemed to
be a payment by the Companies to or on account of the Senior Indebtedness. It
is understood that the provisions of this Section are and are solely for the
purpose of defining the relative rights of the Holders of the Notes on the one
hand, and the holders of the Senior Indebtedness, on the other.
4.4. RELIANCE OF SUBSEQUENT HOLDERS OF SENIOR INDEBTEDNESS.
Each holder of Senior Indebtedness whether outstanding at the date of
the Notes or incurred after the date hereof, shall be deemed to have acquired
such Senior Indebtedness in reliance upon the subordination provision contained
herein.
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5. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to you at
the Closing is subject to the fulfillment to your satisfaction, prior to or at
the Closing, of the following conditions:
5.1. REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Companies in this Agreement
shall be correct when made and at the time of the Closing.
5.2. PERFORMANCE; NO DEFAULT.
The Companies shall have performed and complied with all agreements
and conditions contained in this Agreement required to be performed or complied
with by it prior to or at the Closing and after giving effect to the issue and
sale of the Notes.
5.3. COMPLIANCE CERTIFICATES.
(a) Officer's Certificate. The Companies shall have
delivered to you an Officer's Certificate, dated the date of the Closing,
certifying that the conditions specified in Sections 5.1 and 5.2 have been
fulfilled.
(b) Secretary's Certificate. The Companies shall have
delivered to you a certificate certifying as to the resolutions attached
thereto and other corporate proceedings relating to the authorization,
execution and delivery of the Notes and the Agreements.
5.4. OPINIONS OF COUNSEL.
You shall have received an opinion in form and substance satisfactory
to you, dated the date of the Closing, from ▇▇▇ & ▇▇▇▇▇ Incorporated, counsel
for the Companies.
5.5. PURCHASE PERMITTED BY APPLICABLE LAW, ETC.
On the date of the Closing your purchase of Notes shall (i) be
permitted by the laws and regulations of each jurisdiction to which you are
subject, (ii) not violate any applicable law or regulation and (iii) not
subject you to any tax, penalty or liability under or pursuant to any
applicable law or regulation, which law or regulation was not in effect on the
date hereof.
5.6. PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement and all documents and instruments
incident to such transactions shall be satisfactory to you and your counsel,
and you and your counsel
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shall have received all such counterpart originals or certified or other copies
of such documents as you or they may reasonably request.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES.
The Companies represent and warrant to you that:
6.1. ORGANIZATION; POWER AND AUTHORITY.
Each of the Companies is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, 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 could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Each of the Companies has the
corporate power and authority to own or hold 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
Agreements and the Notes and to perform the provisions hereof and thereof.
6.2. AUTHORIZATION, ETC.
This Agreement and the Notes have been duly authorized by all
necessary corporate action on the part of the Companies, and this Agreement
constitutes, and upon execution and delivery thereof each Note will constitute,
a legal, valid and binding obligation of the Companies enforceable against the
Companies in accordance with its terms, except as such enforceability may be
limited by bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors' rights generally and to principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).
6.3. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES.
(a) All of the outstanding shares of capital stock or
similar equity interests of each Subsidiary owned by either of the Companies
and their Subsidiaries have been validly issued, are fully paid and
nonassessable and are owned by either RGI or RGDC or another Subsidiary free
and clear of any Lien (except as otherwise disclosed by the Companies to you).
(b) Each Subsidiary is a corporation or other legal
entity duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity 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 could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each such Subsidiary has the corporate or other power and
authority
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to own or hold under lease the properties it purports to own or hold under
lease and to transact the business it transacts and proposes to transact.
(c) No Subsidiary is a party to, or otherwise subject to
any legal restriction or any agreement (other than this Agreement, the Bank
Loan Documents and customary limitations imposed by corporate law statutes)
restricting the ability of such Subsidiary to pay dividends out of profits or
make any other similar distributions of profits to the Companies or any of
their Subsidiaries that owns outstanding shares of capital stock or similar
equity interests of such Subsidiary.
6.4. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Companies of this
Agreement and the Notes will not (i) 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 the Companies or any 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 the Companies or any
Subsidiary is bound or by which the Companies or any Subsidiary or any of their
respective properties may be bound or affected, (ii) 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 applicable
to the Companies or any Subsidiary or (iii) violate any provision of any
statute or other rule or regulation of any Governmental Authority applicable to
the Companies or any Subsidiary.
6.5. 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 the Companies of this Agreement or the
Notes.
6.6. LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.
(a) Except as otherwise disclosed to you, there are no
actions, suits or proceedings pending or, to the knowledge of the Companies,
threatened against or affecting the Companies or any Subsidiary or any property
of the Companies or any Subsidiary in any court or before any arbitrator of any
kind or before or by any Governmental Authority that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
(b) Neither of the Companies nor any Subsidiary is in
default under any term of any agreement or instrument to which it is a party or
by which it is bound, or any order, judgment, decree or ruling of any court,
arbitrator or Governmental Authority or is in violation of any applicable law,
ordinance, rule or regulation (including without limitation Environmental Laws)
of any Governmental Authority, which default or
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violation, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.
6.7. TAXES.
The Companies and their Subsidiaries have filed all tax returns that
are required to have been filed in any jurisdiction, and have paid all taxes
shown to be due and payable on such returns and all other taxes and assessments
levied upon them or their properties, assets, income or franchises, to the
extent such taxes and assessments have become due and payable and before they
have become delinquent, except for any taxes and assessments (i) the amount of
which is not individually or in the aggregate Material or (ii) the amount,
applicability or validity of which is currently being contested in good faith
by appropriate proceedings and with respect to which RGI, RGDC or a Subsidiary,
as the case may be, has established adequate reserves in accordance with GAAP.
