SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report
November 12, 1998
Rio Grande, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-8287 74-1973357
(Commission File Number) (I.R.S. Employer Identification Number)
10101 Reunion Place, Suite 210
San Antonio, Texas 78216-4156
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(210) 308-8000
<PAGE>
Item 3. Bankruptcy or Receivership.
Rio Grande, Inc. filed a voluntary petition on November 12, 1998
under Chapter 11 of the Bankruptcy Act, Case No. 98-55619-C in the
United States Bankruptcy Court, Western District of Texas, San Antonio
Division, Judge Leif M. Clark presiding. Rio Grande, Inc., as Debtor in
Possession, will continue to operate and manage its affairs. The case
is expected to be consolidated and jointly administered with the
chapter 11 cases simultaneously filed by the following affiliates of
Rio Grande, Inc.: Rio Grande Drilling Company, a Texas corporation and
wholly owned subsidiary of Rio Grande, Inc.; Rio Grande Desert Oil
Company, a Nevada corporation and wholly owned subsidiary of Rio
Grande Drilling Company; Rio Grande Offshore, Ltd., a Texas limited
partnership, the sole general partner of which is Rio Grande Drilling
Company and the sole limited partner of which is Rio Grande Desert Oil
Company; and Rio Grande GulfMex, Ltd., a Texas limited partnership,
the sole general partner of which is Rio Grande Offshore, Ltd., which
owns an 80%interest in Rio Grande GulfMex, Ltd.
Item 4. Changes in Registrant's Certifying Accountant.
a. Rio Grande, Inc.(the "Company") has terminated KPMG Peat
Marwick LLP("KPMG")as its independent accountants. The dismissal was
approved by the Audit Committee and the Company's Board of Directors.
KPMG's reports on the financial statements for the two most recent
fiscal years did not contain an adverse opinion, disclaimer of opinion,
qualification or modification as to uncertainty, audit scope or accounting
principles, except that such reports included an explanatory paragraph
expressing substantial doubt as to the Company's ability to continue as a
going concern. Furthermore, during the two most recent fiscal
years and through the date of termination, there have been no disagreements
with KPMG on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements,
if not resolved to the satisfaction of KPMG, would have caused that firm
to make reference to the subject matter of such disagreements in its
reports on the financial statements for such years. The Company has
requested KPMG to furnish it with a letter addressed to the Securities
and Exchange Commission stating whether it agrees with the above
statements. A copy of such letter, dated November 12, 1998 is filed as
Exhibit 16 to this Form 8-K.
b. The Company has appointed Ernst & Young LLP as its
independent accountants. During the two most recent fiscal years and
through November 12, 1998, the Company has not consulted with
Ernst & Young LLP regarding the application of accounting principles to
a specific transaction, either completed or proposed, or the type of
audit opinion that might be rendered on the Company's financial
statements.
<PAGE>
Item 5. Purchase of Comerica Note by Exco Resources, Inc.; Voting Agreement
On November 2, 1998, EXCO Resources, Inc., ("EXCO") acquired from
Comerica Bank -Texas ("Comerica") a Promissory Note ("Note") dated January
15, 1997, which was executed by RioGrande, Inc. ("RGI") and Rio Grande
Drilling Company ("RGD") as co-makers in favor of Comerica. The Note, in
the original face amount of $50,000,000, had a principal amount outstanding
of $13,127,666 and related accrued interest payable of $486,227 on November
2, 1998. Repayment of the Note is secured by a first lien deed of trust,
mortgage and security interest in substantially all of the Company's
assets, primarily oil and gas leasehold interests and tangible well
equipment (the"Collateral Properties"). The sum of the outstanding
principal and accrued interest on the Note is significantly in excess of
what the Company believes to be the current market value of the Collateral
Properties. Pursuant to an agreement between Comerica and EXCO relating to
the purchase by EXCO of the Note, EXCO acquired all of Comerica's rights
pursuant to the Note and the related Loan Agreement and associated
collateral documents. In connection with EXCO's purchase of the Note,
Comerica agreed to dismiss litigation it had initiated against the Company
and its directors seeking to collect amounts due under the Note.
Contemporaneously with EXCO's purchase of the Note, the Company, EXCO and
Koch Exploration Company ("Koch"), the holder of the Company's preferred
stock, entered into a Voting Agreement (the "Agreement") providing for a
Financial Restructuring with regards to the Note, the Preferred Stock
Interests of Koch and other claims against the Company. The proposed
Financial Restructuring specifically provides that the Company will
commence cases under Chapter 11 of the Bankruptcy Code (the "Plan") and
will seek to obtain court approval of a joint plan of reorganization
pursuant to the terms of the Financial Restructuring as defined in the
Agreement. The description of the Agreement and the proposed Plan set forth
herein is expressly qualified by and made subject to the terms of the
Agreement, a copy of which is filed herewith. Capitalized terms used herein
and not otherwise defined shall have the meanings ascribed to them in the
Agreement. The proposed Plan would provide for certain class ("Class")
definitions for each group of creditors or parties that may have claims
against the Company. The Class proposed definitions are set out
as follows:
Class 1 The Allowed Secured Claim in respect of the Note.
Class 2 Any Allowed Secured Claims Against any of the RGI Group other
than the Allowed Secured Claim in Class 1.
<PAGE>
Class 3 Any Allowed Claims against any of the RGI Group entitled to
priority pursuant to the Bankruptcy Code, other than
priority claims specified in sections 507(a)(1), 507(a)(2)
and 507(a)(8) of the Bankruptcy Code.
Class 4 Any Allowed Unsecured, Nonpriority Claims against any of the
RGI Group not classified elsewhere including any deficiency
claim under the Note.
Class 5 Allowed Preferred Stock Interests in RGI, and all rights to
dividends and any other rights associated therewith,
held by Koch Exploration Company.
Class 6 Allowed Limited Partnership Interests in GulfMex.
Class 7 Allowed RGI Common Stock Interests, and any options,
warrants, or other rights or Claims in respect of such
Common Stock, and all other equity interests of the
RGI Group, excluding those equity interests classified
in Classes 5 and 6.
Class 8 Intercompany claims.
The Plan would provide that a "disbursing agent" be appointed
to make distributions to claims in Class 2 (not to exceed $20,000),
Class 3 (not to exceed $150,000), and Class 4(not to exceed $750,000).
Distributions to those Classes may not vary by more than 5% pursuant
to the Agreement. Claims designated in Class 4 are primarily the Company
trade creditors and joint interest billings, royalty suspense and
casualty insurance premiums payable. The Preferred Stock Interests
comprising Class 5 would be afforded the opportunity to acquire a 24.5%
working interest owner in the Righthand Creek Field. The Common Stock
Interests and claims in respect of the Company's common stock would be
afforded no value and would be cancelled. The Plan would also provide
that a "Motion to Determine the Rejection Damages Claim" of the Brechtel
Group would be filed prior to confirmation of the Plan. The Brechtel
Group consists of a group of entities and/or individuals who as a group
were the sellers of Righthand Creek Field to the Company. The Company
acquired Righthand Creek Field as a proved producing oil property from the
Brechtel Group on January 16,1997. Righthand Creek Field is located in
Allen and Beauregard Parishes, Louisiana. Pursuant to the Purchase and
Sale Agreement for the Righthand Creek Field, the Brechtel Group retained
a reversionary working interest in Righthand Creek after the Company
achieved certain payout results from the development on defined
undeveloped leasehold acreage. If the contract rights to the reversionary
interest are rejected through the Plan, any claim the Brechtel Group may
have would be a Class 4 claim.
