Exhibit 2
PREFERRED STOCK PURCHASE AGREEMENT
THIS PREFERRED STOCK PURCHASE AGREEMENT (as amended from time to
time, the "Agreement"), dated as of January 16, 1997, is by and between
Xxxx Exploration Company, a Kansas corporation ("Purchaser") and Rio
Grande, Inc., a Delaware corporation ("Rio Grande").
RECITALS
A. Rio Grande and its Subsidiaries are in the business of
acquiring, producing, selling and developing oil and gas properties and
businesses relating to the foregoing, including, without limitation,
exploring for, producing, transporting, marketing and selling oil, natural
gas and related hydrocarbons.
B. Purchaser desires to purchase from Rio Grande, and Rio Grande
desires to issue and sell to Purchaser, 500,000 shares of Rio Grande's
Series A Preferred Stock, par value $.01 per share, and 500,000 shares of
Rio Grande's Series B Preferred Stock, par value $.01 per share, for an
aggregate purchase price of $10,000,000, and on the other terms and subject
to the conditions hereinafter set forth.
AGREEMENTS
In consideration of the recitals and the mutual promises, covenants
and agreements herein contained and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto intending to be legally bound hereby agree as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.1 Definitions. Certain terms used herein shall have
the indicated meanings as set forth on Schedule 1.1.
SECTION 1.2 Accounting Terms. All accounting terms,
determinations and computations not specifically defined herein shall be
construed and made in accordance with GAAP as applied in the preparation of
the Rio Grande Audited Financial Statements, including all notes thereto
(but only to the extent such application is consistent with GAAP).
ARTICLE TWO
PURCHASE AND SALE
SECTION 2.1 Authorization of Preferred Stock. Prior to Closing,
Rio Grande shall file the Certificate of Designation with the Secretary of
State for the State of Delaware.
SECTION 2.2 Sale of Preferred Stock. Subject to the satisfaction
of the terms and conditions herein set forth and in reliance upon the
respective representations and warranties of the parties set forth herein,
at the Closing Rio Grande agrees to sell to Purchaser, free and clear of
any liens, claims, charges or encumbrances whatsoever, and Purchaser agrees
to purchase from Rio Grande, 500,000 shares of Series A Preferred Stock,
par value $.01, and 500,000 shares of Series B Preferred Stock, par value
$.01, (collectively, the "Purchased Shares"), for an aggregate purchase
price of $10,000,000 (the "Purchase Price"). Rio Grande and Purchaser
agree that such purchase price is equal to $10.00 per share of Series A
Preferred Stock and $10.00 per share of Series B Preferred Stock. At the
Closing, Rio Grande agrees to grant to Purchaser an option to purchase an
additional 200,000 shares of Series A Preferred Stock (the "Option Shares")
in accordance with and subject to the terms and conditions set forth in
Section 6.1.
SECTION 2.3 Closing Date. The Closing shall take place at 10:00
a.m., San Antonio, Texas time, on January 16, 1997 or such other time and
date mutually agreed by Rio Grande and Purchaser (the "Closing Date") at
the offices of Rio Grande in San Antonio, or at such other place as may be
mutually agreed upon by Rio Grande and Purchaser.
SECTION 2.4 Activity at Closing. At Closing, the following shall
occur:
(a) Actions to be taken by Rio Grande. At Closing, Rio Grande
shall:
(i) Stock Certificates. Deliver to Purchaser (a) ten
certificates for Series A Preferred Stock, each representing 50,000
shares of such Series A Preferred Stock and in the aggregate all such
certificates representing 500,000 shares of Series A Preferred Stock
and (b) ten certificates for Series B Preferred Stock, each
representing 50,000 shares of such Series B Preferred Stock and in
the aggregate all such certificates representing 500,000 shares of
Series B Preferred Stock, all of such certificates duly executed and
registered in the name of Purchaser (or in the name of such nominee
as Purchaser shall designate).
(ii) Registration Rights Agreement. Execute and deliver to
Purchaser the Registration Rights Agreement in form and substance
satisfactory to Purchaser and Rio Grande.
(iii) Swap Agreement. Deliver to Purchaser a true and
correct copy of a fully executed Master Commodity Swap Agreement
(the "Swap Agreement") between Rio Grande and Xxxx Oil Company, a
division of Xxxx Industries, Inc., pertaining to crude oil in form
and substance satisfactory to Purchaser, Rio Grande and the Senior
Lenders.
(iv) Officer's Certificate. Deliver to Purchaser a
certificate, executed by the President and Chief Financial Officer of
Rio Grande, to the effect that as of the Closing Date (1) no default
exists under the Senior Loan Agreements, (2) the representations and
warranties set forth in Section 3.1 are accurate in all material
respects as of the Closing Date as if made on the Closing Date, and
(3) since the date hereof there has been no Material Adverse Change.
(v) Legal Opinion. Deliver to Purchaser the opinion of Xxx &
Xxxxx Incorporated, counsel to Rio Grande, dated the Closing Date,
substantially in the form of Exhibit B.
(vi) Secretary's Certificate. Deliver to Purchaser copies of
each of the following, in each case certified by the Secretary of Rio
Grande to be in full force and effect on the Closing Date:
(1) the Charter as of the Closing certified by the
Secretary of State for the State of Delaware as of a date not
more than seven days prior to the Closing;
(2) the By-laws; and
(3) resolutions of the Board of Directors of Rio Grande,
the form and substance of which are satisfactory to Purchaser,
adopting and authorizing the execution and filing of the
Certificate of Designation, and authorizing the execution,
delivery and performance of this Agreement and the Registration
Rights Agreement and the transactions contemplated hereby and
thereby, including the issuance and sale of the Purchased
Shares.
(vii) Good Standing Certificates. Deliver to Purchaser
copies of a certificate of existence and, where a jurisdiction issues
good standing certificates, a good standing certificate with respect
to Rio Grande and for each of the Subsidiaries of Rio Grande in their
respective jurisdictions of incorporation or formation from the
respective public authorities of their states of incorporation or
formation as of a date not more than fifteen days prior to the
Closing.
(viii) Expenses. Pay to Purchaser, by wire transfer of
immediately available funds to an account designated in written
instructions theretofore received by Rio Grande from Purchaser, an
amount equal to the lesser of $50,000 or the amount of all direct
out-of-pocket expenses reasonably incurred by Purchaser in connection
with the negotiation, review and consummation of this Agreement and
the transactions contemplated hereby. In lieu of such wire transfer,
such amount may be credited against the Purchase Price at Closing,
thereby reducing the amount to be wire transferred by Purchaser
pursuant to Section 2.4(b)(i).
(b) Actions to be taken by Purchaser. At Closing, Purchaser shall:
(i) Payment. Pay the Purchase Price (minus any adjustments
thereto pursuant to Section 2.4(b)(ix) above) by wire transfer of
immediately available funds to an account designated by Rio Grande in
written instructions theretofore received by Purchaser.
(ii) Registration Rights Agreement. Execute and deliver to Rio
Grande the Registration Rights Agreement.
(iii) Stockholders Agreement. Execute and deliver to each
of Xxxxxx X. Xxxxxxxx and Guy Xxx Xxxxxxxx a Stockholders' Agreement
in form and substance satisfactory to Purchaser.
(iv) Officer's Certificate. Deliver to Rio Grande a
certificate, executed by the Vice President of Purchaser to the
effect that as of the Closing Date the representations and warranties
set forth in Section III.2 hereof are true and accurate in all
material respects as of the Closing Date.
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of Rio Grande. Rio
Grande represents and warrants to Purchaser that as of the date hereof and
as of the Closing Date:
SECTION 3.1.1 Corporate Organization and Standing; Power and
Authority. Rio Grande and each of its Subsidiaries is a corporation or
limited partnership (as the case may be) duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation or formation, and is duly qualified to do business and in
good standing as a foreign corporation or limited partnership in all
jurisdictions in which it is required to be qualified in order to do
business, except where the failure to be so qualified would not have a
Material Adverse Effect on Rio Grande and its Subsidiaries on a
consolidated basis. Accurate and complete copies of the Charter and
By-laws and of the organizational documents of each of Rio Grande's
Subsidiaries have heretofore been delivered to Purchaser. Rio Grande and
each of its Subsidiaries has full power and authority to own or lease its
properties and to carry on its business as it is presently being
conducted. Rio Grande has full corporate power and authority to enter into
this Agreement and the Registration Rights Agreement and to perform its
obligations hereunder and thereunder.
SECTION 3.1.2 Authorized Capital Stock of Rio Grande.
(a) The authorized capital stock of Rio Grande will, as of the
Closing Date, consist of 12,000,000 shares of common stock, $.01 par value,
(the "Common Stock") and 3,000,000 shares of preferred stock, par value
$.01 per share, consisting of the following:
(i) 700,000 shares of Series A Preferred Stock, none of which
shall be issued or outstanding except for the 500,000 shares issued
to Purchaser at Closing;
(ii) 500,000 shares of Series B Preferred Stock, none of which
shall be issued or outstanding except for the 500,000 shares issued
to Purchaser at Closing;
(iii) 500,000 shares of Series C Preferred Stock, none of
which shall be issued or outstanding; and
(iv) 1,300,000 shares of other preferred stock, the rights and
preferences of which having not been established by Rio Grande's
Board of Directors and none of which shares shall be issued or
outstanding.