The Companies know of no basis for any other tax or assessment that could
reasonably be expected to have a Material Adverse Effect. The charges,
accruals and reserves on the books of the Companies and their Subsidiaries in
respect of Federal, state or other taxes for all fiscal periods are adequate.
The Federal income tax liabilities of the Companies and their Subsidiaries have
been determined by the Internal Revenue Service and paid for all fiscal years
up to and including the fiscal year ended January 31, 1994.
6.8. TITLE TO PROPERTY; LEASES.
The Companies and their Subsidiaries have good and sufficient title to
their respective properties that individually or in the aggregate are Material,
in each case free and clear of Liens prohibited by this Agreement. All leases
that individually or in the aggregate are Material are valid and subsisting and
are in full force and effect in all material respects.
6.9. LICENSES, PERMITS, ETC.
Except as otherwise disclosed to you,
(a) the Companies and their Subsidiaries own or possess
all licenses, permits, franchises, authorizations, patents,
copyrights, service marks, trademarks and trade names, or rights
thereto, that individually or in the aggregate are Material, without
known conflict with the rights of others;
(b) to the best knowledge of the Companies, no product of
the Companies infringes in any material respect any, license, permit,
franchise, authorization, patent, copyright, service ▇▇▇▇, trademark,
trade name or other right owned by any other Person; and
(c) to the best knowledge of the Companies, there is no
Material violation by any Person of any right of the Companies or any
of their Subsidiaries with respect to any patent, copyright, service
▇▇▇▇, trademark,
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trade name or other right owned or used by the Companies or any of
their Subsidiaries.
6.10. EXISTING INDEBTEDNESS; FUTURE LIENS.
(a) Neither of the Companies nor any Subsidiary is in default and
no waiver of default is currently in effect, in the payment of any principal or
interest on any Indebtedness of the Companies or any Subsidiary and no event or
condition exists with respect to any Indebtedness of the Companies or any
Subsidiary that would permit (or that with notice or the lapse of time, or
both, would permit) one or more Persons to cause such Indebtedness to become
due and payable before its stated maturity or before its regularly scheduled
dates of payment.
(b) Neither of the Companies nor any Subsidiary has agreed or
consented to cause or permit in the future (upon the happening of a contingency
or otherwise) any of its property, whether now owned or hereafter acquired, to
be subject to a Lien other than a Permitted Lien.
7. REPRESENTATIONS OF THE PURCHASER.
7.1. PURCHASE FOR INVESTMENT.
You understand that the Notes have not been registered under the
Securities Act and may be transferred, assigned or resold only if registered
pursuant to the provisions of the Securities Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law. The Companies are not
and shall not be under any circumstances required to register the Notes.
7.2. RESIDENCE.
You affirm to the Companies that you are a resident of the state of
Texas, that you have no present intention to change your residence and that the
Notes will not be sold, transferred or assigned by you to a nonresident of
Texas for a period of at least nine months after the Closing.
7.3. INVESTOR SUITABILITY QUESTIONNAIRE.
You have completed a Investor Suitability Questionnaire in the form
required by the Companies, and you affirm as of the Closing that all
statements, representations and warranties and responses therein are true and
correct in all respects.
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8. INSPECTIONS
Upon the written request of (i) Holders of Notes in an aggregate
amount greater than or equal to 33 1/3% of the then outstanding principal
amount of the Notes; (ii) Holders of Notes in an aggregate amount greater than
or equal to 10% of the then outstanding principal amount of the Notes, if a
Default or Event of Default then exists; or (iii) a Significant Holder, and in
all cases subject to execution by the Holders and their representatives of
appropriate confidentiality agreements containing substantially the same
provisions as those set forth in Section 21 hereof, the Companies shall permit
the Holders or representatives of Holders of Notes to visit and inspect any of
the offices or Properties of the Companies or any Subsidiary, to examine all
their respective books of account, records, reports (including, without
limitation, Reserve Reports) and other papers, to make copies and extracts
therefrom, and to discuss their respective affairs, finances and accounts with
their respective officers and independent public accountants (and by this
provision the Companies authorize said accountants to discuss the affairs,
finances and accounts of the Companies and their Subsidiaries), all at such
times and as often as may be reasonably requested.
9. PREPAYMENT OF THE NOTES.
9.1. REQUIRED PREPAYMENTS.
The Companies will prepay a portion of the principal of the Notes in
the amounts and at the times as set forth in the Notes (or such lesser
principal amount as shall then be outstanding) at par and without payment of
any premium, provided that upon any partial prepayment of the Notes pursuant to
Section 9.2 the principal amount of each required prepayment of the Notes
becoming due under this Section 9.1 on and after the date of such prepayment
shall be reduced in the same proportion as the aggregate unpaid principal
amount of the Notes is reduced as a result of such prepayment.
9.2. OPTIONAL PREPAYMENTS.
The Companies may, at their option, upon notice as provided below,
prepay at any time all, or from time to time any part of, the Notes, in an
amount not less than $500,000.00 in the case of an optional partial prepayment,
at 100% of the principal amount so prepaid without payment of any premium or
prepayment penalty of any kind, provided that no such optional partial
prepayment will be allowed that would reduce the aggregate outstanding
principal balance of the Notes to less than $500,000.00. The Companies will
give each holder of Notes written notice of each optional prepayment under this
Section 9.2 not less than 10 days and not more than 60 days prior to the date
fixed for such prepayment. Each such notice shall specify such date, the
aggregate principal amount of the Notes to be prepaid on such date, the
principal amount of each Note held by such holder to be prepaid (determined in
accordance with Section 9.3), and the interest to be paid on the prepayment
date with respect to such principal amount being prepaid.