The Plan would also provide for the rejection of any pre-petition
employment agreements effective upon the last day of the calendar month in
which substantial confirmation of the Plan occurs. The Agreement also
provides that two Company officers shall execute twelve month retention
agreements with EXCO immediately after substantial confirmation of the
Plan.
<PAGE>
The Agreement would automatically terminate upon the occurrence of
defined "Agreement Termination Event" unless the parties to the Agreement
waive the specific Agreement Termination Event in writing. An Agreement
Termination Event as defined by the Agreement means any of the following:
(a) The Chapter 11 Cases shall not have been commenced and the Plan and
supporting disclosure statement shall not have been filed by December
11, 1998;
(b) The RGI Group fails to comply in all material respects with its
obligations specified in paragraph 11 of the Agreement and in Exhibit
"A" of the Agreement;
(c) The RGI Group shall not have filed a motion to assume this Agreement
within the first ten (10) days of the Chapter 11 Cases;
(d) The order of the Bankruptcy Court confirming the Plan shall not have
been entered and the effective date of the Plan shall not have
occurred by March 31, 1999;
(e) Any member of the RGI Group shall file or support confirmation, or
fail to actively oppose confirmation, of a plan of reorganization
embodying terms materially different from those contemplated by this
Agreement;
(f) The Plan shall not have been substantially consummated pursuant to
section 1101(2) of the Bankruptcy Code by April 21, 1999;
(g) The Bankruptcy Court shall have entered an order pursuant to Section
1104 of the Bankruptcy Code appointing a trustee with respect to one
or more of the RGI Group;
(h) The Bankruptcy Court shall have entered an order dismissing the
Chapter 11 Cases or an order pursuant to Section 1112 of the
Bankruptcy Code converting the Chapter 11 Cases to cases under Chapter
7 of the Bankruptcy Code;
(i) An injunction, judgment, order, decree, ruling or charge shall have
been entered which prevents consummation of the Plan;
(j) An event or circumstance which has, or could reasonably be expected to
have, a Materially Adverse Effect shall have occurred;
(k) The (i) proofs of claim as of the claims bar date set forth in
Exhibit "A"to the Agreement and (ii) requests for payment of
administrative expenses that are on file in the Chapter 11 Cases,
together with (iii) the expenses set forth in Exhibit "B" to the
Agreement and (iv) those claims listed in the Schedules filed by the
RGI Group in the Chapter 11 Cases that are not designated as
disputed, contingent or unliquidated, exceed the limitation on
"allowed claims" set out in Part IV.G.of Exhibit"A" to the Agreement
and the amounts set forth in Exhibit "B" to the Agreement by more
than 5% in the aggregate; or
(l) The RGI Group or any of its individual members shall fail to
promptly remit to EXCO the net proceeds of any sales of the
Properties that might be consummated between the time of the
execution of this Agreement and the Effective Date.
Under terms of the Agreement, the Company has agreed that all of its
cash and cash equivalents shall be deposited to a collateral account
controlled by EXCO and that any amounts to be received from product sales
subsequent to the Agreement date shall also be deposited to that account.
The Company will provide a monthly budget to EXCO which will provide for
payment of the Company's operating expenses and general and administrative
expenses.
<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial Statements
Not applicable.
(b) Exhibits
Number Document
16 Letter from KPMG Peat Marwick LLP(E-1)
99(e)Voting Agreement dated October 30, 1998 between
Rio Grande, Inc., Rio Grande Drilling Company, Rio
Grande Offshore, Ltd. Rio Grande Desert Oil
Company and Rio Grande GulfMex, Ltd. and Exco
Resources, Inc. (E-2).
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RIO GRANDE, INC.
By: /s/
Guy Bob Buschman, President
Dated: November 12, 1998
<PAGE>
KPMG PEAT MARWICK LLP
November 12, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
We were previously principal accountants for Rio Grande, Inc. and, under
the date of August 7, 1998, we reported on the consolidated financial statements
of Rio Grande, Inc. and subsidiaries as of and for the years ended January 31,
1998 and 1997. On November 6, 1998, our appointment as principal accountants was
terminated. We have read Rio Grande, Inc.'s statements included under Item 4a of
its Form 8-K dated November 12, 1998, and we agree with such statements except
that we are not in a position to agree or disagree with Rio Grande, Inc.'s
statement that the change was approved by the audit committee of the Board of
Directors.
Yours very truly,
KPMG PEAT MARWICK LLP
E-1
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VOTING AGREEMENT
This Voting Agreement (the "Agreement") is entered into this day of October,
1998, between and among Rio Grande, Inc. ("RGI"), Rio Grande Drilling Company
("RGD"), Rio Grande Offshore, Ltd. ("Offshore"), Rio Grande Desert Oil Company
("Desert") and Rio Grande GulfMex, Ltd. ("GulfMex," and together with RGI, RGD,
Offshore and Desert, the "RGI Group"); EXCO Resources, Inc. ("EXCO"); and Koch
Exploration Company ("Koch").
R E C I T A L S
A. RGI and RGD are both co-makers on that certain promissory note dated as of
January 15, 1997, payable to the order of Comerica Bank-Texas ("Comerica") in
the original face amount of $50,000,000.00 (the "Note"), the principal balance
on such Note currently being approximately $13,127,666.06. Repayment of the Note
is secured by a first lien deed of trust, mortgage and security interest in
substantially all of the assets of the RGI Group (herein, the "Properties"). B.
Contemporaneously with execution of this Agreement, EXCO will purchase, for
certain consideration, the Note, together with all of Comerica's rights pursuant
to the Note and pursuant to that certain Loan Agreement dated March 8, 1996
between Comerica, RGI and RGD, including Comerica's security interests in the
Properties (the "Comerica-EXCO Transaction"). Additionally, a term of the
Comerica-EXCO Transaction is that the RGI Group may, prior to the closing of the
Comerica-EXCO Transaction, sell certain of the Properties and the proceeds of
any such sales will be held in escrow, pending the closing of the Comerica-EXCO
Transaction. Any such proceeds held in escrow will be conveyed to EXCO, as part
of the consideration being purchased by EXCO in the Comerica-EXCO Transaction,
upon the consummation of the Comerica-EXCO Transaction. C. On January 16, 1997,
RGI and Koch concluded a $10 million private placement in which Koch acquired
500,000 shares of Series A Preferred Stock in RGI for $5 million and 500,000
shares of Series B Preferred Stock in RGI for $5 million. Subsequent to January
1997, Koch was issued 17,500 shares of Series C Preferred Stock in RGI pursuant
to the terms of the Series C Preferred Stock. All of the shares of Series A, B
and C Preferred Stock, and all rights and remedies associated with any of said
Series A, B or C Preferred Stock, are hereinafter referred to as the "Preferred
Stock Interests". D. The RGI Group, EXCO, and Koch desire to implement a
Financial Restructuring (herein so called) with regard to the Note, the
Preferred Stock Interests, and with regard to the various other claims against
and interests in the RGI Group, which Financial Restructuring would be
substantially on the terms and conditions set forth in Exhibit "A" hereto. E.