Schedule 3.1.2(a) sets forth as of December 31, 1996 the following
information: (i) the number of issued and outstanding shares of Common
Stock, (ii) the number of shares of Common Stock issuable upon the exercise
of options, warrants or other rights of purchase which were exercisable as
of December 31, 1996, including the exercise price for each such share;
(iii) the number of shares of Common Stock issuable upon the exercise of
options, warrants or other rights of purchase which were not exercisable as
of December 31, 1996, including the exercise price for each such share and
(iv) the number of shares of Common Stock issuable pursuant to any other
contract, option, warrant or commitment of any character granted or issued
by Rio Grande. The shares of Common Stock issuable upon the exercise of
all options, warrants or other rights of purchase have been duly reserved
for issuance upon such exercise. Since December 31, 1996, Rio Grande has
not issued or agreed to issue any shares of Common Stock or any options,
warrants or other rights to purchase Common Stock.
(b) On the Closing Date, after giving effect to the consummation of
the transactions contemplated by this Agreement, to the knowledge of Rio
Grande no person or group that would be required to report its ownership of
Rio Grande's equity securities on a Schedule 13D or an amendment thereto
will be the legal or beneficial owner (within the meaning of Rule 13d-3
promulgated by the Commission pursuant to the Exchange Act) of 5% or more
of the issued and outstanding Common Stock other than as set forth on
Schedule 3.1.2(b).
(c) No Person has any preemptive right to purchase or subscribe for
any shares of Common Stock, preferred stock or any other securities of Rio
Grande. Except for the Series B Preferred Stock (which is convertible into
shares of Common Stock) and except as disclosed on Schedule 3.1.2(a), there
are no outstanding securities of Rio Grande or any of its Subsidiaries
which are convertible into or exchangeable for any shares of Rio Grande
capital stock; there are no existing contracts, options, warrants, calls or
similar commitments of any character granted or issued by Rio Grande or any
of its Subsidiaries calling for or relating to the issuance or transfer of
shares of capital stock or any other securities of Rio Grande or any of its
Subsidiaries; and there are no stock appreciation rights, contingent
interest certificates or coupons, phantom stock rights or similar interests
granted or issued by Rio Grande.
(d) Except as set forth on Schedule 3.1.2(d), the Company has no
obligation to register any of its Common Stock or other securities under
the Securities Act.
(e) Cumulative voting in the election of directors of Rio Grande is
not permitted. Except as set forth on Schedule 3.1.2(e), to Rio Grande's
knowledge there exist (and upon consummation of the transactions
contemplated by this Agreement, there will exist) (a) no voting trusts,
voting agreements or other arrangements by or among any of its stockholders
regarding the voting of Rio Grande Common Stock and (b) no agreements
between any of the stockholders or one or more groups of stockholders of
Rio Grande who hold individually or beneficially 5% or more of Rio Grande's
equity securities and Rio Grande related to Rio Grande or its capital
stock.
SECTION 3.1.3 Authorization and Enforceability. All corporate
action on the part of Rio Grande and its directors and stockholders
necessary for the authorization, execution, delivery and performance by Rio
Grande of this Agreement, the Registration Rights Agreement and the
Acquisition Agreement (and related agreements) to which Rio Grande is a
party, as the case may be; the consummation of the transactions
contemplated hereby and thereby (including the Acquisition); and the
authorization of the Preferred Stock and issuance and delivery of the
Purchased Shares have been taken. Each of this Agreement and the
Acquisition Agreement is a legal, valid and binding obligation of Rio
Grande, enforceable against Rio Grande in accordance with its terms, except
as limited by bankruptcy, insolvency or other laws affecting creditors'
rights generally or by general equitable principles. Upon execution, the
Registration Rights Agreement will be a legal, valid and binding obligation
of Rio Grande, enforceable against Rio Grande in accordance with its terms,
except as limited by bankruptcy, insolvency or other laws affecting
creditors' rights generally or by general equitable principles. The
Purchased Shares, when issued, sold and delivered in accordance with the
terms of this Agreement, and the Series C Preferred Stock when issued and
delivered pursuant to the Certificate of Designation, and the Option Shares
when issued, sold and delivered in accordance with the terms of this
Agreement, will be duly and validly issued, fully paid, non-assessable and
free and clear of all liens, charges, claims and encumbrances. The shares
of Common Stock issuable upon the conversion of Series B Preferred Stock
have been duly reserved for issuance upon the conversion of Series B
Preferred Stock and, when issued upon the conversion of Series B Preferred
Stock in accordance with the Charter Certificate of Designation, will be
duly and validly issued, fully paid and non-assessable and free and clear
of all liens, charges, claims and encumbrances.
SECTION 3.1.4 Title to and Condition of Assets. Except as set
forth on Schedule 3.1.4, Rio Grande and each of its Subsidiaries has good
and valid title to all properties, assets and rights of every name and
nature now reflected as being owned by it in the books and records from
which it prepares financial statements, free from all defects, liens,
charges and encumbrances whatsoever (other than insubstantial defects in
title customary in the oil and gas industry and other liens which singly
and in the aggregate do not materially detract from the value or impair the
use of the affected properties). The material tangible assets of Rio
Grande and its Subsidiaries, which are reasonably necessary for the
operation of the business of Rio Grande and its Subsidiaries taken as a
whole, are in good working condition, ordinary wear and tear excepted, are
able to serve the function for which they are currently being used, and to
Rio Grande's knowledge there are no conditions or events which would
prevent continued normal operation of said material tangible assets.
SECTION 3.1.5 Subsidiaries and Other Investments. Except as
indicated on Schedule 3.1.5, Rio Grande does not own, directly or
indirectly, any shares of capital stock of any corporation or hold any
equity or ownership interest in any other Person.
SECTION 3.1.6 Financial Statements. Copies of (a) the Rio Grande
Audited Balance Sheet, and related audited statements of income, earnings
and cash flows for the fiscal year then ended, including the notes thereto
(collectively, the "Rio Grande Audited Financial Statements") and (b) the
unaudited balance sheet of Rio Grande and its Subsidiaries as of October
31, 1996 as filed with the Commission on Form 10-QSB (the "Rio Grande
Unaudited Balance Sheet"), and related unaudited statements of income,
earnings and cash flow for the nine months then ended (collectively, the
"Rio Grande Unaudited Financial Statements"), are included in the Publicly
Filed Documents that have heretofore been delivered to Purchaser. The Rio
Grande Audited Financial Statements have been prepared from the books and
records of Rio Grande and its Subsidiaries in conformity with GAAP applied
on a basis consistent with the applicable prior date or period and present
fairly in all material respects the financial condition of Rio Grande and
its Subsidiaries as at the Audit Date and the results of operations and
cash flow of Rio Grande and its Subsidiaries for the periods indicated.
The Rio Grande Unaudited Financial Statements have been prepared from the
books and records of Rio Grande and its Subsidiaries in conformity with
GAAP (subject to normal year-end audit adjustments and the absence of
footnotes) and present fairly in all material respects the financial
condition of Rio Grande and its Subsidiaries as at the Interim Balance
Sheet Date and the results of operations and cash flow of Rio Grande and
its Subsidiaries for the nine months then ended. The books of account of
Rio Grande and its Subsidiaries fairly reflect all material transactions of
Rio Grande and its Subsidiaries and are correct and complete in all
material respects.
SECTION 3.1.7 Absence of Undisclosed Liabilities. As of the
Interim Balance Sheet Date, Rio Grande had (and as of the date hereof Rio
Grande has and as of the Closing Date Rio Grande will have) no material
liabilities (matured or unmatured, fixed or contingent) known to it which
are not fully reflected or provided for on the Rio Grande Unaudited Balance
Sheet as at the Interim Balance Sheet Date), or any material loss
contingency (as defined in State of Financial Accounting Standards No. 5)
known to it whether or not required by GAAP to be shown on the Rio Grande
Unaudited Balance Sheet, except obligations to perform under commitments
incurred in the ordinary course of business after the Interim Balance Sheet
Date. A portion of the monthly revenues received by Rio Grande's
Subsidiaries from offshore properties located in the Gulf of Mexico is
deducted by the operator to fund future estimated abandonment costs. The
amount of the abandonment escrow and the accrued platform abandonment
expense recognized by Rio Grande is based on the ratio of produced reserves
to the remaining proved producing reserves of the properties based upon
information provided by the operator of the respective properties.
SECTION 3.1.8 Pro Forma Financial Information and Projections. A
true and correct copy of the Acquisition Agreement has heretofore been
filed with the Commission on December 16, 1996 as an Exhibit to a Periodic
Report on Form 10QSB and has been delivered to Purchaser. Purchaser has
been furnished copies of (i) a pro forma balance sheet of Rio Grande and
its Subsidiaries as of July 31, 1996 giving effect to the Acquisition as of
such date (the "Pro Forma Balance Sheet") and (ii) a projected statement of
earnings and cash flows of Rio Grande for the fiscal year ended January 31,
1997, projected statements of earnings and cash flow for Rio Grande and its
Subsidiaries for fiscal years ended January 31, 1998 through January 31,
2007, the projected year end balance sheet for Rio Grande and its
Subsidiaries as of January 31, 1997, and the projected year-end balance
sheets for Rio Grande and its Subsidiaries for the fiscal years ending
January 31, 1998 through January 31, 2001 (collectively the "Projections").
The Projections were prepared in good faith and were and are based upon the
assumptions reflected therein, which Purchaser acknowledges having reviewed
and having had an opportunity to discuss with representatives of Rio
Grande.
SECTION 3.1.9 Minute Books. The copies of the minute books of Rio
Grande and its Subsidiaries which were delivered to Purchaser are complete
in all material respects and reflect all transactions referred to in such
minutes in all material respects.
SECTION 3.1.10 Leases. Schedule 3.1.10 sets forth leases pursuant
to which Rio Grande and any of its Subsidiaries lease real or personal
property. Except as specifically noted on Schedule 3.1.10, all leases and
other agreements pursuant to which Rio Grande or its Subsidiaries lease
from others real or personal property that serve as collateral pursuant to
the Senior Loan Agreements are in good standing, valid and effective in
accordance with their respective terms without any material defaults
thereunder, and to Rio Grande's knowledge, all other leases and agreements
pursuant to which Rio Grande or its Subsidiaries lease from others real or
personal property are in good standing, valid and effective in accordance
with their respective terms without any material defaults thereunder.