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9.3. ALLOCATION OF PARTIAL PREPAYMENTS.
In the case of each partial prepayment of the Notes under Subsection
9.2, the principal amount of the Notes to be prepaid shall be allocated among
all of the Notes at the time outstanding (other than any Notes owned directly
or indirectly by the Companies or any of their Subsidiaries or Affiliates) in
proportion, as nearly as practicable, to the respective unpaid principal
amounts thereof not theretofore called for prepayment.
9.4. MATURITY; SURRENDER, ETC.
In the case of each prepayment of Notes pursuant to this Section 9,
the principal amount to be prepaid shall mature and become due and payable on
the date fixed for such prepayment, together with interest on such principal
amount accrued to such date. From and after such date, unless the Companies
shall fail to pay such principal amount when so due and payable, together with
the interest, as aforesaid, interest on such principal amount shall cease to
accrue. Any Note paid or prepaid in full shall be surrendered to the Companies
and cancelled and shall not be reissued, and no Note shall be issued in lieu of
any prepaid principal amount of any Note.
9.5. PURCHASE OF NOTES.
Except as provided below, the Companies will not and will not permit
any Subsidiary or Affiliate to purchase, redeem, prepay or otherwise acquire,
directly or indirectly, any of the outstanding Notes except upon the payment or
prepayment of the Notes in accordance with the terms of this Section 9.
Notwithstanding the foregoing, the Companies may, with the consent of the
Required Holders, redeem or repurchase, without penalty or premium and without
the necessity of any consent by any Holder (other than the consent of the
Required Holders as provided above), any Note by paying to the Holder of such
Note the then outstanding principal balance of such Note plus all accrued and
unpaid interest so long as the aggregate principal amount of the Notes redeemed
or repurchased does not exceed $200,000.00. The Companies will promptly cancel
all Notes acquired by them or any Affiliate pursuant to any payment,
prepayment, redemption or purchase of Notes pursuant to any provision of this
Agreement and no Notes may be issued in substitution or exchange for any such
Notes.
10. AFFIRMATIVE COVENANTS.
The Companies covenant that so long as any of the Notes are
outstanding:
10.1. COMPLIANCE WITH LAW.
The Companies will and will cause each of their Subsidiaries to comply
with all laws, ordinances or governmental rules or regulations to which each of
them is subject, including, without limitation, Environmental Laws, and will
obtain and maintain in effect
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all licenses, certificates, permits, franchises and other governmental
authorizations necessary to the ownership of their respective properties or to
the conduct of their respective businesses, in each case to the extent
necessary to ensure that non-compliance with such laws, ordinances or
governmental rules or regulations or failures to obtain or maintain in effect
such licenses, certificates, permits, franchises and other governmental
authorizations could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
10.2. INSURANCE.
The Companies will and will cause each of their Subsidiaries to
maintain, with financially sound and reputable insurers, insurance with respect
to their respective properties and businesses against such casualties and
contingencies, of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance, if adequate reserves are
maintained with respect thereto) as is customary in the case of entities of
established reputations engaged in the same or a similar business and similarly
situated.
10.3. MAINTENANCE OF PROPERTIES.
The Companies will and will cause each of their Subsidiaries to
maintain and keep, or cause to be maintained and kept, their respective
properties in good repair, working order and condition (other than ordinary
wear and tear), so that the business carried on in connection therewith may be
properly conducted at all times, provided that this Section shall not prevent
the Companies or any Subsidiary from discontinuing the operation and the
maintenance of any of their properties if such discontinuance is desirable in
the conduct of their business and the Companies have concluded that such
discontinuance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
10.4. PAYMENT OF TAXES AND CLAIMS.
The Companies will and will cause each of their Subsidiaries to file
all tax returns required to be filed in any jurisdiction and to pay and
discharge all taxes shown to be due and payable on such returns and all other
taxes, assessments, governmental charges, or levies imposed on them or any of
their properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Companies or any Subsidiary,
provided that neither the Companies nor any Subsidiary need pay any such tax or
assessment or claims if (i) the amount, applicability or validity thereof is
contested by the Companies or such Subsidiary on a timely basis in good faith
and in appropriate proceedings, and the Companies or a Subsidiary has
established adequate reserves therefor in accordance with GAAP on the books of
one of the Companies or such Subsidiary or (ii) the nonpayment of all such
taxes and
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assessments in the aggregate could not reasonably be expected to have a
Material Adverse Effect.
10.5. CORPORATE EXISTENCE, ETC.
The Companies will at all times preserve and keep in full force and
effect their corporate existence. Subject to Section 11.2, the Companies will
at all times preserve and keep in full force and effect the corporate existence
of each of their Subsidiaries (unless merged into the Companies or a
Subsidiary) and all rights and franchises of the Companies and their
Subsidiaries unless, in the good faith judgment of the Companies, the
termination of or failure to preserve and keep in full force and effect such
corporate existence, right or franchise would not, individually or in the
aggregate, have a Material Adverse Effect.