The Board of Directors of RGI has determined that it is in the best interests of
the RGI Group and its constituencies to effectuate the Financial Restructuring
on the terms and conditions herein set forth. F. In order to implement the
Financial Restructuring, the entities comprising the RGI Group will commence
cases under Chapter 11 of the Bankruptcy Code (the "Chapter 11 Cases") and seek
to obtain court approval of a joint plan of reorganization incorporating the
terms of the Financial Restructuring (hereinafter, the "Plan" or the "Joint
Plan").
E-2
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G. This Agreement is being entered into in order to facilitate the
implementation of the Financial Restructuring, (i) by (a) EXCO and (b) Koch, in
consideration of the RGI Group's agreement to commence the Chapter 11 Cases and
to file and seek confirmation of the Plan, and (ii) by the RGI Group, in
consideration of EXCO's and Koch's respective agreements to vote their
respective claim(s) and/or interests to accept the Plan and otherwise agree to
the terms of the Financial Restructuring as set forth below.
A G R E E M E N T
Now, therefore, in consideration of the premises and the mutual covenants and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows: Voting Agreement; Restriction on Transfer. (a) EXCO and Koch
each hereby agree that they each shall: (i) Subject to their respective receipt
of disclosure and solicitation materials meeting the requirements of the
Bankruptcy Code, timely vote, in the case of EXCO, its claim in respect of the
Note and any other claims against or interests in the RGI Group that EXCO might
have or acquire, and, in the case of Koch, its Preferred Stock Interests and any
other claims against or interests in the RGI Group that Koch might have or
acquire, to accept the Plan (and not revoke or withdraw such votes); (ii)
Refrain from the sale, transfer, pledge or any other assignment of, in the case
of EXCO, the Note or any voting interest therein and any other claims against or
interests in the RGI Group that EXCO might have or acquire, and in the case of
Koch, the Preferred Stock Interests or any voting interests therein and any
other claims against or interests in the RGI Group that Koch might have or
acquire, to any person unless such person agrees in writing to become a party
to, and be bound by the terms and conditions of, this Agreement (it being
expressly acknowledged for the avoidance of doubt that EXCO and Koch may each
disclose the terms of this Agreement and any other information relating to the
parties hereto to any transferee or prospective transferee of either the Note or
the Preferred Stock Interests); (iii) Not take any position in the Chapter 11
Cases that conflicts with their obligations hereunder; (iv) Vote, in the case of
EXCO, its claim in respect of the Note and any other claims against or interests
in the RGI Group that EXCO might have or acquire, and, in the case of Koch, its
Preferred Stock Interests and any other claims against or interests in the RGI
Group that Koch might have or acquire, to reject any bankruptcy plan of
reorganization for the RGI Group other than the Plan; (v) Take such other and
further actions as the RGI Group shall reasonably request to effectuate the
Financial Restructuring. Notwithstanding the foregoing, nothing in this
Agreement shall require either of EXCO or Koch to take any action which is
prohibited by the Bankruptcy Code or by other applicable law or regulation or by
any order or direction of any court or any federal or state governmental
authority. (b) The obligations of EXCO under subsection (a) of this Section 1
shall be at all times subject to the continuing conditions that: (i) The
Comerica-EXCO Transaction shall have been consummated and EXCO shall have become
the holder and legal and beneficial owner of the Note and of valid and binding
liens
E-3
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and/or security interests in the Properties;
(ii) the disclosure statement in respect of the Plan shall contain information
in respect of the RGI Group's businesses and operations that is not materially
inconsistent with the information heretofore provided by the RGI Group to EXCO
or otherwise contained in quarterly, annual and other reports filed with the
Securities and Exchange Commission ("SEC Reports"); (iii) the Plan shall embody
the terms of the Financial Restructuring as outlined in Exhibit "A," and contain
no other financial terms except for terms which are not, individually or in the
aggregate, in the reasonable judgment of EXCO, materially adverse (i) to the
financial condition, assets, business or results of operations of the RGI Group,
taken as a whole, (ii) to the value of the consideration contemplated to be
received by EXCO under the Plan, or (iii) the rights of EXCO under the Plan;
(iv) the RGI Group shall have filed a Motion seeking to assume the Voting
Agreement within ten (10) days of the filing of the Chapter 11 Cases; (v)
exclusive of any claims arising out of the rejection of any contract with
Brechtel Group (as defined by Schedule 1(b)(v)), any deficiency claim under the
Note, any claims arising out of the rejection of any pre-petition employment
agreements, any personal injury claims or any employment-related claims, the
total of the restructuring and ordinary course corporate expenses collectively
incurred by the RGI Group, as set forth in Exhibit "B" attached hereto, together
with any additional administrative claims (including any claim of Energy
Spectrum Advisors, Inc.) and priority claims in the Chapter 11 Cases and the
claims classified in Classes 2, 3, and 4, as set forth in Exhibit "A," shall not
exceed $1,202,500 by more than 5%; (vi) all documentation relating to the
Financial Restructuring are in a form and substance reasonably satisfactory to
EXCO and consistent with the terms in Exhibit "A"; and (vii) an Agreement
Termination Event shall not have occurred. (c) The obligations of Koch under
subsection (a) of this Section 1 shall be at all times subject to the continuing
conditions that: (i) the disclosure statement in respect of the Plan shall
contain information in respect of the RGI Group's businesses and operations that
is not materially inconsistent with the information heretofore provided by the
RGI Group to Koch or otherwise contained in SEC Reports; (ii) the Plan shall
embody the terms of the Financial Restructuring as outlined in Exhibit "A," and
contain no other financial terms except for terms which are not, individually or
in the aggregate, in the reasonable judgment of Koch, materially adverse (i) to
the value of the consideration contemplated to be received by Koch under the
Plan or (ii) the rights of Koch under the Plan; (iii) all documentation relating
to the Financial Restructuring are in a form and substance reasonably
satisfactory to Koch and consistent with the terms in Exhibit "A"; and (iv) an
Agreement Termination Event shall not have occurred. Conditions to Effectiveness
and Implementation. Consummation of the Financial Restructuring, including the
Plan, will be subject to the following closing conditions, unless waived in
writing by all parties hereto: (i) The absence of any pending or threatened
action, suit, or proceeding by any third party before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction that is reasonably likely to result in an unfavorable injunction,
judgment, order, decree,
E-4
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ruling, or charge that would (A) prevent consummation of the Financial
Restructuring, (B) permit the Financial Restructuring to be rescinded following
consummation, or (C) cause the RGI Group or EXCO to incur material damages as a
result of the implementation of the Financial Restructuring; (ii) The accuracy
in all respects of the representations and warranties of the RGI Group as set
forth in this Agreement, which to the extent applicable shall be deemed to have
been made again at and as of the effective date of the Plan (except for those
representations and warranties made as of a specific date); (iii) The
performance in all material respects by the RGI Group of their covenants,