SECTION 3.1.11 Proprietary Rights. As of the date hereof and from
and after the Closing Date, each of Rio Grande and its Subsidiaries will
own or have the unrestricted right to use all Proprietary Rights that are
necessary to permit the business of Rio Grande and its Subsidiaries, as
they propose to conduct them, to be carried on after the Closing Date in
the manner in which they are currently conducted. To Rio Grande's
knowledge, the use of such Proprietary Rights by Rio Grande and/or its
Subsidiaries does not and will not violate or infringe on the proprietary
rights of any third party, there is no claim, action, proceeding or
investigation pending or threatened against Rio Grande or any of its
Subsidiaries with respect to any of such Proprietary Rights and none of Rio
Grande and its Subsidiaries have any knowledge that any third party is
infringing any of such Proprietary Rights. Neither Rio Grande nor any of
its Subsidiaries is in material default under any license or other
agreement relating to any of such Proprietary Rights and all such licenses
and agreements are valid, enforceable and in full force and effect and
there is no event or condition which, with notice or lapse of time, or
both, would constitute an event of default under such licenses or
agreements.
SECTION 3.1.12 Insurance. Rio Grande and its Subsidiaries maintain
insurance with reputable insurers with respect to their respective
properties and business against such casualties and contingencies and in
such types and amounts as are set forth on Schedule 3.1.12. All such
insurance policies are in full force and effect and Rio Grande and its
Subsidiaries are not in default under any such policy. True and complete
summaries of such policies as in effect on the date hereof have been
provided to Purchaser. Such policies provide insurance coverage adequate
to comply with worker's compensation, transportation and other laws
applicable to Rio Grande and/or its Subsidiaries and any permits, licenses,
approvals and/or contracts to which Rio Grande and/or its Subsidiaries are
parties.
SECTION 3.1.13 Taxes. Rio Grande and each of its Subsidiaries has
duly filed all tax reports and returns (including all federal, state and
local income tax, franchise tax, gross receipts, sales tax, wage tax and
real and personal property tax returns) required to be filed by it, has
duly paid all taxes and other charges (including customs duties) reflected
on such tax reports and returns as being due and has withheld all taxes
required to be withheld by it by any federal, state, local or foreign
taxing authority, excepting in each case such taxes as are being contested
in good faith or where the failure to pay such taxes would not have a
Material Adverse Effect on the Company and its Subsidiaries on a
consolidated basis. The federal and state income tax returns of Rio Grande
and its Subsidiaries have never been audited. There are no outstanding
waivers by Rio Grande or any of its Subsidiaries to extend the statute of
limitations on any tax assessment or powers of attorney relating thereto.
Neither Rio Grande nor any of its Subsidiaries has filed with the Internal
Revenue Service any election or consent under Section 341(f) of the Code.
As of January 31, 1996, the net operating loss carryforward of Rio Grande
as reflected in its federal income tax return, Form 1120, was $16,964,968.
To Rio Grande's knowledge, there have been no transfers by or among holders
of five percent or more of the Common Stock that have resulted in a
limitation on the net operating loss carryforward.
SECTION 3.1.14 Disclosure of Contracts and Arrangements. To Rio
Grande's knowledge, the exhibits listed in the Publicly Filed Documents
constitute all of the contracts that would be required to be filed pursuant
to Item 601(b)(4), (9), (10), (22), and (23) of Regulation S-B (as
promulgated by the Commission) if an Annual Report on Form 10-KSB were
being filed on the Closing Date. Accurate and complete copies of all such
contracts have heretofore been furnished to Purchaser, all contracts
referenced in the first sentence hereof are valid and in full force and
effect, and neither Rio Grande nor any of its Subsidiaries is in material
default, and has not been notified by any other party that it is in
material default, under any contract described above. To Rio Grande's
knowledge, no party with whom Rio Grande or any of its Subsidiaries has an
agreement which is of material importance to Rio Grande or any of its
Subsidiaries is in default thereunder. Neither Rio Grande nor any of its
Subsidiaries is subject to any contract, the performance of which it
reasonably anticipates could have a Materially Adverse Effect or would be
considered unreasonably burdensome in its industry. The Annual Report on
Form 10-KSB for the fiscal year ended on the Audit Date, and all other
Publicly Filed Documents complied in form with all rules and regulations of
the Commission and accurately described the affairs and condition of Rio
Grande and its Subsidiaries for the periods indicated therein in all
material respects.
SECTION 3.1.15 No Adverse Changes. Except as set forth in Schedule
3.1.15, since the Interim Balance Sheet Date there has not been:
() any material adverse change in the condition (financial or
otherwise including environmental matters), assets, liabilities,
business or business prospects of Rio Grande or its Subsidiaries from
that shown by the Rio Grande Unaudited Balance Sheet as at the
Interim Balance Sheet Date;
(b) any dividend, declaration, setting aside or payment or
other distribution in respect of any of Rio Grande's capital stock or
any direct or indirect redemption, purchase or other acquisition of
any of such stock by Rio Grande;
(c) any labor dispute, or any other event, development, or
condition, of any character, or threat of the same, materially
adversely affecting the business or business prospects of Rio Grande
of its Subsidiaries;
(d) any asset or property of Rio Grande or its Subsidiaries
made subject to a lien of any kind (other than insubstantial defects
in title customary in the oil and gas industry and other liens which
singly and in the aggregate do not materially detract from the value
or impair the use of the affected properties);
(e) any material liability or obligation incurred by Rio
Grande or its Subsidiaries, other than liabilities or obligations
incurred in the ordinary course of business;
(f) any waiver of any valuable right of Rio Grande or its
Subsidiaries or any cancellation of any debt or claim held by Rio
Grande or its Subsidiaries, in either case in an amount that would be
material to Rio Grande and its Subsidiaries on a consolidated basis;
(g) any issuance of any stock, bonds or other securities
(including options, warrants, or rights) of Rio Grande or its
Subsidiaries or any agreements or commitments respecting the same
(except as contemplated hereby);
(h) any sale, assignment or transfer of any material tangible
or intangible assets of Rio Grande or its Subsidiaries except with
respect to tangible assets in the ordinary course of business;
(i) any extraordinary increase, direct or indirect, in the
compensation paid or payable to any officer, director, employee or
agent of Rio Grande or its Subsidiaries;
(j) any wage or salary increase applicable to any group or
classification of employees generally (other than in connection with
the general salary plan of Rio Grande or its Subsidiaries), any
employment contract with or loan to any officer or employee, or any
material transaction of any other nature with any director, officer,
shareholder or employee of Rio Grande or its Subsidiaries except on
terms no less favorable to Rio Grande than would be obtained in an
arms length transaction with an unaffiliated third party;
(k) any material transaction, contract or commitment outside
the ordinary course of business, except as contemplated by this
Agreement, the Acquisition Agreement, the Senior Loan Agreements (as
amended), the Xxxx Engagement and the transactions contemplated
hereby and thereby;
(l) any material change in its accounting methods or
practices; or
(m) any event requiring the Company to file a Current Report
on Form 8-K.
SECTION 3.1.16 Litigation. There is no action, suit, proceeding or
investigation pending or, to the knowledge of Rio Grande, threatened
against or affecting Rio Grande or any of its Subsidiaries or any property
or right of Rio Grande or any of its Subsidiaries, and neither Rio Grande
nor any of its Subsidiaries is aware of any facts which would provide a
valid basis for any investigation, action, suit, proceeding or claim.
SECTION 3.1.17 Compliance with Laws. Rio Grande and each of its
Subsidiaries has complied with and is not in default in any respect under,
any law, ordinance, requirement, regulation, rule or order applicable to
its business, including equal employment opportunity laws, employee safety
laws, Environmental Laws, transportation, equipment safety laws and other
governmental regulations affecting the conduct of its business, except
where the failure to so comply would not have a Material Adverse Effect on
Rio Grande and its Subsidiaries or on a consolidated basis. Neither Rio
Grande nor any of its Subsidiaries is subject to any continuing court or
administrative order, writ, injunction or decree, applicable specifically
to it, its business, property or employees, or, is in default with respect
to any order, writ, injunction or decree of any court or federal, state,
municipal or other governmental department, commission, board, agency or
instrumentality, domestic or foreign.
SECTION 3.1.18 Absence of Conflicts. The execution and delivery of
this Agreement, the Registration Rights Agreement, the Swap Agreement, the
Stockholders Agreement and the Acquisition Agreement, the consummation of
the transactions provided for herein or therein (including the Acquisition)
and the fulfillment by Rio Grande and/or any of its Subsidiaries of the
terms hereof or thereof, do not and/or will not (a) conflict with or result
in a breach of any provision of the Charter or By-laws or the charter or
by-laws or partnership agreement or other organizational documents of any
of its Subsidiaries, (b) result in a conflict or default or give rise to
any right of termination, cancellation or acceleration under any of the
terms, conditions or provisions of any note, bond, mortgage, loan
agreement, indenture, license, lease, agreement or other instrument or
obligation to which Rio Grande or any of its Subsidiaries is a party or by
which Rio Grande or any of its Subsidiaries is bound (including the Senior
Loan Agreements but excluding the 11.5% Notes), (c) violate any order,
writ, injunction, decree, or any statute, rule or regulation applicable to
Rio Grande or any of its Subsidiaries or any of the material properties or
assets of Rio Grande or any of its Subsidiaries or (d) conflict with or
give rise to any right of termination under, or materially and adversely
affect, any material permit, license or authorization of any governmental
authorizations used or required by Rio Grande or any of its Subsidiaries.