10.6. FINANCIAL REPORTING.
The Companies will furnish to the Holders, for so long as the Notes
remain outstanding, (i) audited financial statements annually within one
hundred twenty (120) days following the end of their fiscal year, and (ii)
unaudited internally prepared financial statements quarterly within ninety (90)
days after the end of each fiscal quarter. Each financial statement shall
consist of a combined balance sheet at the end of the reporting period, a
combined statement of operations from the beginning of the fiscal year to the
end of the reporting period, and a combined statement of cash flows, together
with the notes thereto, all of which shall be prepared in accordance with GAAP.
The Companies may furnish to the Holders, in full satisfaction of their
reporting obligations pursuant to this paragraph 10.6, copies of RGI's Form
10-K or 10-Q for the referenced periods, or any successor or similar periodic
report, as filed with Securities and Exchange Commission.
10.7 COMPLIANCE CERTIFICATES.
The Companies shall deliver to the Holders annually within one hundred
twenty (120) days following the end of their fiscal year a compliance
certificate in the form attached hereto as Exhibit 10.7 executed by an officer
of the Companies certifying that the ratio of the Recourse Indebtedness to the
Qualified Reserves Value does not exceed 75%.
10.8 NOTICE OF DEFAULTS AND MATERIAL ADVERSE EFFECT.
The Companies shall promptly give notice to the Holders of any Event
of Default known to the Companies and of any default known to the Companies
with respect to the Senior Indebtedness that would permit the holder of the
Senior Indebtedness to cause the Senior Indebtedness to become due and payable
before its stated maturity or before its regularly scheduled dates of payment,
and notice of any event or circumstance that has a Material Adverse Effect
other than changes in the market prices of hydrocarbons.
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10.9. FURTHER ASSURANCES.
The Companies will promptly cure or cause to be cured any defects in
the creation and issuance of the Notes or in the execution and delivery of this
Agreement and all other documents incident to this Agreement. The Companies at
their expense will promptly execute and deliver to any Holder upon its request
all such further documents, agreements and instruments to comply with or
accomplish the covenants and agreements of the Companies in this Agreement and
in the Notes.
11. NEGATIVE COVENANTS.
The Companies covenant that so long as any of the Notes are
outstanding, without the prior written consent of the Required Holders:
11.1. TRANSACTIONS WITH AFFILIATES.
The Companies will not and will not permit any Subsidiary to enter
into directly or indirectly any transaction or Material group of related
transactions (including without limitation the purchase, lease, sale or
exchange of properties of any kind or the rendering of any service) with any
Affiliate (other than the Companies or another Subsidiary), except in the
ordinary course and upon fair and reasonable terms no less favorable to the
Companies or such Subsidiary than would be obtainable in a comparable
arm's-length transaction with a Person not an Affiliate.
11.2. MERGER, CONSOLIDATION, ETC.
The Companies, and each of them, shall not, and shall not permit or
cause any Subsidiary to, consolidate with or merge with any other corporation
or convey, transfer or lease substantially all of its assets in a single
transaction or series of transactions to any Person without the consent of the
Required Holders unless:
(a) the successor formed by such consolidation or the
survivor of such merger or the Person that acquires by conveyance,
transfer or lease substantially all of the assets of one of the
Companies or a Subsidiary as an entirety, as the case may be, shall be
a solvent corporation organized and existing under the laws of the
United States or any State thereof (including the District of
Columbia), and, if neither of the Companies is such corporation,(i)
such corporation shall have executed and delivered to each holder of
any Notes its assumption of the due and punctual performance and
observance of each covenant and condition of this Agreement and the
Notes and (ii) shall have caused to be delivered to each holder of any
Notes an opinion of nationally recognized independent counsel, or
other independent counsel reasonably satisfactory to the Required
Holders, to the effect that all agreements or instruments effecting
such assumption are enforceable in accordance with their terms and
comply with the terms hereof; and
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(b) immediately after giving effect to such transaction,
no Default or Event of Default shall have occurred and be continuing.
No such conveyance, transfer or lease of substantially all of the assets of
either of the Companies or any Subsidiary shall have the effect of releasing
either of the Companies or any successor corporation that shall theretofore
have become such in the manner prescribed in this Section 11.2 from its
liability under this Agreement or the Notes.
11.3. LIENS.
The Companies will not create, incur, or suffer to exist any Lien on
any of their properties, except the following which shall be "Permitted Liens":
(i) Liens for taxes, assessments, or governmental charges or levies on their
properties, provided the same shall not at any time be delinquent or thereafter
can be paid without penalty or are being contested in good faith and by
appropriate proceedings and with respect to which reserves in conformity with
GAAP have been adequately provided for on the books of the Companies; (ii)
Liens imposed by law, such as carriers', warehouseman's and mechanic's liens
and other similar Liens arising in the ordinary course of their business which
secure payment of obligations not more than 60 days past due; (iii) Liens
arising out of pledges or deposits under ▇▇▇▇▇▇▇'▇ compensation laws,
unemployment insurance, old age pensions, or other Social Security or
retirement benefits, or similar legislation; (iv) Liens resulting from utility
easements, building restrictions, and such other encumbrances or charges
against real property as of are of a nature generally existing with respect to
properties of a similar character and which do not in any material way affect
the marketability of the same or interfere with the use thereof in the ordinary
course of business of the Companies; (v) Liens resulting from a lessor's
interest under financing leases; (vi) Liens existing on the date hereof and
disclosed on Exhibit "11.3"; (vii) first priority Liens given to secure any
Senior Indebtedness; (viii) Liens incurred by the Companies in connection with
or relating to the acquisition of personal property, provided (a) at the time
of such acquisition of property, no default exists; and (b) each such Lien
shall attach only to the personal property acquired in the transaction by which
such Lien was created or assumed.
11.4. CHANGE OF MANAGEMENT OR BUSINESS.
The Companies will not substantially change the present executive or
management personnel of the Companies, or change the general character of
business conducted by the Companies at the date hereof, or engage in any type
of business not reasonably related to their business as presently and normally
conducted.
11.5. DIVIDENDS, DISTRIBUTIONS AND REDEMPTIONS.
The Companies shall not:
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(a) Declare or pay any dividends, either in cash or
property, on any shares of their capital stock of any class (except
dividends or other distributions payable solely in shares of common
stock of the Companies);
(b) Directly or indirectly, or through any Subsidiary,
purchase, redeem or retire any shares of their capital stock of any
class or any warrants, rights or options to purchase or acquire any
shares of their capital stock; or
(c) Make any other payment or distribution, either
directly or indirectly or through any Subsidiary, in respect of any
class of their capital stock;
provided, however, that the Companies may purchase, redeem or otherwise acquire
(a) any Odd Lot, individually or in an offering for the purpose of redeeming
some or all of the Company's shares of common stock held in Odd Lots and (b)
Warrants, in accordance with the terms thereof.
11.6. RECOURSE INDEBTEDNESS.
The Companies will not allow the ratio of the Recourse Indebtedness to
the Qualified Reserves Value to exceed 75%. The Companies will not permit any
Subsidiary, other than Drilling, to incur, assume or otherwise be liable for
any Recourse Indebtedness.
12. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" shall exist if any of the following conditions
or events shall occur and be continuing:
(a) the Companies default in the payment of any principal
on any Note when the same becomes due and payable, whether at maturity
or at a date fixed for prepayment or by declaration or otherwise, for
more than five (5) Business Days after the same becomes due or
payable; or
(b) the Companies default in the payment of any interest
on any Note for more than five (5) Business Days after the same
becomes due and payable; or
(c) the Companies default in the performance of or
compliance with the obligations contained in Sections 8, 11.2, 11.3,
11.4, 11.5 or 11.6;
(d) the Companies default in the performance of or
compliance with any term contained herein (other than those referred
to in paragraphs (a), (b) and (c) of this Section 12) and such default
is not remedied within thirty (30) days; or
(e) any representation or warranty made in writing by or
on behalf of the Companies or by any officer of either of the
Companies in this Agreement or
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in any writing furnished in connection with the transactions
contemplated hereby proves to have been false or incorrect in any
material respect on the date as of which made; or
(f) (i) the Companies or any Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of any
principal of or premium or interest on any Senior Indebtedness that is
outstanding in an aggregate principal amount of at least $200,000 or
on the Bank Indebtedness beyond any period of grace provided with
respect thereto, or(ii) the Companies or any Subsidiary is in default
in the performance of or compliance with any term of any evidence of
any Indebtedness in an aggregate outstanding principal amount of at
least $200,000 or of any mortgage, indenture or other agreement
relating thereto or any other condition exists, and as a consequence
of such default or condition such Indebtedness has become, or has been
declared (or one or more Persons are entitled to declare such
Indebtedness to be), due and payable before its stated maturity or
before its regularly scheduled dates of payment, or
(g) either of the Companies or any Subsidiary (i) is
generally not paying, or admits in writing its inability to pay, its
debts as they become due,(ii) files, or consents by answer or
otherwise to the filing against it of, a petition for relief or
reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy, insolvency,
reorganization, moratorium or other similar law of any jurisdiction,
(iii) makes an assignment for the benefit of its creditors, (iv)
consents to the appointment of a custodian, receiver, trustee or other
officer with similar powers with respect to it or with respect to any
substantial part of its property, (v) is adjudicated as insolvent or
to be liquidated, or (vi) takes corporate action for the purpose of
any of the foregoing; or
(h) a court or governmental authority of competent
jurisdiction enters an order appointing, without consent by either of
the Companies or any of their Subsidiaries, a custodian, receiver,
trustee or other officer with similar powers with respect to either of
the Companies or a Subsidiary or with respect to any substantial part
of its property, or constituting an order for relief or approving a
petition for relief or reorganization or any other petition in
bankruptcy or for liquidation or to take advantage of any bankruptcy
or insolvency law of any jurisdiction, or ordering the dissolution,
winding-up or liquidation of either of the Companies or any of their
Subsidiaries, or any such petition shall be filed against either of
the Companies or any of their Subsidiaries and such petition shall not
be dismissed within 60 days; or
(i) a final judgment or judgments for the payment of
money aggregating in excess of $200,000 are rendered against either of
the Companies or their Subsidiaries and which judgments are not,
within 60 days after entry thereof, bonded, discharged or stayed
pending appeal, or are not discharged within 60 days after the
expiration of such stay; or
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(j) if (i) any Plan shall fail to satisfy the minimum
funding standards of ERISA or the Code for any plan year or part
thereof or a waiver of such standards or extension of any amortization
period is sought or granted under section 412 of the Code, (ii) a
notice of intent to terminate any Plan shall have been or is
reasonably expected to be filed with the PBGC or the PBGC shall have
instituted proceedings under ERISA section 4042 to terminate or
appoint a trustee to administer any Plan or the PBGC shall have
notified the Companies or any ERISA Affiliate that a Plan may become a
subject of any such proceedings, (iii) the aggregate "amount of
unfunded benefit liabilities" (within the meaning of section
4001(a)(18) of ERISA) under all Plans, determined in accordance with
Title IV of ERISA, shall exceed $200,000; (iv) either of the Companies
or any ERISA Affiliate shall have incurred or is reasonably expected
to incur any liability pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to employee
benefit plans,(v) either of the Companies or any ERISA Affiliate
withdraws from any Multi-employer Plan, or(vi) either of the Companies
or any Subsidiary establishes or amends any employee welfare benefit
plan that provides post-employment welfare benefits in a manner that
would increase the liability of either of the Companies or any
Subsidiary thereunder; and any such event or events described in
clauses(i) through (vi) above, either individually or together with
any other such event or events, could reasonably be expected to have a
Material Adverse Effect.