agreements and obligations hereunder; (iv) The execution and delivery of all
documentation relating to the Financial Restructuring in form and substance
reasonably satisfactory to the parties hereto and consistent with the terms of
Exhibit "A"; (v) The receipt of customary certificates, legal opinions and other
closing documentation in form and substance reasonably satisfactory to the
parties hereto; (vi) The absence of any event or circumstance which has or could
reasonably be expected to have a materially adverse effect on the financial
condition, assets, business or results of operation of the RGI Group, taken as a
whole, or on the value of the consideration contemplated to be received by each
of EXCO and Koch under the Plan, or on the rights of each of EXCO and Koch under
the Plan (a "Materially Adverse Effect"); (vii) The entry of an order of the
bankruptcy court in the Chapter 11 Cases, which order shall be reasonably
satisfactory in form and substance to EXCO, Koch and the RGI Group, unless
finality is waived by EXCO and Koch, which order shall have become final and
non-appealable, confirming the Plan and, among other things, allowing the claim
of EXCO in respect of the Note in the principal amount of $13,127,666.06 plus
all interest which has accrued under the Note, which as of the date of this
Agreement totals $486,227.33; and (viii) The (i) proofs of claim and (ii)
requests for payment of administrative expenses that are on file in the Chapter
11 Cases, as of the claims bar date set forth in Exhibit "A," together with
(iii) the expenses set forth in Exhibit "B" and (iv) those claims listed in the
Schedules filed by the RGI Group in the Chapter 11 Cases that are not designated
as disputed, contingent or unliquidated, shall not exceed the limitation on
"allowed claims" set out in Part IV.G. of Exhibit "A" and the amounts set forth
in Exhibit "B" by more than 5% in the aggregate. 3. Financial Restructuring; The
Plan. Contemporaneously with the consummation of the Comerica-EXCO Transaction,
Offshore, Desert and GulfMex shall execute unconditional, continuing guaranties
of the Note; provided, however, that the guaranty by GulfMex shall be limited in
amount to an amount equal to 80% of the value of the assets of GulfMex. The RGI
Group agrees upon consummation of the Comerica-EXCO Transaction (i) to prepare
the Plan and associated disclosure statement, (ii) to commence the Chapter 11
Cases, (iii) to file a motion to assume this Agreement in the Chapter 11 Cases,
and (iv) to take all such steps as shall be necessary and desirable to
consummate the Financial Restructuring, including confirming the Plan, as
promptly as reasonably practicable. Each member of the RGI Group shall use its
best efforts to cause the Financial Restructuring to become effective on the
terms and conditions set forth on Exhibit "A" and will not take any action that
is inconsistent with such terms and conditions
E-5
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without first consulting with and obtaining the approval of EXCO. 4. Payments.
EXCO acknowledges and agrees (i) that the RGI Group may make the payments
described in Exhibit "B" and (ii) that the dollar amounts for the payments
described in Exhibit "B" as restructuring costs and ordinary course corporate
expenses are estimates and may vary from the actual payments that are made. The
RGI Group represents that the dollar amounts set forth in Exhibit "B" for
restructuring costs and ordinary course corporate expenses represent their good
faith estimate of such payments through substantial consummation of the Plan. 5.
Representations of EXCO. EXCO represents and warrants to the RGI Group that each
of the following statements is true, correct and complete: (a) Corporate Power
and Authority. It has all requisite corporate power and authority to enter into
this Agreement and to carry out the transactions contemplated by, and to perform
its respective obligations under, this Agreement; (b) Authorization. The
execution and delivery of this Agreement and the performance of its obligations
hereunder have been duly authorized by all necessary corporate action; (c) No
Conflicts. Except as disclosed on Schedule 6(c), the execution, delivery and
performance of this Agreement do not and shall not (i) violate any provision of
law, rule or regulation applicable to it, or its certificate of incorporation or
its bylaws, or (ii) conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any of its material contractual
obligations; (d) Binding Obligation. This Agreement has been duly executed and
delivered and is a legal, valid and binding obligation, enforceable against it
in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or limiting creditors' rights generally or by equitable principles
relating to enforceability; Ownership of Note. Upon the closing of the
Comerica-EXCO Transaction, it will be the beneficial owner of (with the power to
vote and dispose of) the Note; and Waiver of Conflicts. EXCO hereby waives in
all respects any provision of the Loan Agreement dated March 8, 1996 between
Comerica, RGI and RGD, as amended, or any related agreement between Comerica and
any of the RGI Group, to the extent EXCO's failure to so waive would result in
an actual or alleged breach by RGI of the provisions of paragraph 7(c) hereof.
6. Representations of Koch. Koch represents and warrants to the RGI Group that
each of the following statements is true, correct and complete: (a) Corporate
Power and Authority. It has all requisite corporate power and authority to enter
into this Agreement and to carry out the transactions contemplated by, and to
perform its respective obligations under, this Agreement; (b) Authorization. The
execution and delivery of this Agreement and the performance of its obligations
hereunder have been duly authorized by all necessary corporate action; (c) No
Conflicts. The execution, delivery and performance of this Agreement do not and
shall not (i) violate any provision of law, rule or regulation applicable to it,
or its certificate of incorporation or its bylaws, or (ii) conflict with, result
in a breach of or constitute (with due notice or lapse of time or both) a
default under any of its material contractual obligations; (d) Binding
Obligation. This Agreement has been duly executed and delivered and is a legal,
E-6
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valid and binding obligation, enforceable against it in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or limiting
creditors' rights generally or by equitable principles relating to
enforceability; Ownership of Preferred Stock Interests. Koch is the beneficial
owner of (with the power to vote and dispose of) the Preferred Stock Interests;
and Waiver of Conflicts. Koch hereby waives in all respects any provision of the
Preferred Stock Purchase Agreement dated January 16, 1997 by and between RGI and
Koch; the Registration Rights Agreement between RGI and Koch of even date
therewith; the Certificate of Designation, Preferences and Rights of Series A,
Series B and Series C Preferred Stock; and the Stockholders Agreement dated
January 16, 1997 between Koch, RGI, Guy Bob Buschman and Robert A. Buschman
(collectively the "Koch Documents") to the extent Koch's failure to so waive
would result in an actual or alleged breach by RGI of the provisions of
paragraph 7(c) hereof. 7. Representations of the RGI Group. Each member of the
RGI Group represents and warrants to each of Koch and EXCO that each of the
following statements is true, correct and complete: (a) Corporate Power and
Authority. Each member of the RGI Group has all requisite corporate power and
authority to enter into this Agreement and to carry out the transactions
contemplated by, and perform their respective obligations under, this Agreement;
(b) Authorization. The execution and delivery of this Agreement and the
performance of the RGI Group's obligations hereunder have been duly authorized
by all necessary corporate action; (c) No Conflicts. Except as set forth in
Schedule 7(c), the execution, delivery and performance of this Agreement do not
and shall not (i) violate any provision of law, rule or regulation applicable to
the RGI Group or their certificates of incorporation or bylaws, or (ii) conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any of their material contractual obligations; (d) Binding
Obligation. This Agreement has been duly executed and delivered and is the
legal, valid and binding obligation of each member of the RGI Group, enforceable
against each in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or limiting creditors' rights generally or by equitable principles
relating to enforceability; (e) RGI Group Assets. Except as disclosed in
Schedule 7(e), each member of the RGI Group is the sole legal and beneficial
owner of, with good and marketable title to, its assets, including the
Properties and all assets of the members of the RGI Group, including the
Properties, are free and clear of all liens, security interests, restrictions,
encumbrances, charges, or other adverse claims or rights whatsoever; (f)
Financial Statements. The (i) audited balance sheet as of January 31, 1998, and
the related statements of operations, changes in stockholders' equity, and cash
flow as of and for the fiscal years then ended contained in the RGI Group's
annual Forms 10-KSB filed by the RGI Group with the Securities and Exchange
Commission on August 24, 1998 and (ii) unaudited balance sheets and statements
of operations, and cash flows for the six months ended July 31, 1998 for the RGI
Group filed pursuant to Form 10-QSB (collectively, the "Financial Statements")
have been prepared in accordance with generally accepted accounting principles
applied on a
E-7
<PAGE>
consistent basis throughout the periods covered thereby (except as noted
therein), present fairly the financial condition of the RGI Group for such
periods and are consistent in all material respects with the books and records
of the RGI Group, subject to normal and recurring year end adjustments and any
other adjustments noted by the Form 10-KSB filed for the fiscal year ended
January 31, 1998 and except that the Financial Statements for the six months
ended July 31, 1998 do not include notes required by generally accepted
accounting principles;
(g) Undisclosed Liability. Except as set forth in Schedule 7(g), no member of
the RGI Group has any material liability, except for (i) liabilities set forth
on the face of the most recent balance sheets included in the Financial
Statements and (ii) liabilities which have arisen after the date of the most
recent balance sheets included in the Financial Statements in the ordinary
course of business;
(h) Contracts. Schedule 7(h) lists all material contracts and other
agreements (excluding operating agreements and oil and gas leases) to which any
member of the RGI Group is a party; (i) Existing Cash. As of the date of the
execution of this Agreement, the RGI Group has collectively and inclusive of all
GulfMex's cash approximately $415,000 of cash and cash equivalents; and (j)
Disclosure. The representations and warranties contained in this Section 7 do
not contain any untrue statements of material fact or omit to state any material
fact necessary in order to make the statements and information contained in this
Section 7 not misleading. To the knowledge of the members of the RGI Group,
after giving effect to the Comerica-EXCO Transaction, there is no fact relating
to any member of the RGI Group which could reasonably be expected to have a
Materially Adverse Effect which has not been disclosed to EXCO or in the SEC
Reports. 8. Forbearance. So long as no Agreement Termination Event (as herein
defined) shall have occurred, EXCO hereby agrees to forbear from enforcing the
Note or taking any action to foreclose upon its liens and Koch hereby agrees to
forebear from enforcing its rights pursuant to the Preferred Stock Interests. 9.
Termination of Agreement. All obligations hereunder shall terminate
automatically upon the occurrence of any Agreement Termination Event, unless the
occurrence of such Agreement Termination Event is waived in writing by all of
the parties hereto. If any Agreement Termination Event occurs (and has not been
waived) at a time when court permission shall be required for EXCO and Koch to
change or withdraw (or cause to be changed or withdrawn) their votes in favor of
the Plan, no member of the RGI Group shall oppose any attempt by EXCO and/or
Koch to change or withdraw (or cause to be changed or withdrawn) such votes. An
"Agreement Termination Event" shall mean any of the following: (a) The Chapter
11 Cases shall not have been commenced and the Plan and supporting disclosure
statement shall not have been filed by December 11, 1998; (b) The RGI Group
fails to comply in all material respects with its obligations specified in
paragraph 11 hereinbelow and in Exhibit "A" attached hereto; (c) The RGI Group
shall not have filed a motion to assume this Agreement within the first ten (10)
days of the Chapter 11 Cases; (d) The order of the Bankruptcy Court confirming
the Plan shall not have been entered and
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<PAGE>
the effective date of the Plan shall not have occurred by March 31, 1999;
(e) Any member of the RGI Group shall file or support confirmation, or fail to
actively oppose confirmation, of a plan of reorganization embodying terms
materially different from those contemplated by this Agreement; (f) The Plan
shall not have been substantially consummated pursuant to section 1101(2) of the
Bankruptcy Code by April 21, 1999; (g) The Bankruptcy Court shall have entered
an order pursuant to Section 1104 of the Bankruptcy Code appointing a trustee
with respect to one or more of the RGI Group; (h) The Bankruptcy Court shall
have entered an order dismissing the Chapter 11 Cases or an order pursuant to
Section 1112 of the Bankruptcy Code converting the Chapter 11 Cases to cases
under Chapter 7 of the Bankruptcy Code; (i) An injunction, judgment, order,
decree, ruling or charge shall have been entered which prevents consummation of
the Financial Restructuring; (j) An event or circumstance which has, or could
reasonably be expected to have, a Materially Adverse Effect shall have occurred;
(k) The (i) proofs of claim as of the claims bar date set forth in Exhibit "A,"
and (ii) requests for payment of administrative expenses that are on file in the
Chapter 11 Cases, together with (iii) the expenses set forth in Exhibit "B" and
(iv) those claims listed in the Schedules filed by the RGI Group in the Chapter
11 Cases that are not designated as disputed, contingent or unliquidated, exceed
the limitation on "allowed claims" set out in Part IV.G. of Exhibit "A" and the
amounts set forth in Exhibit "B" by more than 5% in the aggregate; or (l) The
RGI Group or any of its individual members shall fail to promptly remit to EXCO
the net proceeds of any sales of the Properties that might be consummated
between the time of the execution of this Agreement and the Effective Date. 10.
Procedures Concerning Existing Cash. The RGI Group stipulates and agrees that
all of its cash and cash equivalents described in Section 7(i) and any amounts
thereafter remitted to the RGI Group, shall be promptly deposited by the RGI
Group into an account at NationsBank in Dallas, Texas, and the RGI Group shall
not use any of such cash without the express consent of EXCO. EXCO and the RGI
Group agree that the RGI Group will prepare a monthly budget for the RGI Group's
expenditures, after the date of the execution of this Agreement, and EXCO and
the RGI Group will cooperate and use good faith efforts to enter into an agreed
cash collateral order in the Chapter 11 Cases that contemplates the RGI Group's
using the cash collateral in accordance with its monthly budgets that have been
approved by EXCO or otherwise with the consent of EXCO. 11. Further Acquisition
of Claims. This Agreement shall in no way be construed to preclude EXCO and Koch
from acquiring additional claims against or interests in the RGI Group. Any such
additional claims or interests so acquired, however, shall automatically be
deemed to be subject to the terms of this Agreement. EXCO and Koch both agree
that they will vote (or cause to be voted) any such additional claims or
interests in favor of the Plan for so long as this Agreement remains in effect.
12. Amendments. This Agreement may not be modified, amended or supplemented
except in writing signed by all of the parties hereto. 13. Governing Law;
Jurisdiction. This Agreement shall be governed by and construed in
E-9
<PAGE>
accordance with the internal laws of the State of Texas, without regard to any
conflicts of law provision which would require the application of the law of any
other jurisdiction. 14. Headings. The Headings of the Sections, paragraphs and
subsections of this Agreement are inserted for convenience only and shall not
affect the interpretation hereof. 15. Successors and Assigns. This Agreement is
intended to bind and inure to the benefit of the parties and their respective
successors, assigns, heirs, executors, administrators and representatives.
Except as set forth herein, no party may assign any of its rights or obligations
hereunder without the prior consent of all other parties. 16. Prior
Negotiations. This Agreement supersedes all prior negotiations, understandings
and agreements with respect to the subject matter hereof. 17. Counterparts. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original and all of which shall constitute one and the same Agreement.
18. No Third-Party Beneficiaries. Unless expressly stated herein, this Agreement
shall be solely for the benefit of the parties hereto and no other person or
entity shall be a third-party beneficiary hereof. 19. Consideration. It is
hereby acknowledged by the parties that no consideration shall be due or paid to
EXCO and Koch for their agreements to vote to accept the Plan and to reject any
other plan in accordance with the terms and conditions of this Agreement other
than the RGI Group's agreement to commence the Chapter 11 Cases and to file and
seek confirmation of the Plan embodying the terms and conditions set forth in
Exhibit "A." 20. Notices. All notices and communications in connection with this
Voting Agreement shall be in writing and shall be delivered by hand, overnight
courier, certified mail, return receipt requested, or facsimile transmission, at
the addresses set forth in the signature pages hereto. 21. Disclosures or Public
Statements Concerning Agreement. No party to this Agreement shall issue any
press release, file any SEC Report, or make any other type of public
announcement or disclosure ("Public Disclosure") concerning this Agreement or
any of the details hereof without first providing the other parties to the
Agreement the opportunity to review and comment upon such Public Disclosure.
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<PAGE>
22. Specific Performance. It is understood and agreed by each of the parties
hereto that money damages would not be a sufficient remedy for any breach of
this Agreement by any party and each non-breaching party shall be entitled to
specific performance and injunctive or other equitable relief as a remedy of any
such breach.
SIGNED this day of October, 1998.
EXCO RESOURCES, INC.
5735 Pineland Dr., Suite 235
Dallas, Texas 75231
By:
Its:
KOCH EXPLORATION COMPANY
20 East Greenway Plaza
Houston, Texas 77046
By:
Its:
RIO GRANDE, INC.
10101 Reunion Place
Union Square, Suite 210
San Antonio, Texas 78216-4156
By:
Its:
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<PAGE>
RIO GRANDE DRILLING COMPANY
10101 Reunion Place
Union Square, Suite 210
San Antonio, Texas 78216-4156
By:
Its:
RIO GRANDE OFFSHORE, LTD.
10101 Reunion Place
Union Square, Suite 210
San Antonio, Texas 78216-4156
By: Rio Grande Drilling Company,
General Partner
By:
Its:
RIO GRANDE DESERT OIL COMPANY 10101 Reunion Place Union Square, Suite 210 San
Antonio, Texas 78216-4156
By:
Its:
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<PAGE>
RIO GRANDE GULFMEX, LTD.
10101 Reunion Place
Union Square, Suite 210
San Antonio, Texas 78216-4156
By: Rio Grande Offshore Ltd.,
General Partner
By:
Its:
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<PAGE>
EXHIBIT TO VOTING AGREEMENT
SCHEDULE 1(b)(v)
BRECHTEL GROUP
Brechtel Energy Corporation
19331 North 12th Street
Covington, LA 70433 34.5284%
Coastal Energy Corporation
P. O. Box 1670
Gretna, LA 70056 31.1233%
Mud Motors, Inc.
P. O. Box 1670
Gretna, LA 70056 10.0000%
ATC Properties, Inc.
19331 North 12th Street
Covington, LA 70433 8.6321%
Miller, Patrick & Rowe, Inc.
2439 Manhattan Blvd., Suite 205
Harvey, LA 70058 7.1979%
AFP Exploration, Inc.
3752 Lake Charles Drive
Gretna, LA 70056 2.8794%
Susan Brechtel
19331 North 12th Street
Covington, LA 70433 2.8363%
Richard J. Thibodeaux
3121 Plymouth Place
New Orleans, LA 70131 2.8026%
-------
100.0000%
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<PAGE>
SUPPORT FOR ESTIMATES CONTAINED IN Section 1(b)(v) of the VOTING AGREEMENT and
EXHIBIT A Section IV.G.
CLASS 2
A. Toyota Motor Credit Corporation
P.O. Box 9490
Cedar Rapids, IA 52409-9490
Telephone No. 800-874-8822
Account No. 0146066954 $11,841
B. IOS Capital
P.O. Box 9115
Macon, GA 3120-9115
Telephone No. 800-774-1004
Account No. 364015-26991 4,000
PotentialMechanic's and Materialmen's Liens (no estimate given, but any claim
would reduce amount of claims in Class 4)
TOTAL $15,841.00
CLASS 3
A. Employee Vacation Payments and IRA Bonuses
11 employees $40,600
-------
$40,600
B. Ad Valorem Taxes
Texas $29,337
Louisiana 67,010
------
$96,347
C. Delaware Franchise Tax (estimate) $3,000
Louisiana Franchise Tax (estimate) $1,225
Louisiana Income Tax (estimate) $100
Mississippi Income Tax (estimate) $200
----
$4,525
TOTAL $ 141,472.00
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<PAGE>
CLASS 4
A. Trade Creditors and Joint Interest charges
1. Recorded accounts payable
Rio Grande Offshore, Ltd. $203,448
Rio Grande Drilling Company $ 1,292
Rio Grande GulfMex, Ltd. (100%)* $271,312
Rio Grande, Inc. $0
-----------
$476,052
*RGI Group's ownership interest = 80%
2. Rio Grande GulfMex, Ltd. (100%)*
Cash Call - Eugene Island 275
AFE No. 98-048-0 $56,498
AFE No. 98-154-0 122,063
-------
$178,561
*RGI Group's ownership interest = 80%
B. Royalty - Suspense/Minimum -
Rio Grande Offshore Ltd. $17,431
Rio Grande GulfMex, Ltd. $ 8,437
-------
$25,868
C. Casualty Insurance Notes
American International Companies $ 6,295
AFCO $10,574
-------
$16,869
D. Brechtel Group's Unliquidated claims $ 1,000
TOTAL $ 698,350.00
Additional claims in this Class include the following, some of which have
already agreed to waive any additional distribution (E and F) and some of which
are believed to be fully covered by insurance (G). E. Unliquidated claims under
pre-petitioned employment agreements.
F. Deficiency on Class I Note
G. Unliquidated claims of personal injury lawsuit.
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<PAGE>
CLASS 5
Unliquidated balances of dividends due on Preferred Stock Interests held by Koch
Exploration Company.
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<PAGE>
EXHIBIT TO VOTING AGREEMENT
SCHEDULE 7(C)
CONFLICTS
(1) Potential dissolution of each of Rio Grande Offshore, Ltd. and Rio
Grande GulfMex, Ltd. pursuant to Sections 12.1 of the Limited
Partnership Agreement of each such partnership.
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<PAGE>
EXHIBIT TO VOTING AGREEMENT
SCHEDULE 7(e)
TITLE TO ASSETS
(1) 1997 Toyota T-100
4 x 4 Pickup
VIN #JT4UN22D4V0034674
Toyota Motor Credit Corporation - Mortgagor
(2) Potential Mechanic's and Materialmen's Liens on leasehold interests
which have been or will be invoked due to non-payment of service and
material invoices.
(3) Potential Tax Liens may be asserted by counties and/or parishes of
various taxing jurisdictions for non-payment of ad valorem or similar
property taxes.
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<PAGE>
EXHIBIT TO VOTING AGREEMENT
SCHEDULE 7(g)
UNDISCLOSED LIABILITIES
A. While no liability has been asserted and management is not aware of any
outstanding liabilities, there may be potential liabilities for Federal
and State Income Taxes, Franchise Taxes and/or Ad Valorem Taxes and/or
associated penalties.
B. While no liability has been asserted, there may be potential penalties
or assessments which may be assessed by the Securities and Exchange
Commission for late filing of the Form 10-KSB which was due for Fiscal
Year Ending 1998.
C. While no liability has been asserted and management is not aware of any
outstanding liabilities , there may be potential liabilities asserted
with plugging and/or abandonment liabilities, related to onshore oil
and/or gas wells offshore oil and/or gas wells and/or salt water
disposal wells).
D. There is a potential liability, estimated at $17,750, which may be due
to Beau Pre'Country Club, Inc., as surface owners to Ogden Branch Unit
#2, Adams County, Mississippi related to claims for site renovation.
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<PAGE>
EXHIBIT TO VOTING AGREEMENT
SCHEDULE 7(h)
CONTRACTS
A. Oil Sales and Purchase Agreement dated September 1, 1996 between Rio
Grande Offshore, Ltd. and Highland Energy Company (renewed through
December 30, 1998).
B. Gas Sales and Purchase Agreement dated September 1, 1996 between Rio
Grande Offshore, Ltd. and Highland Energy Company (renewed through
December 30, 1998).
C. Other Oil and Gas Purchase Contracts (subject to 30 day cancellation
provision).
D. Engagement Letter dated March 9, 1998 between Rio Grande, Inc., et al.
and Energy Spectrum Advisors, Inc.
E. Employment Contract - Guy Bob Buschman
F. Employment Contract - Gary Scheele
G. Brechtel Group reversionary interest pursuant to Brechtel Energy
Corporation, et al., Purchase and Sale Agreement with Rio Grande
Offshore, Ltd., dated November 20, 1996 (i.e., Section 2)
H. Purchase and Sale Agreement dated September 8, 1998 between Rio Grande
Offshore, Ltd. and Samson Resources Company.
I. Purchase and Sale Agreement dated September 8, 1998 between Robert A.
Buschman, H. Wayne Hightower and H. W. Hightower, Jr. and Samson
Resources Company.
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<PAGE>
EXHIBIT "A" TO VOTING AGREEMENT
The Financial Restructuring shall be accomplished through cases filed under
Chapter 11 of the Bankruptcy Code for each member of the RGI Group, and through
a joint plan of reorganization for the members of the RGI Group (the "Joint
Plan") that embodies the following classification and treatment of claims and
interests and other pertinent terms:
I. Means for Implementation of the Plan
A. The members of the RGI Group shall file Chapter 11 cases which shall be
administratively consolidated pursuant to Rule 1015(b) of the Bankruptcy Rules.
Schedules, Statement of Affairs, a motion to assume the Voting Agreement, the
Joint Plan and Disclosure Statement shall be filed simultaneously with the
Chapter 11 petitions.
B. The Joint Plan shall incorporate all of the terms, provisions and conditions
of this Exhibit "A" and the Voting Agreement.
C. RGD, Offshore, and Desert shall merge into and with RGI. After such merger,
the Reorganized RGI will own and have the right to dispose of all the RGI Group
Assets, including the 80% partnership interest in GulfMex.
D. All of the common stock and other equity interests in RGI, as well as all of
the equity interests in all of the other members of the RGI Group, shall be
canceled, and the Reorganized RGI will issue shares of common stock of
Reorganized RGI, as set forth in the Reorganized RGI Articles of Incorporation
(the "Reorganized RGI Common Stock"). Reorganized RGI will issue to the holder
of the Class 1 Allowed Secured Claim the Reorganized RGI Common Stock, as set
forth in Part II below.
II. Classification and Treatment of Claims and Interests in Joint Plan
Class 1 The Allowed Secured Claim in respect of the Note.
The claim in respect of the Note, which as of the date of the execution
of the Agreement is in the amount of $13,127,666.06 in principal and
$486,227.33 in interest, shall be an Allowed Secured Claim. The Allowed
Secured Class 1 Claim shall be discharged and satisfied in full by the
delivery, on the Effective Date, to the holder of the Allowed Secured
Class 1 Claim, the Reorganized RGI Common Stock.
Class 1 shall be impaired and entitled to vote with regard to the Joint
Plan.
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<PAGE>
Class 2 Any Allowed Secured Claims Against any of the RGI
Group other than the Allowed Secured Claim in Class
1.
The Allowed Class 2 Claims shall be paid either: (a) in cash in full on
the later of the Effective Date or, in the event that a Class 2 Claim
is a Disputed Claim, then on the date that such Class 2 Claim becomes
an Allowed Claim; or (b) on such other terms as are acceptable to the
holders of such Claims, in full satisfaction of their Claims.
The Joint Plan will be deemed to leave unaltered the legal, equitable
and contractual rights of the holder of such Claim. Class 2 will be
deemed unimpaired and will be deemed to have accepted the Joint Plan
under the provisions of section 1126(f) of the Code. The Debtors will
not solicit acceptances of the Joint Plan from this Class.
Class 3 Any Allowed Claims against any of the RGI Group
entitled to priority pursuant to the Bankruptcy Code,
other than priority claims specified in sections
507(a)(1), 507(a)(2) and 507(a)(8) of the Bankruptcy
Code.
The Allowed Class 3 Claims shall be paid either: (a) in cash in full on
the later of the Effective Date or, in the event that a Class 3 Claim
is a Disputed Claim, then on the date that such Class 3 Claim becomes
an Allowed Claim; or (b) on such other terms as are acceptable to the
holders of such Claims, in full satisfaction of their Claims.
The Joint Plan will be deemed to leave unaltered the legal, equitable
and contractual rights of the holder of such Claim. Class 3 will be
deemed unimpaired and will be deemed to have accepted the Joint Plan
under the provisions of section 1126(f) of the Code. The Debtors will
not solicit acceptances of the Joint Plan from this Class.
Class 4 Any Allowed Unsecured, Nonpriority Claims against
any of the RGI Group not classified elsewhere
including any deficiency claim under
the Note.
The Allowed Class 4 Claims shall be paid either: (a) in cash in full on
the later of the Effective Date or, in the event that a Class 4 Claim
is a Disputed Claim, then on the date that such Class 4 Claim becomes
an Allowed Claim; or (b) on such other terms as are acceptable to the
holders of such Claims, in full satisfaction of their Claims which, for
any deficiency claim under the Note and any claims under rejected
pre-petition employment agreements, shall be a waiver of any additional
distribution.
The Joint Plan will be deemed to leave unaltered the legal, equitable
and contractual rights of the holder of such Claim. Class 4 will be
deemed to have accepted the Joint Plan under the provisions of section
1126(f) of the Code. The Debtors will not solicit acceptances of the
Joint Plan from this Class.
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<PAGE>
Class 5 Allowed Preferred Stock Interests in RGI, and all
rights to dividends and any other rights associated
therewith, held by Koch Exploration Company.
The Allowed Class 5 Interests shall be discharged, canceled and
extinguished by the distribution of the following consideration: an
option to acquire up to 24.5% of the working interest owned by the RGI
Group, in the "Righthand Creek" Properties for the same consideration,
proportionately, as is offered to the holder of the Class 1 Claim.
Class 5 shall be impaired and entitled to vote with regard to the Joint
Plan.
Class 6 Allowed Limited Partnership Interests in GulfMex.
The Plan leaves unaltered the legal, equitable and contractual rights
of the Limited Partners in GulfMex.
The Class 6 Interests are deemed to have accepted the Plan under the
provisions of Section 1126(f) of the Code and the RGI Group will not
solicit acceptances of the Plan from these Interest holders.
Class 7 Allowed RGI Common Stock Interests, and any
options, warrants, or other rights or Claims in
respect of such Common Stock, and all other equity
interests of the RGI Group, excluding those equity
interests classified in Classes 5 and 6.
The holders of Interests in Class 7 shall receive no distribution under
the Joint Plan and such Interests shall be discharged, extinguished and
canceled.
Class 7 shall be deemed to have rejected the Joint Plan under the
provisions of section 1126(g) of the Code. The Debtors will not solicit
acceptances of the Joint Plan from this Class.
Class 8 Intercompany claims.
All claims between or among members of the RGI Group and between and
among any member of the RGI Group and any of their affiliates or
shareholders will be disallowed.
Class 8 Claims shall be deemed to have rejected the Joint Plan under
the provisions of section 1126(g) of the Code. The Debtors will not
solicit acceptances of the Joint Plan from the Class.
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<PAGE>
III. Treatment of Unclassified Administrative and Priority Claims, Under
Sections 507(a)(1), 507(a)(2), and 507(a)(8) of the Bankruptcy Code.
These Allowed Claims (that are unclassified and not entitled to a vote pursuant
to section 1123(a)(1) of the Bankruptcy Code) shall be paid either: (a) in cash
in full on the later of the Effective Date or, in the event that such a Claim is
a Disputed Claim, then on the date that such Claim becomes an Allowed Claim; or
(b) on such other terms as are acceptable to the holders of such Claims, in full
satisfaction of their Claims; provided, however, at the direction of the holder
of the Class 1 Claim, the Debtors may elect to satisfy the Claims entitled to
priority under section 507(a)(8) pursuant to "deferred cash payments" as
provided in section 1129(a)(9)(C) of the Bankruptcy Code.
IV. Miscellaneous Chapter 11 Details
A. The RGI Group will not utilize its cash and cash equivalents,
existing as of the date of the execution of the Agreement or
accumulated thereafter, without the express consent of EXCO or
upon an order of the Bankruptcy Court. The RGI Group will
submit an agreed cash collateral order, with a monthly budget
attached which has been consented to by EXCO and which will be
updated on a monthly basis, that sets forth the allowed
disbursements of cash collateral during the Chapter 11 Cases.
B. The Plan shall provide for the release by all persons who are
creditors or equity holders of any members of the RGI Group of
any claims or causes of action of any kind or character which
in any way relate to the businesses of the RGI Group or the
Plan, now existing or arising hereafter, against any member of
the RGI Group and EXCO, and each of their respective estates,
subsidiaries, affiliates, shareholders, predecessors,
successors, assigns, directors, officers, employees, agents,
attorneys, representatives, guarantors, sureties and insurers;
provided, however, the RGI Group agrees that if an objection
to confirmation is filed based on the release of third parties
or of claims not owned by the RGI Group or any member thereof,
then the releases provided for in the Plan will be amended to
the extent necessary to cause the withdrawal or denial of such
objection.
C. A Motion (or Complaint) to Determine the Rejection Damages
Claim of Brechtel Group will be filed prior to confirmation of
the Joint Plan. At the option of the holder of the Class 1
Claim, the contract between the Brechtel Group and Offshore
will (i) be assumed, or (ii) rejected. If the contract is
rejected, then any Claim that Brechtel may be allowed will be
a Class 4 Claim.
D. The Court shall set a Claims Bar Date no later than thirty
(30) days prior to the first scheduled hearing on confirmation
of the Plan. Objections to Claims will be filed no later than
sixty (60) days after entry of the Confirmation Order.
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<PAGE>
E. Unsecured Claims in respect of any equity security or contract
relating thereto (other than the Class 5 Interests) shall be
subordinated pursuant to section 510(b) of the Code and shall
be classified in Class 7 and shall not receive any
distribution in connection with the Plan.
F. A disbursing agent shall be appointed to make the
distributions to Creditors and Interest holders in Classes 2
through 6 and to Priority and Administrative Claimants. At the
election of the holder of the Class 1 Claim, six (6) months
after the Effective Date of the Plan, all funds or other
property retained by the Disbursing Agent on the Effective
Date shall be delivered to the holder of the Class 1 Claim or
its designee. Such person shall make any remaining
distributions under the Plan to holders of Claims entitled to
priority or to holders in Classes 2, 3, and 4.
G. Allowed Claims in Class 2 shall not exceed $20,000. Allowed
claims in Class 3 shall not exceed $150,000. Allowed claims in
Class 4 shall not exceed $750,000.
H. The Plan shall provide for the rejection of any pre-petition
employment agreements, effective upon the last day of the
calendar month in which substantial confirmation occurs.
I. Effective upon the first day of the first calendar month
following substantial confirmation, Guy Bob Buschman and Gary
Scheele shall execute twelve-month Retention Agreements with
EXCO.
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<PAGE>
EXHIBIT "B" TO VOTING AGREEMENT
I. Restructuring Expenses
A. Professional fees $150,000
B. Filing and U. S. Trustee quarterly fees 13,320
C. Miscellaneous (Printing, postage, etc.) 11,000
------
$174,320
II. Operating Expenses (November 1, 1998 through February 28, 1999)
A. General and administrative expenses $332,000
B. Lease operating expenses 537,000
---------
$869,000
$1,043,320
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<PAGE>