SECTION 3.1.19 Consents. No consent, approval or other action by any
local, state, federal or foreign governmental authority or any third person
is required in connection with the execution and delivery by Rio Grande of
this Agreement, the Registration Rights Agreement and the Acquisition
Agreement and the consummation of the transactions contemplated hereby and
thereby except for consents and approvals that have been obtained as of the
Closing Date.
SECTION 3.1.20 Employee Benefit Plans.
(a) No Plan is subject to Title IV of ERISA and no Plan is a
"multiemployer plan" (as that term is defined in sections 3(37) and
4001(a)(3)of ERISA).
(b) To the extent required by applicable law or regulations, all
Plans have been accurately described in the Publicly Filed Documents and
there have been no material changes in the provisions thereof.
(c) All Plans comply and have been administered in form and
operation in all material respects with all requirements of applicable law.
(d) There are no actions, suits, or claims (except for the one
outstanding employment claim summarized on Schedule 3.1.20) pending or
threatened involving any Plan or the assets thereof and no facts exist
which could give rise to any such actions, suits or claims (other than
routine claims for benefits).
(e) No Plan provides pension, post-retirement medical or
post-retirement life insurance benefits (except as may be required by
section 601 of ERISA or section 4980B of the Code).
(f) There have been no "prohibited transactions" (as described in
section 406 of ERISA) with respect to any Plan and neither the Company nor
any Subsidiary has otherwise engaged in any prohibited transaction.
(g) To the extent required, actuarially adequate accruals for all
obligations under each of the Plans are reflected in the Rio Grande Audited
Financial Statements and such obligations include a pro rata amount of the
contributions that would otherwise have been made in accordance with past
practices and applicable law for plan years which include the Closing Date.
SECTION 3.1.21 Labor Relations. Neither Rio Grande nor any of its
Subsidiaries is a party to any collective bargaining agreement. No strike,
work stoppage or other labor dispute relating to Rio Grande or any of its
Subsidiaries is pending or, to the knowledge of Rio Grande or any of its
Subsidiaries, is threatened and no application for certification of a
collective bargaining agent is pending or, to the knowledge of Rio Grande
or any of its Subsidiaries, is threatened. There are no unfair labor
practice charges or grievances pending or in process or, to Rio Grande's
knowledge, threatened by or on behalf of any employee of Rio Grande or any
of its Subsidiaries nor have any complaints been received by Rio Grande or
any of its Subsidiaries or, to the knowledge of Rio Grande or any of its
Subsidiaries, threatened or filed, with any federal, state or local
governmental agencies alleging employment discrimination or other
violations of laws pertaining to such employees.
SECTION 3.1.22 Compensation, Ownership and Conflicts of Interest.
The Publicly Filed Documents set forth in all material respects the
information required by Regulation S-B, Items 401-404 to be disclosed in
such Publicly-Filed Documents for the periods covered thereby. Since the
dates and periods covered by the Publicly-Filed Documents no material
change has occurred in the type, nature or amount of the arrangements and
transactions covered by such items in Regulation S-B.
SECTION 3.1.23 Licenses and Permits. Rio Grande and each of its
Subsidiaries has all material licenses, permits and other authorizations of
governmental authorities, domestic and foreign, used or required by it in
the conduct of its business, is in full compliance with the material terms
of and requirements that are conditions to the existence of such material
licenses, permit and other authorization, and has not received any notice
(nor does Rio Grande or any of its Subsidiaries have any reason to believe)
that revocation is being considered with respect to any of such material
licenses, permits or authorizations.
SECTION 3.1.24 Absence of Certain Payments. Neither Rio Grande nor
any of its Subsidiaries, or any Person acting with knowledge or
authorization of Rio Grande on behalf of Rio Grande or its Subsidiaries,
has made any payment to or conferred any benefit, directly or indirectly,
on suppliers, customers, employees or agents of suppliers or customers, or
officials or employees of any government or agency or instrumentality of
any government (domestic or foreign) or any political parties or candidates
for office, which is or was unlawful.
SECTION 3.1.25 Environmental Matters. Except as set forth in
Schedule 3.1.25, (a) all facilities and property (including underlying
groundwater) owned, leased or operated by Rio Grande or any of its
Subsidiaries have been, and continue to be, owned, leased or operated by
Rio Grande and its Subsidiaries in material compliance with all
Environmental Laws; (b) there have been no past, and there are no pending
or, to the knowledge of Rio Grande, threatened (i) claims, complaints,
notices or inquiries to, or requests for information received by, Rio
Grande or any of its Subsidiaries with respect to any alleged violation of
any Environmental Law, or (ii) claims, complaints, notices or inquiries to,
or requests for information received by, Rio Grande or any of its
Subsidiaries regarding potential liability under any Environmental Law or
under any common law theories relating to operations or the condition of
any facilities or property (including underlying groundwater) owned, leased
or operated by Rio Grande or any of its Subsidiaries; (c) there have been
no Releases of Hazardous Materials at, on or under any property now or
previously owned or leased or operated by Rio Grande or any of its
Subsidiaries that, singly or in the aggregate, have, or may reasonably be
expected to have, a Material Adverse Effect; (d) Rio Grande and its
Subsidiaries have been issued and are in material compliance with all
material permits, certificates, approvals, licenses and other
authorizations required under Environmental Laws; (e) no property now or
previously owned, leased or operated by Rio Grande or any of its
Subsidiaries is listed or, to Rio Grande's knowledge proposed for listing,
on the National Priorities List pursuant to CERCLA, on the CERCLIS or on
any other federal or state list of sites requiring investigation or
clean-up; (f) there are no underground storage tanks, active or abandoned,
including petroleum storage tanks, on or under any property now or
previously owned, leased or operated by Rio Grande or any of its
Subsidiaries that, singly or in the aggregate, have, or may reasonably be
expected to have, a Material Adverse Effect; (g) neither Rio Grande nor any
Subsidiary of Rio Grande has directly transported or directly arranged for
the transportation of any Hazardous Material to any location which is
listed or, to Rio Grande's knowledge proposed for listing, on the National
Priorities List pursuant to CERCLA, on the CERCLIS or on any similar
federal or state list or which is the subject of federal, state or local
enforcement actions or other investigations which may reasonably be
expected to lead to claims against Rio Grande or such Subsidiary thereof
for any remedial work, damage to natural resources or personal injury,
including claims under CERCLA; (h) there are no polychlorinated biphenyls,
radioactive materials or friable asbestos present at any property now or
previously owned or leased or operated by Rio Grande or any Subsidiary of
Rio Grande that, singly or in the aggregate, have, or may reasonably be
expected to have, a Material Adverse Effect; and (i) to the knowledge of
Rio Grande, no conditions exist at, on or under any property now or
previously owned or leased or operated by Rio Grande or any of its
Subsidiaries which, with the passage of time, or the giving of notice or
both, would give rise to liability under any Environmental Law which may
reasonably be expected to have a Material Adverse Effect.
SECTION 3.1.26 Fees and Commissions. Except as set forth on
Schedule 3.1.26, neither Rio Grande nor any Person acting on behalf of Rio
Grande has retained any finder, broker, agent, financial advisor or other
intermediary (collectively, "Rio Grande Intermediary") in connection with
the transactions contemplated hereby. Rio Grande shall indemnify and hold
harmless Purchaser from liability for any compensation to any Rio Grande
Intermediary (including, without limitation, any Persons listed in Schedule
3.1.26) and the fees and expenses of defending against such liability or
alleged liability.
SECTION 3.1.27 Regulation G, Etc. None of the proceeds from the
sale of the Purchased Shares or Option Shares will be used, directly or
indirectly, for the purpose of purchasing or carrying any "margin stock" as
defined in Regulation G (12 CFR Part 207) of the Board of Governors of the
Federal Reserve System (herein called "margin stock") or for the purpose of
reducing or retiring any indebtedness which was originally incurred to
purchase or carry margin stock or for any other purpose which might
constitute this transaction or transactions relating to the Acquisition a
"purpose credit" within the meaning of Regulation G. Neither Rio Grande,
any of its Subsidiaries nor any agent acting on its behalf has taken or
will take any action which might cause this Agreement to violate Regulation
G, T, U or X or any other regulation of the Board of Governors of the
Federal Reserve System or to violate the Exchange Act.
SECTION 3.1.28 Senior Loan Agreements; No Restrictive Covenants.
All agreements between Rio Grande and/or its Subsidiaries and Comerica
Bank-Texas are listed on Schedule 3.1.28. Rio Grande has delivered to
Purchaser true, correct and complete copies of the Senior Loan Agreements,
as in effect on the date hereof and as at the Closing. Except as set forth
in the Senior Loan Agreements, there are no contractual arrangements to
which Rio Grande or any of its Subsidiaries is a party or is bound that
would prohibit or restrict the dividend payments on any series of Preferred
Stock or the redemption, conversion or issuance of any Preferred Stock or
Common Stock in accordance with the terms of this Agreement and/or the
Certificate of Designation or that would limit or prevent any Subsidiaries
of Rio Grande from paying dividends or making advances to its immediate
corporate parent. The Senior Loan Agreements are in full force and effect
and there does not exist any default thereunder and Rio Grande is not aware
of any presently existing facts or circumstances which with the passage of
time would result in a default under the Senior Loan Agreements.
SECTION 3.1.29 Holding Company and Investment Company Status.
Neither Rio Grande nor any of its Subsidiaries is a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a
"holding company", or a "public utility", within the meaning of the Public
Utility Holding Company Act of 1935 or a "public utility" within the
meaning of the Federal Power Act. Neither Rio Grande nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of
1940 or an "investment adviser" within the meaning of the Investment
Advisers Act of 1940.