As used in Section 11 (j), the terms "EMPLOYEE BENEFIT PLAN" and "EMPLOYEE
WELFARE BENEFIT PLAN" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.
13. REMEDIES ON DEFAULT, ETC.
13.1. ACCELERATION.
(a) If an Event of Default with respect to the Companies described
in paragraph (g) or (h) of Section 12 (other than an Event of Default described
in clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) to
the extent such Event of Default relates to clause (i) of paragraph (g)) has
occurred, all the Notes then outstanding shall automatically become immediately
due and payable.
(b) If any Event of Default described in paragraph (a) or (b) of
Section 12 has occurred and is continuing, any Holder or Holders of Notes at
the time outstanding affected by such Event of Default may at any time, at its
or their option, by notice or notices to the Companies, declare all the Notes
held by it or them to be immediately due and payable.
(c) If any other Event of Default has occurred and is continuing,
the Required Holders may at any time at their option, by notice or notices to
the Companies, declare all the Notes then outstanding to be immediately due and
payable.
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Upon any Notes becoming due and payable under this Section 13.1,
whether automatically or by declaration, such Notes will forthwith mature and
the entire unpaid principal amount of such Notes, plus all accrued and unpaid
interest thereon shall all be immediately due and payable, in each and every
case without presentment, demand, protest or further notice, all of which are
hereby waived.
13.2. OTHER REMEDIES.
If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 13.1, the Holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such Holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for
an injunction against a violation of any of the terms hereof or thereof, or in
aid of the exercise of any power granted hereby or thereby or by law or
otherwise.
13.3. RESCISSION.
At any time after any Notes have been declared due and payable
pursuant to clause (b) or (c) of Section 13.1, the Required Holders, by written
notice to the Companies, may rescind and annul any such declaration and its
consequences if (a) the Companies have paid all overdue interest on the Notes,
all principal on any Notes that is due and payable and is unpaid other than by
reason of such declaration, and all interest on such overdue principal and (to
the extent permitted by applicable law) any overdue interest in respect of the
Notes, at the Default Rate, (b) all Events of Default and Defaults, other than
non-payment of amounts that have become due solely by reason of such
declaration, have been cured or have been waived pursuant to Section 18, and
(c) no judgment or decree has been entered for the payment of any monies due
pursuant hereto or to the Notes. No rescission and annulment under this
Section 13.3 will extend to or affect any subsequent Event of Default or
Default or impair any right consequent thereon.
13.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any holder of any
Note in exercising any right, power or remedy shall operate as a waiver thereof
or otherwise prejudice such Holder's rights, powers or remedies. No right,
power or remedy conferred by this Agreement or by any Note upon any Holder
thereof shall be exclusive of any other right, power or remedy referred to
herein or therein or now or hereafter available at law, in equity, by statute
or otherwise. Without limiting the obligations of the Companies under Section
16, the Companies will pay to the holder of each Note on demand such further
amount as shall be sufficient to cover all costs and expenses of such holder
incurred in any enforcement or collection under this Section 13, including,
without limitation, reasonable attorneys' fees, expenses and disbursements.
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14. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
14.1. REGISTRATION OF NOTES.
The Companies shall keep at their principal executive office a
register for the registration and registration of transfers of Notes. The name
and address of each Holder of one or more Notes, each transfer thereof and the
name and address of each transferee of one or more Notes shall be registered in
such register. Prior to due presentment for registration of transfer, the
Person in whose name any Note shall be registered shall be deemed and treated
as the owner and Holder thereof for all purposes hereof, and the Companies
shall not be affected by any notice or knowledge to the contrary.
14.2. TRANSFER AND EXCHANGE OF NOTES.
Upon surrender of any Note at the principal executive office of the
Companies for registration of transfer or exchange (and in the case of a
surrender for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered Holder of such
Note or his attorney duly authorized in writing and accompanied by the address
for notices of each transferee of such Note or part thereof), the Companies
shall execute and deliver, at the Companies' expense (except as provided
below), one or more new Notes (as requested by the holder thereof) in exchange
therefor, in an aggregate principal amount equal to the unpaid principal amount
of the surrendered Note. Each such new Note shall be payable to such Person as
such Holder may request and shall be substantially in the form of Exhibit 1.
Each such new Note shall be dated and bear interest from the date to which
interest shall have been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon. The Companies
may require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be
transferred in denominations of less than $50,000, provided that if necessary
to enable the registration of transfer by a holder of its entire holding of
Notes, one Note may be in a denomination of less than $50,000. Any transferee,
by its acceptance of a Note registered in its name (or the name of its
nominee), shall be deemed to have made the representations set forth in Section
7.
14.3. REPLACEMENT OF NOTES.
Upon receipt by the Companies of evidence reasonably satisfactory to
them of the ownership of and the loss, theft, destruction or mutilation of any
Note, and
(a) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to it, or
(b) in the case of mutilation, upon surrender and
cancellation thereof,
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the Companies at their own expense shall execute and deliver, in lieu
thereof, a new Note, dated and bearing interest from the date to which
interest shall have been paid on such lost, stolen, destroyed or
mutilated Note or dated the date of such lost, stolen, destroyed or
mutilated Note if no interest shall have been paid thereon.
15. PAYMENTS ON NOTES.
15.1. PLACE OF PAYMENT.
Subject to Section 15.2, payments of principal, and interest becoming
due and payable on the Notes shall be made in San Antonio, Texas at the
principal office of the Companies in such jurisdiction. The Companies may at
any time, by notice to each holder of a Note, change the place of payment of
the Notes so long as such place of payment shall be either the principal office
of the Companies in such jurisdiction or the principal office of a bank or
trust company in such jurisdiction.
15.2. HOME OFFICE PAYMENT.
So long as you or your nominee shall be the Holder of any Note, and
notwithstanding anything contained in Section 15.1 or in such Note to the
contrary, the Companies will pay all sums becoming due on such Note for
principal and interest by the method and at the address specified for such
purpose below your name in Schedule A, or by such other method or at such other
address as you shall have from time to time specified to the Companies in
writing for such purpose, without the presentation or surrender of such Note or
the making of any notation thereon, except that upon written request of the
Companies made concurrently with or reasonably promptly after payment or
prepayment in full of any Note, you shall surrender such Note for cancellation,
reasonably promptly after any such request, to the Companies at their principal
executive office or at the place of payment most recently designated by the
Companies pursuant to Section 15.1. Prior to any sale or other disposition of
any Note held by you or your nominee you will, at your election, either endorse
thereon the amount of principal paid thereon and the last date to which
interest has been paid thereon or surrender such Note to the Companies in
exchange for a new Note or Notes pursuant to Section 14.2.
16. EXPENSES, ETC.
16.1. TRANSACTION EXPENSES.
The Companies will pay all costs and expenses (including reasonable
attorneys' fees of a special counsel and, if reasonably required, local or
other counsel) incurred by you and each other purchaser or Holder of a Note in
connection with any amendments, waivers or consents under or in respect of this
Agreement or the Notes (whether or not such amendment, waiver or consent
becomes effective), including, without limitation: (a) the costs and expenses
incurred in enforcing or defending (or determining whether or how to enforce or
defend) any rights under this Agreement or
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the Notes or in responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement or the Notes, or
by reason of being a Holder of any Note, and (b) the costs and expenses,
including financial advisors' fees, incurred in connection with the insolvency
or bankruptcy of either of the Companies or any Subsidiary or in connection
with any work-out or restructuring of the transactions contemplated hereby and
by the Notes. The Companies will pay, and will save you 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 you).
16.2. SURVIVAL.
The obligations of the Companies under this Section 16 will survive
the payment or transfer of any Note, the enforcement, amendment or waiver of
any provision of this Agreement or the Notes, and the termination of this
Agreement.
17. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or
transfer by you 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 you or any
other Holder of a Note. All statements contained in any certificate or other
instrument delivered by or on behalf of the Companies pursuant to this
Agreement shall be deemed representations and warranties of the Companies under
this Agreement. Subject to the preceding sentence, this Agreement and the
Notes embody the entire agreement and understanding between you and the
Companies and supersede all prior agreements and understandings relating to the
subject matter hereof.
18. AMENDMENT AND WAIVER.
18.1. REQUIREMENTS.
This Agreement and the Notes may be amended, and the observance of any
term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Companies and
the Required Holders, except that (a) no amendment or waiver of any of the
provisions of Section 1, 2, 3, 5, 6, 7 or 22 hereof, or any defined term (as it
is used therein), will be effective as to you unless consented to by you in
writing, and (b) no such amendment or waiver may, without the written consent
of the Holder of each Note at the time outstanding affected thereby, (i)
subject to the provisions of Section 13 relating to acceleration or rescission,
change the amount or time of any prepayment or payment of principal of, or
reduce the rate or change the time of payment or method of computation of
interest on the Notes, (ii) change the percentage of the principal amount of
the Notes the Holders of which are
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required to consent to any such amendment or waiver, or (iii) amend any of
Sections 9, 12(a), 12 (b), 13, 18 or 21.
18.2. SOLICITATION OF HOLDERS OF NOTES.
(a) Solicitation. The Companies will provide each Holder of the
Notes (irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such Holder to make a reasonably informed and considered decision with
respect to any proposed amendment, waiver or consent in respect of any of the
provisions hereof or of the Notes. The Companies will deliver executed or true
and correct copies of each amendment, waiver or consent effected pursuant to
the provisions of this Section 18 to each Holder of outstanding Notes promptly
following the date on which it is executed and delivered by, or receives the
consent or approval of, the requisite holders of Notes.
(b) Payment. The Companies will not directly or indirectly pay or
cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, or grant any security, to any Holder of
Notes as consideration for or as an inducement to the entering into by any
Holder of Notes or any waiver or amendment of any of the terms and provisions
hereof unless such remuneration is concurrently paid, or security is
concurrently granted, on the same terms, ratably to each Holder of Notes then
outstanding even if such Holder did not consent to such waiver or amendment.
18.3. BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this Section 18
applies equally to all Holders of Notes and is binding upon them and upon each
future Holder of any Note and upon the Companies 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, agreement, Default
or Event of Default not expressly amended or waived or impair any right
consequent thereon. No course of dealing between the Companies 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. As used
herein, the term "this Agreement" and references thereto shall mean this
Agreement as it may from time to time be amended or supplemented.
18.4. NOTES HELD BY COMPANIES, ETC.
Solely for the purpose of determining whether the Holders of the
requisite percentage of the aggregate principal amount of Notes then
outstanding approved or consented to any amendment, waiver or consent to be
given under this Agreement or the Notes, or have directed the taking of any
action provided herein or in the Notes to be taken upon the direction of the
Holders of a specified percentage of the aggregate principal amount of Notes
then outstanding, Notes directly or indirectly owned by the Companies or any of
their Affiliates shall be deemed not to be outstanding.
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19. 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 you or your nominee, to you or it at the
address specified for such communications in Schedule A, or at such
other address as you or it shall have specified to the Companies in
writing,
(ii) if to any other Holder of any Note, to such Holder at
such address as such other Holder shall have specified to the
Companies in writing, or
(iii) if to the Companies, to the Companies at their
address set forth at the beginning hereof to the attention of Guy ▇▇▇
▇▇▇▇▇▇▇▇, their President, or at such other address as the Companies
shall have specified to the Holder of each Note in writing.
Notices under this Section 19 will be deemed given only when actually received.
20. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation,(a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or
other similar process and you may destroy any original document so reproduced.
The Companies agree and stipulate that, to the extent permitted by applicable
law, any such reproduction shall be admissible in evidence as the original
itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made by you
in the regular course of business) and any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
This Section 20 shall not prohibit the Companies or any other Holder of Notes
from contesting any such reproduction to the same extent that it could contest
the original, or from introducing evidence to demonstrate the inaccuracy of any
such reproduction.
21. CONFIDENTIAL INFORMATION.
For the purposes of this Section 21, "Confidential Information" means
information delivered to you by or on behalf of the Companies or any Subsidiary
in connection with the transactions contemplated by or otherwise pursuant to
this
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Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when received by you as being confidential
information of the Companies or such Subsidiary, provided that such term does
not include information that (a) was publicly known or otherwise known to you
prior to the time of such disclosure, (b) subsequently becomes publicly known
through no act or omission by you or any person acting on your behalf, (c)
otherwise becomes known to you other than through disclosure by the Companies
or any Subsidiary or (d) constitutes financial statements delivered to you
under Section 8 that are otherwise publicly available. You agree to maintain
the confidentiality of such Confidential Information; provided that you may
deliver or disclose Confidential Information to (i) your directors, officers,
employees, agents, attorneys and affiliates (to the extent such disclosure
reasonably relates to the administration of the investment represented by your
Notes), (ii) your financial advisors and other professional advisors who agree
to hold confidential the Confidential Information substantially in accordance
with the terms of this Section 21, (iii) any other holder of any Note, (iv) any
Institutional Investor to which you sell or offer to sell such Note or any part
thereof or any participation therein (if such Person has agreed in writing
prior to its receipt of such Confidential Information to be bound by the
provisions of this Section 21), (v) any Person from which you offer to purchase
any security of the Companies (if such Person has agreed in writing prior to
its receipt of such Confidential Information to be bound by the provisions of
this Section 21), (vi) any federal or state regulatory authority having
jurisdiction over you, or (vii) any other Person to which such delivery or
disclosure may be necessary or appropriate (w) to effect compliance with any
law, rule, regulation or order applicable to you, (x) in response to any
subpoena or other legal process, (y) in connection with any litigation to which
you are a party or (z) if an Event of Default has occurred and is continuing,
to the extent you may reasonably determine such delivery and disclosure to be
necessary or appropriate in the enforcement or for the protection of the rights
and remedies under your Notes and this Agreement. You acknowledge that such
Confidential Information may include material information that has not been
publicly disclosed by the Companies, that you are aware of the proscriptions of
the Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder with regard to the purchase or sale of securities while in
possession of material nonpublic information, and that you will not purchase or
sell securities of the Companies while in possession of material, nonpublic
information, other than to Persons possessing such information. Each Holder of
a Note, by its acceptance of a Note, will be deemed to have agreed to be bound
by and to be entitled to the benefits of this Section 21 as though it were a
party to this Agreement. On reasonable request by the Companies in connection
with the delivery to any Holder of a Note of any Confidential Information
required to be delivered to such Holder under this Agreement or requested by
such Holder (other than a Holder that is a party to this Agreement or its
nominee), such Holder will enter into an agreement with the Companies embodying
the provisions of this Section 21.
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22. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates as
the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Companies, which notice shall be signed by both you and
such Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 7. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than
in this Section 22), such word shall be deemed to refer to such Affiliate in
lieu of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Companies of notice of such
transfer, wherever the word "you" is used in this Agreement (other than in this
Section 22), such word shall no longer be deemed to refer to such Affiliate,
but shall refer to you, and you shall have all the rights of an original holder
of the Notes under this Agreement.
23. MISCELLANEOUS.
23.1. 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.
23.2. PAYMENTS DUE ON NON-BUSINESS DAYS.
Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of or interest on any Note that is
due on a date other than a Business Day shall be made on the next succeeding
Business Day without including the additional days elapsed in the computation
of the interest payable on such next succeeding Business Day.
23.3. 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.
23.4. 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
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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.
23.5. 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.
23.6. 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 Texas
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.
* * * * *
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If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to
the Companies, whereupon the foregoing shall become a binding agreement between
you and the Companies.
Very truly yours,
RIO GRANDE, INC.
By
---------------------------------
Guy ▇▇▇ ▇▇▇▇▇▇▇▇, President
RIO GRANDE DRILLING COMPANY
By
---------------------------------
Guy ▇▇▇ ▇▇▇▇▇▇▇▇, President
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