SECTION 3.1.30 Absence of Untrue Statements. Neither this Agreement
nor any Schedule or Exhibit, nor any other document, certificate or
statement prepared by Rio Grande and furnished or to be furnished to
Purchaser by Rio Grande in connection with the transactions contemplated
hereby, taken as a whole, contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary in
order to make the statements contained herein and therein not misleading.
There is no fact relating to the condition (financial or otherwise),
properties, assets, operations, results of operations, business or
prospects of Rio Grande which could reasonably be expected to have a
Material Adverse Effect which has not been disclosed to Purchaser.
SECTION 3.2 Representations and Warranties of Purchaser.
Purchaser hereby represents and warrants to Rio Grande as of the date
hereof and as of the Closing Date as follows:
SECTION 3.2.1 Purchase for Investment. Purchaser is acquiring the
Purchased Shares for investment and not with a present view to distributing
all or any part thereof in any transaction or series of transactions which
would constitute a "distribution" within the meaning of the Securities Act,
subject at all times to the right of such Purchaser to dispose of its
property in its own discretion subject to the provisions of Section 6.2.
Purchaser acknowledges that the Purchased Shares have not been registered
under the Securities Act. Purchaser agrees that Purchased Shares will bear
a legend or legends substantially to the effect of the legend or legends
set forth in Section 6.2 hereto.
SECTION 3.2.2 Investor Qualifications. Purchaser is an "accredited
investor" as defined in Rule 501 promulgated by the Commission pursuant to
the Securities Act.
SECTION 3.2.3 Due Authorization. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Kansas and has full corporate power and authority to enter into
this Agreement and to perform the transactions contemplated herein. This
Agreement, the Registration Rights Agreement, the Stockholders' Agreement,
and the Swap Agreement have been duly and validly executed and delivered by
Purchaser (or the respective affiliate of Purchaser made a party thereto)
and each constitutes the legal, valid and binding obligation of Purchaser
(or such affiliate), enforceable in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or other laws affecting creditors' rights
generally or by the availability of equitable remedies.
SECTION 3.2.4 Consents. All consents, approvals, qualifications,
licenses, orders or authorizations of, or filings with, any governmental
authority required in connection with Purchaser's valid execution, delivery
and performance of this Agreement have been obtained or made, or will as of
the Closing Date have been obtained or made.
SECTION 3.2.5 No Violation. The execution and delivery by
Purchaser of this Agreement and the execution and delivery by Purchaser
and/or an affiliate of Purchaser of all other agreements and instruments to
be executed and delivered by Purchaser or such affiliate in connection
herewith, the consummation by Purchaser and any such affiliate of the
transactions provided for herein and therein and contemplated hereby or
thereby, and the fulfillment by Purchaser or such Affiliate of the terms
hereof and thereof, will not (a) conflict with or result in a breach of any
provision of Purchaser's or such affiliate's certificate of incorporation
or by-laws or (b) result in a default, give rise to any right of
termination, cancellation or acceleration, or require any consent or
approval, under any of the terms, conditions or provisions of any note,
bond, mortgage, loan agreement, indenture, license, agreement, lease or any
other instrument or obligation to which Purchaser or Purchaser's respective
affiliate is a party or by which it is bound.
SECTION 3.2.6 Brokers and Finders. Neither Purchaser nor any
Person acting on behalf of such Purchaser has retained any finder, broker,
agent, financial advisor or other intermediary in connection with the
transactions contemplated by this Agreement.
ARTICLE FOUR
CONDITIONS TO THE CLOSING
SECTION 4.1 Conditions to Obligations of Purchaser. The
obligation of Purchaser to purchase the Purchased Shares at the Closing is
subject to the fulfillment on or before the Closing of the following
conditions:
SECTION 4.1.1 Representations and Warranties; Performance. (a) (i)
The representations and warranties set forth in Section 3.1 shall be
accurate as of the Closing Date and (ii) since the Interim Balance Sheet
Date, there shall have been no Material Adverse Change; and (b) Rio Grande
shall have performed all obligations and complied with all covenants and
agreements required to be performed or to be complied with by it under this
Agreement on or prior to the Closing Date.
SECTION 4.1.2 Stockholders' Agreement; Employment Agreements.
Xxxxxx X. Xxxxxxxx, Guy Xxx Xxxxxxxx and Purchaser shall have executed a
Stockholders' Agreement and Purchaser shall have been provided copies of
fully executed Employment Agreements between Rio Grande and each of Guy Xxx
Xxxxxxxx and Xxxx Xxxxxxx, in each case such agreements being in form and
substance satisfactory to Purchaser.
SECTION 4.1.3 Consents. Any foreign, federal, state or local
governmental authority or regulatory agency having jurisdiction, to the
extent that its consent, approval or other action is required for the
consummation of the transactions contemplated by this Agreement or the
agreements entered into in connection herewith, shall have granted such
required consents or approvals and taken any other such required actions.
SECTION 4.1.4 Proceedings and Documents. As of the Closing, all
corporate and other proceedings in connection with the transactions
contemplated hereby, and all documents and instruments incident to such
transactions, and all documents to be delivered to Purchaser pursuant to
Section 2.4, shall be satisfactory in form and substance to, and shall have
been delivered to, Purchaser and, as to legal matters, its counsel, and
Purchaser shall have received at or prior to the Closing any other
documents as it shall have reasonably requested.
SECTION 4.1.5 Indebtedness; Acquisition. No default shall exist
under any of the Senior Loan Agreements and all conditions to the
consummation of the Acquisition (other than the payment of the purchase
price) shall have been satisfied on the day of Closing.
SECTION 4.1.6 Qualifications. As of the Closing, all
authorizations, approvals or permits of, or filings with, any governmental
authority, including state securities or "Blue Sky" authorities, that are
required by law in connection with the lawful sale and issuance of the
Purchased Shares shall have been duly obtained by Rio Grande, and shall be
effective as of the Closing.
SECTION 4.1.7 Authorization. Purchaser shall have received
approval from its upper management or board of directors, as the case may
be, to close the transactions contemplated hereunder.
SECTION 4.2 Conditions Precedent to Obligations of Rio Grande.
The obligation of Rio Grande to issue and sell the Purchased Shares at the
Closing is subject to the fulfillment on or before the Closing of the
following condition:
SECTION 4.2.1 Representations and Warranties. The representations
and warranties set forth in this Agreement made by Purchaser shall be
accurate as of the Closing Date as if made on the Closing Date.
SECTION 4.2.2 Senior Loan Agreements; Acquisition. The Senior Loan
Agreements shall have been modified and amended in such respects as shall
in form and substance be satisfactory to Rio Grande, and all conditions to
the consummation of the Acquisition (other than payment of the purchase
price) shall have been satisfied on the date of Closing.
ARTICLE FIVE
COVENANTS
Rio Grande hereby covenants and agrees with Purchaser as follows:
SECTION 5.1 Regular Reporting Information. Rio Grande will
furnish to Purchaser by overnight courier not later than five days
following the filing by Rio Grande or any of its Subsidiaries with the
Commission, a copy of each report on Form 8-K, 10-QSB or 10-KSB under the
Exchange Act, each registration statement filed pursuant to the Securities
Act and each communication delivered to its stockholders as a class.
SECTION 5.2 Other Information.
(a) Promptly after the occurrence thereof, Rio Grande will (unless
Purchaser specifically otherwise directs in writing) notify Purchaser of
the existence and nature of a default under the Senior Loan Agreements and
the steps that it intends to take to cure such default. During the
pendency of any such default, Rio Grande shall provide to Purchaser, upon
Purchaser's reasonable request, with reports as to such default and/or its
efforts to cure same.
(b) Upon the reasonable request of Purchaser, Rio Grande will
deliver to Purchaser other information and data, not proprietary in nature
(in the good faith judgment of Rio Grande), pertaining to its business,
financial and corporate affairs to the extent that such delivery will not
violate any then applicable laws or any contracts of Rio Grande with third
persons. Rio Grande will permit any Person designated by Purchaser in
writing, at the expense of Purchaser, to visit and inspect any of the
properties of Rio Grande, including its books of account, and to discuss
its affairs, finances and accounts with Rio Grande's officers or directors,
all at such reasonable times and as often as Purchaser may reasonably
request, all in a manner consistent with the reasonable security and
confidentiality needs of Rio Grande, provided, that Rio Grande shall be
under no such obligation (i) with respect to information deemed in good
faith by Rio Grande to be proprietary or (ii) if Rio Grande's board of
directors reasonably believes such visit, inspection or discussion would
violate applicable laws or any contract with third persons.
Notwithstanding the foregoing, Purchaser acknowledges that in connection
with its review of information and data pertaining to Rio Grande it will be
provided information that has not been publicly disclosed and may
constitute material inside information within the meaning of applicable
securities laws. Purchaser agrees to retain in confidence all such
information, data, reports, compilations or reviews, to refrain from
disclosing any of such information to any third party until and unless such
information is otherwise publicly disclosed, to use such information solely
and exclusively as permitted by law, and to permit no use of such
information that would or might be detrimental to Rio Grande from a
competitive standpoint or otherwise.
(c) Business Plan. Not less than 30 days prior to the commencement
of each fiscal year, Rio Grande shall provide to Purchaser a business plan
for such fiscal year; provided, however, the business plan for the fiscal
year ending January 31, 1998 shall be provided to Purchaser within thirty
days of Closing. The business plan shall be in form and substance
reasonably satisfactory to Purchaser and shall in any event cover those
items described in Exhibit D. Within 30 days after the end of each fiscal
quarter, Rio Grande shall provide to Purchaser a summary comparing the
business plan to Rio Grande's actual performance during such fiscal
quarter.
SECTION 5.3 Rule 144 and Rule 144A Information. Rio Grande shall
(i) make and keep "current public information" "available" (as both such
terms are defined in Rule 144 under the Securities Act), (ii) timely file
with the Commission, in accordance with all rules and regulations
applicable thereto, all reports and other documents (x) required of Rio
Grande for Rule 144, as it may be amended from time to time (or any rule,
regulation or statute replacing Rule 144), to be available to stockholders
of Rio Grande and (y) required to be filed under section 15(d) of the
Exchange Act, notwithstanding that Rio Grande's duty to file such reports
or documents may be suspended or otherwise terminated under the express
terms of such provision and (iii) upon request by Purchaser, furnish to
Purchaser a written statement by Rio Grande that it has complied with the
reporting requirements of the Exchange Act and Rule 144, together with a
copy of the most recent annual or quarterly report of Rio Grande and such
reports and documents filed by Rio Grande with the Commission as may
reasonably be requested by Purchaser. Rio Grande shall, upon Purchaser's
request or upon the request of a prospective buyer (a "Prospective Buyer")
of shares of Common Stock or Preferred Stock, deliver to Purchaser and such
Prospective Buyer, all information described in Section (d)4(i) of Rule
144A under the Securities Act (all of such information being "reasonably
current" as described in such Section (d)4(i)) if Rio Grande (x) is not
subject to Section 13 or 15(d) of the Exchange Act, and (y) is not exempt
from reporting pursuant to Rule 12g3-2(b) under the Exchange Act.
SECTION 5.4 Liability Insurance. Rio Grande will maintain in
full force and effect a policy or policies of standard comprehensive
general liability insurance underwritten by a financially sound and
reputable U.S. insurance company (as of the date the policy is secured)
insuring Rio Grande's and its Subsidiaries' properties and business against
such losses and risks, and in such amounts, as are adequate for its
business and as are customarily carried by entities of similar size engaged
in the same or similar business. Such policies shall include property loss
insurance policies, with extended coverage, sufficient in amount to allow
the substantial replacement of any of its tangible properties which might
be damaged or destroyed by the risks or perils normally covered by such
policies. Rio Grande shall, upon the written request of Purchaser,
purchase liability insurance covering the directors of Rio Grande.
SECTION 5.5 Dividend and Redemption Restrictions. Except as
otherwise permitted pursuant to the Certificate of Designation, so long as
Purchaser is the holder of any Preferred Stock, neither Rio Grande nor any
of its Subsidiaries shall enter into any contract or agreement except the
Senior Loan Agreements as in effect on the Closing Date which by its terms
restricts payments of dividends on, or redemptions or conversions of,
shares of Rio Grande's capital stock and/or, in the case of the
Subsidiaries of Rio Grande, restricts the making of advances to any
Subsidiary of Rio Grande.
SECTION 5.6 Payment of Notes. Upon Closing, Rio Grande shall
segregate into a separate bank account funds sufficient to pay and
discharge the 11.5% Notes. Rio Grande shall, as soon as reasonably
practical after the Closing, prepay the 11.5% Notes in accordance with the
terms thereof.
SECTION 5.7 Treatment of Preferred Stock. Rio Grande shall treat
all distributions (other than payments in redemption of the Preferred Stock
that are not with respect to accrued but unpaid dividends) paid by it on
the Preferred Stock as non-deductible dividends on all of its tax returns.
SECTION 5.8 Price Risk Protection. Except as otherwise agreed by
Purchaser, so long as Purchaser owns any Preferred Stock in Rio Grande, Rio
Grande shall have price risk protection in place on Rio Grande's net oil
and gas production using a 6:1 gas/oil ratio. This risk protection shall
be in the form of one or more swap, hedge, floor, collar or similar
agreements with a reputable institution that has a S&P long term unsecured
debt rating of at least AA or a Xxxxx'x long term unsecured debt rating of
Aa. Rio Grande shall have price risk management in place at closing that
will extend for at least 12 months. Rio Grande shall inform Purchaser (or
its affiliate) when Rio Grande desires to enter into a commodity price risk
management agreement and shall grant Purchaser (or its affiliate) the right
to match the terms of any proposal for commodity price risk management
services. For the purposes of this Section, unless the Senior Lenders
consent otherwise, Rio Grande shall not put in place such price risk
protection in excess of the following amounts of barrels of oil (or its
equivalent) per day or at a price less than the following: (a) through
October 31, 1997, 700 barrels of oil and $20.09; (b) for the period
November 1, 1997 through October 31, 1998, 600 barrels of oil and $20.66,
and (c) November 1, 1998 through October 31, 1999, 500 barrels of oil and
$20.23.
SECTION 5.9 Negotiations Regarding Marketing Agreement.
(a) Rio Grande will facilitate negotiations and discussions between
Purchaser (or affiliate of Purchaser) and Highland Energy Company with
regard to the prospective purchase by Purchaser (or such affiliate) of oil,
natural gas and related hydrocarbons (collectively, "Products") produced
from mineral properties owned or leased by Rio Grande; provided, however,
any prospective agreements between Purchaser (or an affiliate of
Purchaser), Rio Grande and/or Highland relating to the sale of Products to
any entity affiliated with Purchaser must be in form and substance
satisfactory to Rio Grande and its Senior Lenders and must provide to Rio
Grande prices for its Product at least equivalent to the prices that could
be obtained in an arms length transaction with an unaffiliated third party.
(b) Within thirty (30) days of Closing, Rio Grande shall enter into
one or more marketing agreements with Purchaser (or its affiliate) for the
purchase, sale and transportation of all oil and gas products (i) produced
by Rio Grande, (ii) that is currently under contract with another party to
become effective at such time when the existing contract expires, and (iii)
subsequently acquired by Rio Grande; provided, that such agreement shall be
at arms-length, for a term of not less than five years, and shall
incorporate terms and conditions satisfactory to Purchaser, Rio Grande and
the Senior Lenders. Such marketing agreement would automatically be
renewed on a year to year basis for so long as Purchaser (or its affiliate)
owns a majority of the Series B Preferred Stock (or the equivalent of a
majority of Series B Preferred Stock in the event of the conversion of such
stock into Common Stock as provided herein). In respect to such marketing
agreements:
(i) Rio Grande would grant to Xxxx the right to purchase all
crude oil/condensate and/or natural gas owned or controlled by Rio Grande
(whether Rio Grande's owned/controlled interest is by lease, ownership or
any other device), wherever located in the United States;
(ii) Xxxx would have the right, but not the obligation, to
purchase said crude oil/condensate and natural gas from Rio Grande on an
outright basis;
(iii) If Xxxx exercises this right in association with the
purchase of crude oil/condensate it would pay a price equal to the highest
price which Xxxx pays in the region where the crude/oil condensate is
produced, for comparable term, location, and quantities of crude oil. Any
deviations in these categories will trigger adjustments to the price paid.
Prices payable for natural gas and associated products shall be based on
the prices Rio Grande could receive under competitive marketing
arrangements; and
(iv) the specific details regarding the associated crude oil
and natural gas purchase and sale transaction will be the subject of
separate crude oil and natural gas purchase and sales contracts between
Xxxx and Rio Grande.
SECTION 5.10 Financing Right.
(a) Financing Right of First Refusal. Before offering or selling
any New Securities to any third party in a transaction principally designed
to provide additional debt or equity financing for Rio Grande and/or its
subsidiaries, Rio Grande shall first offer to sell such New Securities to
Purchaser. If Rio Grande intends to so issue New Securities, it shall give
each Holder written notice of such intention, describing the amount of
funds Rio Grande wishes to raise, the type of New Securities to be issued,
the price thereof and the general terms upon which Rio Grande proposes to
effect such issuance. Purchaser shall have fifteen (15) days from the date
when any such notice is received to agree to purchase all or part of such
New Securities for the price and upon the general terms and conditions
specified in Rio Grande's notice (or on such other terms as Rio Grande and
Purchaser may agree upon during such 15-day period) by giving written
notice to Rio Grande stating the quantity of New Securities to be so
purchased.
If at the end of such 15-day period (or the end of the additional
ten-day period provided for overallotments) the Purchaser fails to exercise
the foregoing right of first refusal with respect to all of the New
Securities being offered by Rio Grande, Rio Grande may within 120 days
after the end of such 15-day period sell such New Securities to a third
party or parties at a price and upon general terms no more favorable to the
purchasers thereof than specified in the foregoing notice given to
Purchaser, provided that Rio Grande must first reoffer the New Securities
to Purchaser pursuant to the preemptive right described in subparagraph (b)
below. In the event Rio Grande has not sold such New Securities within
such 120-day period, Rio Grande shall not thereafter issue or sell any New
Securities without first offering such New Securities to Purchaser in the
manner provided above in this subparagraph (a).
(b) Preemptive Right. This subparagraph (b) shall apply to any
offers by Rio Grande to issue or sell New Securities after Rio Grande first
complies with subparagraph (a) above. Rio Grande hereby grants to
Purchaser a right of first refusal to purchase, on a pro rata basis, all or
any part of New Securities (as defined below) which Rio Grande may, from
time to time, propose to sell and issue to third parties, subject to the
terms and conditions set forth below. The Purchaser's pro rata share, for
purposes of this subparagraph (b) shall equal a fraction, the numerator of
which is the number of shares of Common Stock then held by Purchaser and/or
issuable upon conversion or exercise of any Preferred Stock, convertible
securities, options, rights or warrants then held by Purchaser, and the
denominator of which is the total number of shares of Common Stock then
outstanding or issuable upon conversion or exercise of any Preferred Stock,
convertible securities, options, rights or warrants.
If this subparagraph (b) applies, Rio Grande shall give Purchaser
written notice of its intention to issue or sell New Securities, describing
the type of New Securities to be issued, the price thereof and the general
terms upon which Rio Grande proposes to effect such issuance. Purchaser
shall have seven (7) business days from the date of when any such notice is
received to agree to purchase all or part of its pro rata share of such New
Securities for the price and upon the general terms and conditions
specified in Rio Grande's notice by giving written notice to Rio Grande
stating the quantity of New Securities to be so purchased.
If Purchaser fails to exercise the foregoing right of first refusal
with respect to any New Securities within such 7-day period (or the
additional seven-day period provided for overallotments), Rio Grande may
within the balance of the 120 days set forth in subparagraph (a) sell any
or all of such New Securities not agreed to be purchased by Purchaser, at a
price and upon general terms no more favorable to the purchasers thereof
than specified in the notice given to Purchaser pursuant to above. In the
event Rio Grande has not sold such New Securities within such 120-day
period, Rio Grande shall not thereafter issue or sell any New Securities
without first offering such New Securities to Purchaser in the manner
provided in subparagraph (a) above.
(c) Assignment; Termination. This rights set forth in this Section
5.10 may not be assigned or transferred, except that such rights are
assignable by Purchaser in whole or in part to any Permitted Assign. This
Section 5.10 shall not apply to any New Securities first offered by Rio
Grande after January 15, 2002.
SECTION 5.11 Negative Covenants. For so long as Purchaser owns
more than $2,500,000 in aggregate face amount of the issued and outstanding
Series A Preferred Stock and/or Series B Preferred Stock (except with
regard to 5.11(m), which shall apply regardless of ownership), without the
prior written consent of Purchaser (which consent may not be unreasonably
withheld), Rio Grande hereby agrees that it will not, and it will cause its
Subsidiaries not to:
(a) authorize or issue shares of any class of stock having any
preference or priority as to dividends or assets superior to or on a
parity with any such preference or priority of the Preferred Stock;
(b) permit the number of directors constituting the Board of
Directors of Rio Grande to be less than six or more than nine;
(c) reclassify any shares of any class of stock into shares
having any preference or priority as to dividends or assets superior
to or on a parity with any such preference or priority of the
Preferred Stock;
(d) engage in any business other than acquiring, producing,
selling and developing oil and gas properties; and exploring for,
producing, transporting, marketing and selling oil, natural gas and
related hydrocarbons;
(e) merge or consolidate with any Person (other than mergers
of wholly-owned Subsidiaries with and into each other or Rio Grande),
or directly or indirectly sell, lease or otherwise dispose of assets
involving an aggregate consideration of more than ten percent (10%)
of the book value of its assets on a consolidated basis at the time
of such sale, lease or disposition in any 12-month period, other than
in the ordinary course of business;
(f) repurchase or agree to repurchase any shares of its Common
Stock or any options, warrants or other rights to acquire shares of
its Common Stock except for the redemption of Preferred Stock in
accordance with the Charter and as permitted by the Certificate of
Designation, Section B.3(c)(v);
(g) unless all dividends accrued on shares of the Preferred
Stock shall have been declared and paid, pay cash dividends or make
any other distribution on, or redeem, any shares of Common Stock;
(h) without limiting (g), pay dividends or make any other
distribution on any shares of Common Stock at any time prior to
January 15, 1999;
(i) enter into, or permit a Subsidiary to enter into, any new
agreement or make any amendment to any existing agreement, which by
its terms would restrict Rio Grande's performance of its obligations
to holders of Preferred Stock;
(j) after the Closing, enter into any agreement with any
holder or prospective holder of any securities of Rio Grande
providing for the granting to such holder of registration rights,
preemptive rights, special voting rights or protection against
dilution;
(k) except as otherwise provided in Schedule 5.11(k), incur
any indebtedness for borrowed money or become a guarantor or
otherwise contingently liable for any such indebtedness except for
trade payables, purchase money obligations or other unsecured
indebtedness incurred in the ordinary course of business;
(l) incur any additional indebtedness if Rio Grande's total
indebtedness exceeds or if the additional debt will result in the
total indebtedness by Rio Grande exceeding 65% of the present value,
using a 12% discount factor ("PV12"), of the Proved Reserves (as
defined below) net to Rio Grande's interest. The PV12 shall be
determined by using reserve projections provided by an independent
engineering firm or firms as mutually agreed upon by Rio Grande and
Purchaser. Proved Reserves will be determined by utilizing 100% of
the proved developed producing reserve profile, 75% of the proved
developed not producing reserve profile and 50% of the proved
undeveloped reserve profile. The operating costs used in the
appraisal shall be based on the prior twelve (12) months average
lease operating costs disregarding the lowest and highest cost months
in such twelve (12) month period. The oil and gas prices shall be
based on the then current futures price strip less any pertinent
adjustments for basis differential and any other associated burdens.
Capital expenditures that are necessary for development of such
reserves shall be included. Purchaser may request a redetermination
of the value of Rio Grande's reserves if the Senior Lenders have not
required a redetermination within 120 days of request and if in
Purchaser's reasonable assessment, the total debt of Rio Grande has
exceeded 65% of the PV12 value for more than 90 consecutive days;
(m) directly or indirectly use or permit to be used the "Xxxx"
name (or the name of Purchaser or any of Purchaser's affiliates) in
any public announcements, press releases, filings with any
governmental authority (including, without limitation, filings made
pursuant to the Securities Act or the Exchange Act or other
information provided to the Commission whether or not deemed "filed"
pursuant to the Securities Act or the Exchange Act), marketing or
advertising materials or otherwise, except as required by law in the
good faith judgment of Rio Grande;
(n) reduce the percentage of shares of Preferred Stock
required to consent to any of the above matters, or alter or negate
the need for such consent; or
(o) grant or issue at an exercise price less than the
Conversion Price (as defined in the Certificate of Designation) any
rights, options, or warrants to directly or indirectly subscribe for,
purchase, or otherwise acquire shares of Common Stock, or any
evidences of indebtedness, shares, or other securities directly or
indirectly convertible into or exchangeable for shares of Common
Stock, that would constitute upon issuance Adjustment Shares pursuant
to Section B.5(a)(i) of the Certificate of Designation.
ARTICLE SIX
OPTION SHARES; TRANSFER
SECTION 6.1 Option to Purchase. For purposes of this Agreement,
the shares of Series A Preferred Stock to be issued pursuant to Section 2.2
of this Agreement as Purchased Shares are referred to as the "Initially
Issued Series A Preferred Stock." Rio Grande hereby grants to Purchaser
the right and option to purchase an additional four-tenths (0.40) of one
(1) share of Series A Preferred Stock for each one (1) share of Initially
Issued Series A Preferred Stock then held by Purchaser or such subsequent
holder; provided, however, this option shall expire and be of no further
force and effect upon redemption in full of the Initially Issued Series A
Preferred Stock. The exercise price shall be $4.00 for each four-tenths
(0.40) of one (1) share of Series A Preferred Stock so purchased (or $10.00
for each whole share of Series A Preferred Stock so purchased), meaning
that if such option is exercised in full with respect to all 500,000 shares
of Initially Issued Series A Preferred Stock, would be entitled to purchase
200,000 shares of Series A Preferred Stock for an aggregate exercise price
of $2,000,000. The foregoing option may be exercised by Purchaser at any
time on or after January 16, 1999 but on or before January 16, 2000 (the
"Option Period"). The option may be exercised in whole or in part and may
be exercised at any time and from time to time during the Option Period.
To exercise this option, Purchaser shall deliver to Rio Grande (i)
the certificate or certificates for the shares of the Initially Issued
Series A Preferred Stock as to which the option to purchase is being
exercised, (ii) written notice stating that the Purchaser is electing to
exercise its option to purchase with respect to all or any number of the
shares of Initially Issued Series A Preferred Stock represented by such
certificate or certificates, specifying the number of shares of Series A
Preferred Stock to be purchased as a result of such exercise and specifying
Purchaser's or such holder's name or the names of the nominees in which
Purchaser wishes the certificate or certificates of Series A Preferred
Stock to be issued and (iii) a certified or cashier's check payable to the
order of Rio Grande in the amount of the purchase price of the shares being
purchased pursuant to the exercise of such option. Upon receipt of such
notice, certificate and purchase price, Rio Grande shall promptly issue the
additional purchased shares and re-issue the Initially Issued Series A
Preferred Stock evidenced by the certificate so delivered, in each case in
the names specified in the notice. Once the option has been exercised with
respect to a share of Initially Issued Series A Preferred Stock, the
foregoing option shall terminate as to that share of Initially Issued
Series A Preferred Stock but not as to any other share of Initially Issued
Series A Preferred Stock as to which the option to purchase had never been
exercised.
SECTION 6.2 Restrictive Legends. (a) Except as otherwise
permitted by this Section 6.2, each certificate representing Preferred
Stock constituting "restricted securities" as defined in Rule 144 under the
Securities Act ("Restricted Securities") shall bear a legend substantially
in the form shown below:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE LAWS OF ANY STATE
AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT OR LAWS,
OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR
OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL,
THAT SUCH REGISTRATION IS NOT REQUIRED."
(b) In addition to the legend set forth in Section 6.2(a), each
certificate representing Series B Preferred Stock shall bear a legend
substantially in the form shown below:
"THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN CERTIFICATE OF
DESIGNATION, RIGHTS AND PREFERENCES OF THE CORPORATION, WHICH PROHIBITS THE
TRANSFER OF THIS CERTIFICATE INDEPENDENTLY AND APART FROM A CERTIFICATE
REPRESENTING SHARES OF SERIES C PREFERRED STOCK. SUCH CERTIFICATE MAY BE
OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION."
(c) In addition to the legend set forth in Section 6.2(a), each
certificate representing Series C Preferred Stock shall bear a legend
substantially in the form shown below:
"THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN CERTIFICATE OF
DESIGNATION, RIGHTS AND PREFERENCES OF THE CORPORATION, WHICH PROHIBITS THE
TRANSFER OF THIS CERTIFICATE INDEPENDENTLY AND APART FROM A CERTIFICATE
REPRESENTING SHARES OF SERIES B PREFERRED STOCK. SUCH CERTIFICATE MAY BE
OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION."
SECTION 6.3 Notice of Proposed Transfer; Opinions of Counsel.
Prior to any transfer of any Restricted Securities which are not
registered under an effective registration statement under the Securities
Act, the holder thereof will give written notice to Rio Grande of such
holder's intention to effect such transfer, describing in reasonable detail
the manner of the proposed transfer. If any such holder delivers to Rio
Grande (i) an opinion of counsel reasonably acceptable to Rio Grande and
its counsel to the effect that the proposed transfer may be effected
without registration of such Restricted Securities under the Securities Act
and applicable blue sky laws and (ii) such other documents, certificates or
information pertaining to such transfer as Rio Grande may reasonably
request, Rio Grande agrees to transfer such Restricted Securities to the
proposed transferee; provided, however, the newly issued certificate will
contain a legend substantially in the form shown in Section 6.2, above.
SECTION 6.4 Issuance of Certificates Without Legend. Upon
receipt of evidence satisfactory to Rio Grande confirming that some or all
of the shares of Preferred Stock or common stock issued upon conversion of
the Series B Preferred Stock are no longer Restricted Securities, Rio
Grande shall reissue or shall authorize its transfer agent to reissue
certificates representing such shares without the restrictive legend
provided for in Section 6.2 hereof. In connection with any such request
for reissuance, Rio Grande may require an opinion of counsel, satisfactory
to Rio Grande in form and substance, that the shares in question are no
longer Restricted Securities.
ARTICLE SEVEN
MISCELLANEOUS
SECTION 7.1 Written Waivers. Any waiver, permit, consent or
approval of any kind or character on the part of any party of any
provisions or conditions of this Agreement must be made in writing and
shall be effective only to the extent specifically set forth in such
writing.
SECTION 7.2 Indemnification.
SECTION 7.2.1 By Rio Grande. Rio Grande hereby indemnifies and
agrees to defend and hold Purchaser harmless from, against and in respect
of any and all claims, demands, losses, costs, expenses, obligations,
liabilities, damages, recoveries and deficiencies, including interest,
penalties and attorneys' fees, that such Purchaser shall incur or suffer,
which arise, result from, or relate to the breach or failure of performance
by Rio Grande, or the falsity of any of the representations or warranties,
covenants or agreements in this Agreement or the Registration Rights
Agreement, or in any certificate or other instrument furnished or to be
furnished by Rio Grande or any Subsidiary hereunder or thereunder.
SECTION 7.2.2 By Purchaser. Purchaser hereby indemnifies and
agrees to defend and hold Rio Grande harmless from, against and in respect
of any and all claims, demands, losses, costs, expenses, obligations,
liabilities, damages, recoveries and deficiencies, including interest,
penalties and attorneys' fees, that Rio Grande shall incur or suffer, which
arise, result from, or relate to the breach or failure of performance by
Purchaser, or the falsity of any of the representations or warranties,
covenants or agreements in this Agreement or the Registration Rights
Agreement, or in any certificate or other instrument furnished or to be
furnished by Purchaser or any Subsidiary hereunder or thereunder.
SECTION 7.3 Successors and Assigns. This Agreement is binding
upon Rio Grande and Purchaser and inures to the benefit of Rio Grande,
Purchaser and their respective successors and Permitted Assigns.
SECTION 7.4 Severability. Whenever possible, each provision of
this Agreement will be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement is held
to be prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
SECTION 7.5 Descriptive Headings. The descriptive headings of
this Agreement are inserted for convenience of reference only and do not
constitute a part of this Agreement.
SECTION 7.6 Notices. Any notices required or permitted to be
given hereunder shall be delivered personally, sent by overnight courier or
mailed, registered or certified mail, return receipt requested, to the
following addresses, and shall be deemed to have been received on the day
of personal delivery, one Business Day after deposit with an overnight
courier or three business days after deposit in the mail:
If to Purchaser, to: Xxxx Exploration Company
0000 X. 00xx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxx 00000
Attention: Vice President
If to Rio Grande, to: Rio Grande, Inc.
00000 Xxxxxxx Xxxxx
Xxxxx Xxxxxx, Xxxxx 000
San Antonio, Texas 78216
Attention: President and Chief
Executive Officer
or to such other address as any party may specify in a written notice given
to the other parties hereto.
SECTION 7.7 Governing Law. The corporate law of Delaware will
govern all issues concerning the relative rights of holders of the
Preferred Stock as such. All other questions concerning the construction,
validity and interpretation of this Agreement and the Exhibits and
Schedules shall be governed by the internal law, and not the law of
conflicts of, the State of Texas, and the performance of the obligations
imposed by this Agreement, shall be governed by the laws of the State of
Texas applicable to contracts made and wholly to be performed in that
state.
SECTION 7.8 Exhibits and Schedules. All Exhibits and Schedules
are an integral part of this Agreement.
SECTION 7.9 Final Agreement. This Agreement, together with those
documents expressly referred to herein including the Registration Rights
Agreement, constitute the final agreement of the parties concerning the
matters referred to herein, and supersedes all prior agreements and
understandings with respect to such matters.
SECTION 7.10 Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which when so executed and
delivered shall be deemed an original, and such counterparts together shall
constitute one instrument. A photographic, photostatic, facsimile or other
similar reproduction of a writing signed by a party shall be regarded as an
executed original. Delivery of counterparts by facsimile shall be deemed
delivery of the original by a party.
SECTION 7.11 Further Assurances. Upon reasonable request of
either party, the other party hereto will on and after the Closing Date
take such reasonable actions as may be required to carry out the purposes
of this Agreement, the terms of the Certificate of Designation and the
Registration Rights Agreement.
SECTION 7.12 Remedies Cumulative. The remedies provided in this
Agreement shall be cumulative and shall not preclude the assertion or
exercise of any other rights or remedies available by law, in equity or
otherwise.
SECTION 7.13 Effect of Investigation. Any due diligence review,
audit or other investigation or inquiry undertaken or performed by or on
behalf of Purchaser shall not limit, qualify, modify or amend the
representations, warranties or covenants of, or indemnities by Rio Grande
made or undertaken pursuant to this Agreement, irrespective of the
knowledge and information received (or which should have been received
therefrom) by Purchaser; provided, however, if Purchaser or any
representative thereof becomes aware of facts or circumstances constituting
an actual or an alleged breach or falsity of a representation, warranty or
covenant of Rio Grande prior to Closing, and notwithstanding its knowledge
of such facts or circumstances, Purchaser acquires the Purchased Shares as
set forth herein, Purchaser may not thereafter assert such alleged breach
or falsity as a grounds for relief pursuant to Section 7.2.1 of this
Agreement or otherwise.
SECTION 7.14 Survival and Renewal of Representations and
Warranties. The representations, warranties, indemnities and covenants of
Rio Grande contained herein shall survive the Closing. The representations
and warranties of Rio Grande contained herein shall be made on the date
hereof and deemed remade on and as of the Closing Date.
SECTION 7.15 Fees and Expenses. Rio Grande will bear all of its
own expenses in connection with the preparation, execution and negotiation
of this Agreement and the Registration Rights Agreement, and the
transactions contemplated hereby and thereby. If Purchaser does not close
the purchase of the Purchased Shares as a result of a breach of
representation, warranty or covenant by Rio Grande, Rio Grande shall pay to
Purchaser the sum of $100,000 in same day or immediately available funds.
SECTION 7.16 Interpretation. In this Agreement, unless a clear
contrary intention appears:
(a) the singular number includes the plural number and vice versa;
(b) reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are
permitted by this Agreement, and reference to a Person in a particular
capacity excludes such Person in any other capacity or individually;
(c) reference to any gender includes each other gender;
(d) reference to any agreement (including this Agreement and the
Schedules and Exhibits), document or instrument means such agreement,
document or instrument as amended or modified and in effect from time to
time in accordance with the terms thereof and, if applicable, the terms
hereof and reference to any promissory note includes any promissory note
which is an extension or renewal thereof or a substitute or replacement
therefor;
(e) reference to any applicable law means such applicable law as
amended, modified, codified, replaced or reenacted, in whole or in part,
and in effect from time to time, including rules and regulations
promulgated thereunder and reference to any section or other provision of
any applicable law means that provision of such applicable law from time to
time in effect and constituting the substantive amendment, modification,
codification, replacement or reenactment of such section or other
provision;
(f) reference to any Article, Section, Schedule or Exhibit means
such Article or Section hereof or Schedule or Exhibit hereto;
(g) "hereunder", "hereof", "hereto" and words of similar import
shall be deemed references to this Agreement as a whole and not to any
particular Article, Section or other provision hereof; and
(h) "including" (and with correlative meaning "include") means
including without limiting the generality of any description preceding such
term.
ARTICLE EIGHT
TERMINATION
SECTION 8.1 Termination. This Agreement may be terminated at any
time prior to the Closing:
(a) by mutual consent of Purchaser and Rio Grande;
(b) by either Rio Grande or Purchaser if the Closing shall not
have occurred by January 17, 1997, provided that the failure to
consummate the transactions contemplated hereby is not a result of
the failure by the party so electing to terminate this Agreement to
perform any of its obligations hereunder.
SECTION 8.2 Effect of Termination. Except for the obligations of
Section 7.15 hereof, if this Agreement shall be terminated pursuant to
Section 8.1, all obligations, representations and warranties of the parties
hereto under the Agreement shall terminate and there shall be no liability
of any party to another party.
The parties hereto have executed this Agreement as of the date first
set forth above.
Rio Grande, Inc.
By:
Its:
Xxxx Exploration Company
By:
Its:
