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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): FEBRUARY 4, 1999
WEATHERFORD INTERNATIONAL, INC.
(Exact name of registrant as specified in charter)
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DELAWARE 1-13086 04-2515019
(State of Incorporation) (Commission File No.) (I.R.S. Employer Identification No.)
5 POST OAK PARK, SUITE 1700
HOUSTON, TEXAS 77027-3415
(Address of Principal Executive Offices) (Zip Code)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 297-8400
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EXHIBIT INDEX APPEARS ON PAGE 5
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ITEM 5. OTHER EVENTS
On February 2, 1999, Weatherford International, Inc., a Delaware
corporation (the "Company"), and General Electric Capital Corporation, a New
York corporation ("GECC"), completed the formation of a joint venture into
which both the Company and GECC contributed their gas compression business and
related assets and operations (the "Joint Venture"). The Joint Venture was
formed pursuant to the terms of a Formation Agreement dated as of February
2,1999, by and among the Company, Weatherford Enterra Compression Company,
L.P., a wholly owned subsidiary of the Company, GECC and Global Compression
Services, Inc., a wholly owned subsidiary of GECC. The Company beneficially
owns 64% of the Joint Venture and GECC beneficially owns 36% of the Joint
Venture.
A copy of the press release announcing the formation of the Joint
Venture is filed as Exhibit 99.1 and is hereby incorporated herein by reference.
This Current Report includes or incorporates by reference certain
statements relating to future results of the Company, including certain
projections and business trends. The Company believes these statements
constitute "forward- looking statements" as defined in the Private Securities
Litigation Reform Act of 1995. Certain risks and uncertainties may cause
actual results to be materially different from projected results and industry
trends contained in forward- looking statements in this Current Report. Such
risks and uncertainties include, but are not limited to, the following: future
prices of oil and gas and their effect on the demand and pricing of the
Company's and the Joint Venture's products and services; any material decline
in the current worldwide rig count or drilling activity; the ability of the
Company to achieve cost savings from the recent merger between EVI, Inc. and
Weatherford Enterra, Inc.; the ability of the Company to successfully integrate
its compression business with GECC's compression business; the Joint Venture's
ability to achieve costs savings from the combined compression businesses of
the Company and Global; the Company's ability to penetrate new and existing
markets with the new products and services acquired in recent transactions and
the Company's ability to integrate such operations and acquisitions; any
unexpected Year 2000 problems that arise during the implementation of the
Company's Year 2000 program; a material decline in the Chinese economy or
devaluation of its currency or further deterioration of the Asian and world
economies; any unexpected material political event that would affect the oil
and gas industry or particular oil producing countries in which the Company or
the Joint Venture operates; any material decline in currency rates in countries
in which the Company or Joint Venture operates; or any unexpected litigation or
legal disputes. These risks and uncertainties are more fully described in the
Company's filings with the Securities Exchange Commission under the Securities
Exchange Act of1934 and the Securities Act of 1933. Should one or more of
these risks or uncertainties materialize, actual results and trends may vary in
material aspects from those currently anticipated.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits
10.1 Formation Agreement dated as of February 2, 1999, by and among
Weatherford International, Inc., Weatherford Enterra
Compression Company, L.P., General Electric Capital
Corporation and Global Compression Services, Inc.
10.2 Limited Partnership Agreement of Weatherford Global
Compression Services, L.P. dated as of February 2, 1999, by
and among Weatherford Global Compression Holding, L.L.C.,
Weatherford Enterra Compression Company, L.P. and Global
Compression Services, Inc.
10.3 Limited Liability Company Agreement of Weatherford Global
Compression Holding, L.L.C. dated as of February 2, 1999, by
and between Weatherford Enterra Compression Company, L.P. and
Global Compression Services, Inc.
10.4 Registration Rights Agreement dated as of February 2, 1999,
among Weatherford Global Compression Services, L.P.,
Weatherford Enterra Compression Company, L.P. and Global
Compression Services, Inc.
99.1 Press release of the Company dated February 3, 1999,
announcing the formation of the Joint Venture.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WEATHERFORD INTERNATIONAL, INC.
Dated: February 4, 1999 /s/ Curtis W. Huff
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Curtis W. Huff
Senior Vice President,
General Counsel and Secretary
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INDEX TO EXHIBITS
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Number Exhibit
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10.1 Formation Agreement dated as of February 2, 1999, by and among Weatherford
International, Inc., Weatherford Enterra Compression Company, L.P., General
Electric Capital Corporation and Global Compression Services, Inc.
10.2 Limited Partnership Agreement of Weatherford Global Compression Services,
L.P. dated as of February 2, 1999, by and among Weatherford Global
Compression Holding, L.L.C., Weatherford Enterra Compression Company, L.P.
and Global Compression Services, Inc.
10.3 Limited Liability Company Agreement of Weatherford Global Compression
Holding, L.L.C. dated as of February 2, 1999, by and between Weatherford
Enterra Compression Company, L.P. and Global Compression Services, Inc.
10.4 Registration Rights Agreement dated as of February 2, 1999, among
Weatherford Global Compression Services, L.P., Weatherford Enterra
Compression Company, L.P. and Global Compression Services, Inc.
99.1 Press release of the Company dated February 3, 1999, announcing the
formation of Weatherford Global.
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EXHIBIT 10.1
FORMATION AGREEMENT
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Formation Agreement
By and Among
Weatherford International, Inc.
a Delaware corporation,
Weatherford Enterra Compression Company, L.P.,
a Delaware limited partnership,
General Electric Capital Corporation,
a New York corporation, and
Global Compression Services, Inc.,
a Delaware Corporation
Dated as of February 2, 1999
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS..........................................................................................1
Section 1.1. Definitions..................................................................1
ARTICLE II
FORMATION AND CONTRIBUTION; CLOSING..................................................................1
Section 2.1. Formation and Contribution...................................................1
Section 2.2. Closing.....................................................................11
Section 2.3. Audit and Adjustment........................................................11
Section 2.4. Financing for the Partnership...............................................12
ARTICLE III
REPRESENTATIONS AND WARRANTIES......................................................................12
Section 3.1. Representations and Warranties of Weatherford and WECC......................12
Section 3.2. Representations and Warranties of GE Capital and Global.....................23
ARTICLE IV
CERTAIN COVENANTS...................................................................................34
Section 4.1. Conduct of Weatherford Compression Business.................................34
Section 4.2. Conduct of Global Compression Business......................................36
Section 4.3. Certain Other Covenants.....................................................37
Section 4.4. Curing Adverse Environmental Conditions.....................................40
ARTICLE V
CONDITIONS..........................................................................................40
Section 5.1. Conditions Precedent to Each Party's Obligations............................40
Section 5.2. Conditions Precedent to Obligations of Weatherford and the other
Weatherford Entities........................................................41
Section 5.3. Conditions Precedent to Obligations of GE Capital and the other
GE Entities.................................................................43
ARTICLE VI
TERMINATION; AMENDMENT; WAIVER......................................................................45
Section 6.1. Termination.................................................................45
Section 6.2. Amendment...................................................................46
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Section 6.3. Procedure for Termination, Amendment, Extension or Waiver
.......................................................................................46
ARTICLE VII
TAX MATTERS.........................................................................................46
Section 7.1. Certain Tax Matters.........................................................46
ARTICLE VIII
INDEMNIFICATION.....................................................................................50
Section 8.1. Survival of Certain Representations and Warranties..........................50
Section 8.2. Indemnification by Weatherford and WECC.....................................50
Section 8.3. Indemnification by GE Capital and Global....................................52
ARTICLE IX
MISCELLANEOUS.......................................................................................53
Section 9.1. Expenses....................................................................53
Section 9.2. Dispute Resolution and Arbitration..........................................54
Section 9.3. Notice......................................................................56
Section 9.4. Assignment..................................................................56
Section 9.5. Successors Bound............................................................56
Section 9.6. Governing Law...............................................................56
ANNEX
Annex I Glossary of Terms
EXHIBITS
Exhibit A Certificate of Formation
Exhibit B Certificate of Limited Partnership
Exhibit C LLC Agreement
Exhibit D LP Agreement
Exhibit E Registration Rights Agreement
Exhibit F Unanimous Consent of Directors
Exhibit G [Reserved]
Exhibit H Shared Services Agreement
Exhibit I Transition Agreement
Exhibit J Assignment, Conveyance and Assumption Documents
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SCHEDULES
Schedule 2.1(c)(2)(A) - Included Weatherford Assets
Schedule 2.1(c)(2)(B) - Excluded Weatherford Assets
Schedule 2.1(c)(2)(i) - Weatherford Real Property Interests
Schedule 2.1(c)(2)(ii) - Weatherford Contracts
Schedule 2.1(c)(2)(iii) - Weatherford Other Property Interests
Schedule 2.1(c)(2)(vi) - Weatherford Business Records
Schedule 2.1(c)(2)(vii) - Weatherford Miscellaneous Assets
Schedule 2.1(c)(2)(ix) - Weatherford Licenses
Schedule 2.1(c)(2)(x) - Weatherford Intellectual Property
Schedule 2.1(c)(2)(xii) - Weatherford Bank Accounts
Schedule 2.1(c)(3) - "Twelve-Step" Transfer
Schedule 2.1(d)(2)(A) - Excluded Global Assets
Schedule 2.1(d)(2)(i) - Global Real Property Interests
Schedule 2.1(d)(2)(ii) - Global Contracts
Schedule 2.1(d)(2)(iii) - Global Other Property Interests
Schedule 2.1(d)(2)(vi) - Global Business Records
Schedule 2.1(d)(2)(vii) - Global Miscellaneous Assets
Schedule 2.1(d)(2)(ix) - Global Licenses
Schedule 2.1(d)(2)(x) - Global Intellectual Property
Schedule 2.1(d)(2)(xii) - Global Bank Accounts
Schedule 2.3 - Calculation of Net Assets
Schedule 3.1(a) - Weatherford Foreign Qualifications
Schedule 3.1(b) - Weatherford Financial Statements
Schedule 3.1(f) - Weatherford Business Exceptions
Schedule 3.1(h) - Weatherford Litigation
Schedule 3.1(i) - Weatherford Employee Benefit Matters
Schedule 3.1(j) - Weatherford Tax Matters
Schedule 3.1(l) - Weatherford Environmental Matters
Schedule 3.1(n) - Weatherford Material Contracts and Agreements
Schedule 3.1(o) - Weatherford Property Encumbrances
Schedule 3.1(q) - Weatherford Labor Matters
Schedule 3.1(r) - Weatherford Insurance Policies
Schedule 3.1(s) - Weatherford Undisclosed Liabilities
Schedule 3.1(t) - Weatherford Year 2000 Compliance
Schedule 3.2(a) - Global Foreign Qualifications
Schedule 3.2(b) - Global Financial Statements
Schedule 3.2(f) - Global Business Exceptions
Schedule 3.2(h) - Global Litigation
Schedule 3.2(i) - Global Employee Benefit Matters
Schedule 3.2(j) - Global Tax Matters
Schedule 3.2(l) - Global Environmental Matters
Schedule 3.2(n) - Global Material Contracts and Agreements
Schedule 3.2(o) - Global Property Encumbrances
Schedule 3.2(r) - Global Insurance Policies
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Schedule 3.2(s) - Global Undisclosed Liabilities
Schedule 3.2(t) - Global Year 2000 Compliance
Schedule 4.1(a)(iv) - Weatherford Acquisition Transactions
Schedule 4.2(a)(iv) - Global Acquisition Transactions
Schedule 4.2(a)(viii) - Global Contemplated Transactions
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FORMATION AGREEMENT
This Formation Agreement dated as of February 2, 1999
("Formation Agreement"), by and among (i) Weatherford International, Inc., a
Delaware corporation ("Weatherford"), and Weatherford Enterra Compression
Company, L.P., a Delaware limited partnership ("WECC", and, collectively with
Weatherford, the "Weatherford Entities"), on the one hand, and (ii) General
Electric Capital Corporation, a New York corporation ("GE Capital"), and Global
Compression Services, Inc., a Delaware corporation ("Global," and, collectively
with GE Capital, the "GE Entities"), on the other hand.
R E C I T A L S
WHEREAS, the Weatherford Entities and the GE Entities desire
to form a Delaware limited partnership (the "Partnership") and a Delaware
limited liability company to act as the sole general partner thereof, which
Partnership will issue interests therein in exchange for contributions and
transfers by WECC and by the Transferring Weatherford Entities and Global and GE
Capital (Thailand) of certain of their respective gas compression assets, in
each case pursuant to and in accordance with the terms and conditions hereof;
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Weatherford Entities and the GE Entities hereby covenant and
agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. All capitalized or other defined terms used
but not defined in this Formation Agreement are used in this Formation Agreement
with the meanings assigned thereto in Annex I to this Formation Agreement.
ARTICLE II
FORMATION AND CONTRIBUTION; CLOSING
Section 2.1. Formation and Contribution. Subject to the terms and
conditions of this Formation Agreement, (i) WECC and Global shall form Limited,
(ii) Limited, WECC and Global shall form the Partnership, (iii) WECC and Global
shall contribute or transfer their respective gas compression assets to the
Partnership in exchange for Partnership Interests and agree to make certain cash
payments to fund the purchase of certain of the assets of the Transferring
Weatherford Entities and GE Capital (Thailand) and Global's Canadian Assets,
(iv) Weatherford shall cause the Transferring Weatherford Entities and GE
Capital shall cause GE Capital (Thailand) to transfer certain of their assets to
the Partnership as provided in this Article II, and (v) the other transactions
contemplated by this Formation Agreement shall be effected as follows:
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(a) Certain Filings. On or before the Closing Date, the
following organizational documents shall be filed:
(1) Certification of Formation. WECC and Global shall
file the Certificate of Formation with the Secretary of State of Delaware.
(2) Certificate of Limited Partnership. Limited, WECC
and Global shall file the Certificate of Limited Partnership with the Secretary
of State of Delaware.
(b) Execution and Delivery of Certain Agreements. On the
Closing Date, the following agreements and documents shall be executed and
delivered:
(1) LLC Agreement. WECC and Global shall execute and
deliver the LLC Agreement.
(2) LP Agreement. Limited, WECC and Global shall
execute and deliver the LP Agreement and Weatherford shall execute and deliver
the LP Agreement solely to evidence its joint and several liability with WECC
for the obligations of WECC under Section 11.2 thereof.
(3) Registration Rights Agreement. WECC, Global and
the Partnership shall execute and deliver the Registration Rights Agreement.
(4) Unanimous Consent of Directors of General
Partner. All members of the Board of Directors of Limited shall execute and
deliver the Unanimous Consent of Directors.
(5) Shared Services Agreement. Weatherford and the
Partnership shall execute and deliver the Shared Services Agreement.
(6) Transition Services Agreement. GE Capital, Global
and the Partnership shall execute and deliver the Transition Services Agreement.
(7) Employee Lease Agreement. GE Capital, Global and
the Partnership shall execute and deliver the Employee Lease Agreement.
(8) License Agreement. The Partnership, Weatherford
Holding U.S., Inc. and Weatherford/Lamb, Inc. shall execute and deliver the
License (and Weatherford shall cause each of Weatherford Holding U.S., Inc. and
Weatherford/Lamb, Inc. to so execute and deliver the License Agreement.
(9) Master Lease Assignment. WECC and the Partnership
and the Agents and Lessors named therein will execute and deliver the Assignment
and Assumption and First Amendment to Participation Agreement, Master Lease
Intended as Security and Schedule X dated February 2, 1999 (the "Master Lease
Assignment"), among the Partnership and the Parties thereto.
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(c) Contribution and Transfer by WECC and the other
Transferring Weatherford Entities of the Weatherford Compression Business.
(1) Weatherford shall contribute funds to WECC and
cause WECC to fulfill its obligations under this Section 2.1(c).
(2) Partnership Contribution Transactions. On the
Closing Date, in exchange for sixty three and 36/100 percent (63.36%) of the
Partnership Interests in the Partnership, WECC shall contribute to the
Partnership, by assigning, transferring, conveying and delivering to the
Partnership, and the Partnership shall accept as a contribution therefrom,
pursuant to the Weatherford/Partnership Assignment and Conveyance Agreement and
other instruments of assignment and conveyance as contemplated by the
Weatherford/Partnership Assignment and Conveyance Agreement in form or forms
attached as Exhibit J, an undivided ninety-nine percent (99%) of (i) all assets,
properties, rights, titles, interests, contracts of every kind, character and
description, claims and estates of whatever nature, wherever located, however
evidenced, whether recorded or unrecorded, real, personal or mixed, movable or
immovable, tangible or intangible, Owned by WECC that are Used in connection
with the Weatherford Compression Business (the "Closing Weatherford Assets") and
(ii) its obligation under Section 2.1(c)(4) of this Formation Agreement to
contribute cash to the Partnership in an amount equal to the amount the
Partnership needs to acquire, as described in Section 2.1(c)(4), the assets of
the nature described in clauses (i) through (xiii) below to the extent that such
assets are Owned and Used by the other Transferring Weatherford Entities and
such assets are either scheduled as an Additional Weatherford Assets on Schedule
2.1(c)(2)(A) or are dedicated exclusively to the compression businesses of such
entities, in each case, subject to the exclusions described therein (the
"Additional Weatherford Assets") and all of the Transferring Weatherford
Entities' rights, titles and interests therein, including without limitation all
assets reflected on the Balance Sheet at December 31, 1998, as the same may
exist on the Closing Date (the Closing Weatherford Assets and the Additional
Weatherford Assets (or, prior to the transfer of the Additional Weatherford
Assets to the Partnership by the Transferring Weatherford Entities, WECC's
obligation hereunder to contribute cash therefor) being hereinafter referred to
collectively as the "Included Weatherford Assets"), the Included Weatherford
Assets include the assets shown on Schedule 2.1(c)(2)(A) and further including
without limitation, the following:
(i) All gas compression facilities and interests
therein (including without limitation all leases, subleases, fee estates, joint
operations and leaseholds related thereto), and other real property and real
property interests Used in connection with the Weatherford Compression Business,
including without limitation the properties listed on and referred to in
Schedule 2.1(c)(2)(i) to this Formation Agreement, and rights to acquire any of
the foregoing;
(ii) All rights in, to and under or derived from all
Contracts, which are attributable to or are arising from or are Used, in
connection with the Weatherford Compression Business or the Included Weatherford
Assets, including without limitation all such Contracts for the compression of
natural gas, partnership agreements, Contracts that relate to the Weatherford
Compression Business, the Included Weatherford Assets or any of the properties
and interests described or referred to in Section 2.1(c)(2)(i) of this Formation
Agreement and any other Contracts and all rights to receive payment for products
sold and/or services rendered and all rights
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to receive goods and services purchased pursuant to such Contracts and to assert
claims and take other actions in respect of breaches, defaults or other
violations thereof and otherwise (all of which Contracts and rights are listed
and referred to in Schedule 2.1(c)(2)(ii) to this Formation Agreement);
(iii) All fixtures, personal property, improvements,
easements, permits, licenses, servitudes, rights-of-way, surface leases and
other surface, subsurface, air and water rights Used in connection with the
Weatherford Compression Business including computer hardware that is Owned by a
Transferring Weatherford Entity that is Used by persons who are offered
employment by the Partnership and any boilers, buildings, compression
facilities, construction and construction in progress, machinery, equipment,
furniture, furnishings, automobiles, trucks and rolling stock, tools, power
lines, telephone and telegraph lines, roads, and other appurtenances, easements,
facilities and similar property, Used in connection with the Weatherford
Compression Business or the operation or maintenance of the properties and
interests described in Section 2.1(c)(2)(i) of this Formation Agreement,
including without limitation such assets listed on Schedule 2.1(c)(2)(iii) to
this Formation Agreement;
(iv) All current and long-term notes receivable,
accounts receivables and all bonds and other evidences of indebtedness of, and
rights to receive payments, from any Person, in each case attributable to or
arising solely from the Weatherford Compression Business or the Included
Weatherford Assets (other than intercompany funded debt), and all security
interests of WECC in respect of such notes, accounts, bonds, evidences of
indebtedness and other rights;
(v) All inventories of materials (including without
limitation natural gas), raw materials, work in process, finished products,
spare parts, replacement and component parts, and office and other supplies Used
in connection with the Included Weatherford Assets or the Weatherford
Compression Business;
(vi) All contract files, gas processing files,
division order files, abstracts, title policies, binders or opinions, product
design data, plans, blueprints, specifications, manuals, designs, drawings,
recorded knowledge, surveys, engineering reports, equipment and parts lists,
test reports, materials standards, catalogues, performance and quality control
standards, procedures and records, research and development data, price lists,
mailing lists, photographs, production data, sales and purchase records, sales
order files, records, data, media materials and plates, advertising, marketing,
promotional and sales materials, files and materials relating to suppliers,
vendors and other service providers, and all other books, records, intangibles,
files, maps, accounting information and records and other similar information or
data Used in connection with the Weatherford Compression Business (collectively,
the "Weatherford Compression Business Records") in whatever media such
Weatherford Compression Business Records may be retained and stored, including
without limitation any Transferring Weatherford Entities' proprietary computer
and automatic machinery software and programs and source disks that are Used
thereby in the Weatherford Compression Business and listed on Schedule
2.1(c)(2)(vi) to this Formation Agreement, and program documentation, tapes,
manuals, forms, guides and other materials with respect thereto Used in
connection with the Weatherford Compression Business;
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(vii) All miscellaneous assets listed on Schedule
2.1(c)(2)(vii) to this Formation Agreement;
(viii) All rights in, to and under all express or
implied warranties, representations, indemnities, covenants or other agreements
of any third parties arising from or attributable to the Weatherford Compression
Business or the Included Weatherford Assets;
(ix) To the extent permitted by law, all permits,
approvals, licenses, qualifications, product registrations, safety
certifications and other similar authorizations Used in connection with the
Weatherford Compression Business including without limitation those listed on
Schedule 2.1(c)(2)(ix) to this Formation Agreement;
(x) The rights of the Weatherford Compression
Business in the patents, patent applications, trademarks, trade names, service
marks, service names, registered user names, copyrights and copyright
applications and related agreements and licenses Owned by any Transferring
Weatherford Entity and Used in the Weatherford Compression Business (all of
which are identified on Schedule 2.1(c)(2)(x) to this Formation Agreement), and
all designs, plans, inventions, trade secrets, processes, procedures, research
records, manufacturing know-how and formulas, whether patentable or
unpatentable, and similar proprietary rights wherever located, Owned by any
Weatherford Entity that are Used in connection with the Weatherford Compression
Business;
(xi) All other intangible personal property of the
Weatherford Compression Business;
(xii) The bank accounts listed on Schedule
2.1(c)(2)(xii) to this Formation Agreement, including without limitation the
cash on deposit therein on the Closing Date; and
(xiii) All other rights, properties and assets Used
exclusively for the Weatherford Compression Business of any character
whatsoever, wherever located;
provided, however, that the Included Weatherford Assets do not include and WECC
and the other Transferring Weatherford Entities shall retain all of their
rights, titles and interests in and to (i) those specific assets, properties,
rights, titles, interests, contracts, claims and estates described on Schedule
2.1(c)(2)(B) hereto and (ii) in the case of the Transferring Weatherford
Entities other than WECC, those assets, properties, rights, titles, interests,
contracts, claims and estates that are not dedicated exclusively to the
compression business of such entities, (such retained assets, properties,
rights, titles, interests, contracts, claims and estates, the "Excluded
Weatherford Assets").
(3) Limited Contribution Transactions. On the Closing
Date, in exchange for sixty four percent (64%) of the Membership Interests in
Limited, WECC shall contribute to Limited, by assigning, transferring, conveying
and delivering to Limited, and Limited shall accept as a contribution from WECC,
pursuant to the Weatherford/Limited Assignment and Conveyance Agreement and
other instruments of assignment and conveyance as contemplated by the
Weatherford/Limited Assignment and Conveyance Agreement in form or forms
attached as
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Exhibit J, an undivided one percent (1%) of the Included Weatherford Assets and
its obligation under Section 2.1(c)(4) of this Formation Agreement to contribute
cash as provided therein.
(4) Post-Closing Contribution and Transfer
Transactions. Upon receipt of notice from the Partnership to Weatherford and
WECC of the formation by the Partnership of the entities referred to in clauses
(x) and (y) below (which the Partnership shall use its best efforts to complete
not later than 90 days after the Closing Date), (i) WECC shall contribute to the
Partnership an amount in cash necessary to allow the Partnership to purchase or
otherwise acquire an undivided ninety-nine percent (99%) of the Additional
Weatherford Assets, (ii) the Partnership shall use such contributed cash to
purchase or otherwise acquire an undivided ninety-nine percent (99%) of the
Additional Weatherford Assets pursuant to instruments of assignment and
conveyance in form or forms mutually agreed upon by the Parties, (iii) WECC
shall contribute to Limited an amount in cash necessary to allow Limited to
purchase or otherwise acquire an undivided one percent (1%) of the Additional
Weatherford Assets, and (iv) Limited shall use such contributed cash to purchase
or otherwise acquire an undivided one percent (1%) of the Additional Weatherford
Assets and shall transfer such undivided interest to the Partnership, in each
case pursuant to instruments of assignment and conveyance in form or forms
mutually agreed upon by the Parties.
(x) The Additional Weatherford Assets that are located in Venezuela,
Argentina and Australia shall be transferred to one or more entities or
branches of the Partnership to be created promptly following the
Closing in consideration of cash payments by the Partnership or for the
account of the applicable Transferring Weatherford Entities equal to
the net book value as of the Closing Date of the Additional Weatherford
Assets to be transferred. The Partnership shall also assume the
liabilities and obligations associated therewith to the extent such
liabilities and obligations are Partnership Assumed Liabilities. The
cash to be contributed by WECC to purchase such assets shall also
include such cash as may be necessary to pay any value added taxes,
general service taxes or other similar transfer or sales taxes as may
be payable in respect of the transfer. The Partnership shall promptly
take such actions as may be necessary to obtain a refund of such taxes
(and WECC shall have a right to participate in obtaining such refund)
and shall remit to WECC any refunds of such taxes when received, or if
utilized by the Partnership or a subsidiary branch thereof, the amount
equal to the amount utilized shall be promptly paid to WECC as the same
is utilized.
(y) The Additional Weatherford Assets to be transferred that are
located in Canada shall be transferred in a manner designed to be
non-taxable to the Transferring Weatherford Entities and reasonably
acceptable to GE Capital, it currently being anticipated that such
transfer would be effected through a sale of shares of newly formed
entities organized in Nova Scotia or other similar jurisdiction, with
the purchase price to be paid for these shares to be equal to the tax
book value as of the Closing Date of the assets and liabilities in
Canada to be transferred. WECC shall indemnify the Partnership, GE
Capital and Global for any liability or expenses incurred as a result
of the structure of the transaction and if any preferred or separate
class of stock is issued to WECC or another entity (other than the
Partnership, Limited or subsidiary or entity wholly owned by the
Partnership or Limited) as part of such transfer, WECC shall pay to the
Partnership any dividend or distribution that may be received by it in
respect of such stock and shall indemnify the Partnership, GE
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Capital and Global for any additional costs or expenses that may be
incurred by it as a result of the structure as proposed and implemented
by WECC.
(z) All benefits and burdens associated with the ownership and
operation of the Additional Weatherford Assets after the Closing shall
inure to the benefit of the Partnership and Limited. As of the Closing,
the Additional Weatherford Assets shall be deemed to be beneficially
owned by the Partnership and be held in trust for the benefit of the
Partnership and Limited. Except with the consent of all the Partners,
Weatherford shall cause the Additional Weatherford Assets to be
operated in the ordinary course of business.
(d) Contribution and Transfer by Global of the Global
Compression Business.
(1) GE Capital shall contribute funds to Global and cause
Global to fulfill its obligations under this Section 2.1(d).
(2) Partnership Contribution Transactions. On the Closing
Date, in exchange for thirty five and 64/100 percent (35.64%) of the Partnership
Interests in the Partnership, Global shall contribute to the Partnership, by
assigning, transferring, conveying and delivering to the Partnership, and the
Partnership shall accept as a contribution from Global, pursuant to the Global/
Partnership Assignment and Conveyance Agreement and other instruments of
assignment and conveyance as contemplated by the Global/Partnership Assignment
and Conveyance Agreement in form or forms attached as Exhibit J, an undivided
ninety-nine percent (99%) of (i) all assets, properties, rights, titles,
interests, contracts of every kind, character and description, claims and
estates of whatever nature, wherever located, however evidenced, whether
recorded or unrecorded, real, personal or mixed, movable or immovable, tangible
or intangible, Owned by Global that are Used in connection with the Global
Compression Business, (the "Closing Global Assets") and (ii) obligation under
Section 2.1(d)(4) of this Formation Agreement to contribute cash to the
Partnership in an amount equal to the amount the Partnership needs to acquire,
as described in Section 2.1(d)(4), the assets, properties, rights, titles,
interests, contracts, claims and estates owned by GE Capital (Thailand) (the
"Additional Global Assets") and all of Global's and GE Capital (Thailand)'s
rights, titles and interests therein, including without limitation all assets
reflected on the Balance Sheet at December 31, 1998, included in the Global
Financial Statements attached as Schedule 3.2(b) hereto, as the same may exist
on the Closing Date (the Closing Global Assets and the Additional Global Assets
(or, before the transfer of the Additional Global Assets to the Partnership by
GE Capital (Thailand), Global's obligation hereunder to contribute cash
therefor) being hereinafter referred to collectively as the "Included Global
Assets"), and further including without limitation, the following:
(i) All gas compression facilities and
interests therein (including without limitation all leases, subleases, fee
estates, joint operations and leaseholds related thereto), and other real
property and real property interests Used in connection with the Global
Compression Business, including without limitation the properties listed on and
referred to in Schedule 2.1(d)(2)(i) to this Formation Agreement, and rights to
acquire any of the foregoing;
(ii) All rights in, to and under or derived
from all Contracts, which are attributable to or are arising from or are Used,
in connection with the Global Compression Business
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or the Included Global Assets, including without limitation all such Contracts
for the compression of natural gas, partnership agreements, Contracts that
relate to the Global Compression Business, the Included Global Assets or any of
the properties and interests described or referred to in Section 2.1(d)(2)(i) of
this Formation Agreement and any other Contract and all rights to receive
payment for products sold and/or services rendered and all rights to receive
goods and services purchased pursuant to such Contracts and to assert claims and
take other actions in respect of breaches, defaults or other violations thereof
and otherwise (all of which Contracts and rights are listed and referred to in
Schedule 2.1(d)(2)(ii) to this Formation Agreement;
(iii) All fixtures, personal property,
improvements, easements, permits, licenses, servitudes, rights-of-way, surface
leases and other surface, subsurface, air and water rights, including without
limitation any computer hardware Used exclusively by persons who are offered
employment by the Partnership and any boilers, buildings, compression
facilities, construction and construction in progress, machinery, equipment,
furniture, furnishings, automobiles, trucks and rolling stock, tools, power
lines, telephone and telegraph lines, roads, and other appurtenances, easements,
facilities and similar property, Used in connection with the Global Compression
Business or the operation or maintenance of the properties and interests
described in Section 2.1(d)(2)(i) of this Formation Agreement, including without
limitation such assets listed on Schedule 2.1(d)(2)(iii) to this Formation
Agreement;
(iv) All current and long-term notes
receivable, accounts receivables and all bonds and other evidences of
indebtedness of, and rights to receive payments, from any Person, in each case
attributable to or arising from the Global Compression Business or the Included
Global Assets (other than intercompany funded debt, except for the Contributed
Global Note), and all security interests of Global or GE Capital (Thailand) in
respect of such notes, accounts, bonds, evidences of indebtedness and other
rights;
(v) All inventories of materials (including
without limitation natural gas), raw materials, work in process, finished
products, spare parts, replacement and component parts, and office and other
supplies Used in connection with the Included Global Assets or the Global
Compression Business;
(vi) All contract files, gas processing files,
division order files, abstracts, title policies, binders or opinions, product
design data, plans, blueprints, specifications, manuals, designs, drawings,
recorded knowledge, surveys, engineering reports, equipment and parts lists,
test reports, materials standards, catalogues, performance and quality control
standards, procedures and records, research and development data, price lists,
mailing lists, photographs, production data, sales and purchase records, sales
order files, records, data, media materials and plates, advertising, marketing,
promotional and sales materials, files and materials relating to suppliers,
vendors and other service providers, and all other books, records, intangibles,
files, maps, accounting information and records and other similar information or
data Used in connection with the Global Compression Business (collectively, the
"Global Compression Business Records") in whatever media such Global Compression
Business Records may be retained and stored, including without limitation
Global's and GE Capital (Thailand)'s proprietary computer and automatic
machinery software and programs and source disks that are Used thereby in the
Global Compression Business and listed on Schedule 2.1(d)(2)(vi) to this
Formation Agreement, and program documentation,
8
<PAGE> 15
tapes, manuals, forms, guides and other materials with respect thereto Used in
connection with the Global Compression Business;
(vii) All miscellaneous assets listed on
Schedule 2.1(d)(2)(vii) to this Formation Agreement;
(viii) All rights in, to and under all express
or implied warranties, representations, indemnities, covenants or other
agreements of any third parties arising from or attributable to the Global
Compression Business or the Included Global Assets;
(ix) To the extent permitted by law, all
permits, approvals, licenses, qualifications, product registrations, safety
certifications and other similar authorizations Used in connection with the
Global Compression Business including without limitation those listed on
Schedule 2.1(d)(2)(ix) to this Formation Agreement;
(x) The rights of the Global Compression
Business in the patents, patent applications, trademarks, trade names, service
marks, service names, registered user names, copyrights and copyright
applications and related agreements and licenses Owned by Global or GE Capital
(Thailand) and Used in the Global Compression Business (all of which are
identified on Schedule 2.1(d)(2)(x) to this Formation Agreement), and all
designs, plans, inventions, trade secrets, processes, procedures, research
records, manufacturing know-how and formulas, whether patentable or
unpatentable, and similar proprietary rights wherever located, Owned by Global
that are Used in connection with the Global Compression Business;
(xi) All other intangible personal property of
the Global Compression Business;
(xii) The bank accounts listed on Schedule
2.1(d)(2)(xii) to this Formation Agreement, including without limitation the
cash on deposit therein on the Closing Date; and
(xiii) All other rights, properties and assets
Used in connection with the Global Compression Business of any character
whatsoever, wherever located;
provided, however, that the Included Global Assets do not include and Global
shall retain all of its rights, titles and interests in and to (i) those
specific assets, properties, rights, titles, interests, contracts, claims and
estates described on Schedule 2.1(d)(2)(A) hereto and (ii) in the case of GE
Capital (Thailand), those assets, properties, rights, titles, interests,
contracts, claims and estates that are not dedicated exclusively to the
compression business of GE Capital (Thailand) (such retained assets, properties,
rights, titles, interests, contracts, claims and estates, the "Excluded Global
Assets").
(3) Limited Contribution Transactions. On the Closing
Date, in exchange for thirty six percent (36%) of the Membership Interests in
Limited, Global shall contribute to Limited, by assigning, transferring,
conveying and delivering to Limited, and Limited shall accept as a contribution
from Global, pursuant to the Global/Limited Assignment and Conveyance Agreement
and other instruments of assignment and conveyance as contemplated by
9
<PAGE> 16
the Global/Limited Assignment and Conveyance Agreement in form or forms mutually
agreed upon by the Parties, an undivided one percent (1%) of the Included Global
Assets and its obligation under Section 2.1(d)(4) of this Formation Agreement to
contribute cash as provided therein.
(4) Post-Closing Contribution Transactions.
(w) Upon receipt of notice from the Partnership to GE Capital and
Global of the formation by the Partnership of a new Thailand entity or
branch (which the Partnership shall use its best efforts to complete
not later than 90 days after the Closing Date), (i) Global shall
contribute to the Partnership an amount in cash necessary to allow the
Partnership to purchase or otherwise acquire an undivided ninety-nine
percent (99%) of the Additional Global Assets, (ii) the Partnership
shall use such contributed cash to purchase or otherwise acquire an
undivided ninety-nine percent (99%) of the Additional Global Assets
pursuant to instruments of assignment and conveyance in form or forms
mutually agreed upon by the Parties, (iii) Global shall contribute to
Limited an amount in cash necessary to allow Limited to purchase or
otherwise acquire an undivided one percent (1%) of the Additional
Global Assets, and (iv) Limited shall use such contributed cash to
purchase or otherwise acquire an undivided one percent (1%) of the
Additional Global Assets and shall transfer such undivided interest to
the Partnership, in each case pursuant to instruments of assignment and
conveyance in form or forms mutually agreed upon by the Parties. The
purchase price for the Additional Global Assets shall be paid as of the
date on which payments under Section 2.3 are to be paid. In the event
the adjustment provisions under Section 2.3 result in a Global Excess,
Global shall have the option to have the cash contribution by Global
under this Section reduced by the amount of the Global Excess and the
Global Excess shall not be paid as an adjustment under Section 2.3 (or
to make full payment hereunder and receive payment of the Global
Excess.
(x) The Additional Global Assets shall be transferred to a new Thailand
entity or branch of the Partnership to be created promptly following
the Closing in consideration of a cash payments by the Partnership to
or for the account of GE Capital (Thailand) equal to the net book value
as of the Closing of the Additional Global Assets to be transferred.
The cash to be contributed by Global to purchase such assets shall also
include such cash as necessary to pay any value added taxes, general
service taxes or other similar transfer or sales taxes as may be
payable in respect of the transfer. The Partnership shall promptly take
such actions as may be necessary to obtain a refund of such taxes (and
Global shall have a right to participate in obtaining such refund) and
shall remit to Global any refunds of such taxes when received, or if
utilized by the Partnership or a subsidiary branch thereof, the amount
equal to the amount utilized shall be promptly paid to Global as the
same is utilized.
(y) The assets of Global located in Canada shall be transferred to the
Partnership in a manner designed to be non-taxable to Global and
reasonably acceptable to WECC through a transaction similar to that in
which the Additional Weatherford Assets are to be transferred to the
Partnership. Global shall contribute to the Partnership, Weatherford
and WECC cash sufficient to allow for the purchase of such assets
either directly or through a purchase of stock. Global shall also
indemnify the Partnership, Weatherford and WECC for any liability or
expenses incurred as a result of the structure of the transaction or
the
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<PAGE> 17
contribution of the Canadian assets by it and if any preferred or
separate class of stock is issued to it or another entity (other than
the Partnership, Limited or a subsidiary or entity wholly owned by the
Partnership or Limited) as part of this transfer, Global shall pay to
the Partnership any dividends or distributions that may be received by
or in respect of such stock and indemnify the Partnership, Weatherford
and WECC for any additional costs or expenses that may be incurred by
it as a result of the structure that is proposed by Global.
(z) All benefits and burdens associated with the ownership and
operations of the assets of GE Capital (Thailand) and the Canadian
assets of Global to be transferred is contemplated by this Section
shall inure to the benefits of the Partnership and Limited. As of the
Closing, the Additional Weatherford Assets shall be deemed to be
beneficially owned by the Partnership and be held in trust for the
benefit of the Partnership and Limited. Except with the consent of the
Partnership, GE Capital shall cause GE Capital (Thailand) compression
assets and the Global Canadian assets to be operated in the ordinary
course of business.
(e) Personal Property Conveyance. All personal property
conveyed pursuant to this Section 2.1 will be conveyed on an AS IS, WHERE IS
BASIS WITH ALL FAULTS.
(f) Contribution and Transfer by Limited. On the Closing Date,
in exchange for one percent (1%) of the Partnership Interests in the
Partnership, Limited shall contribute to the Partnership, by assigning,
transferring, conveying and delivering to the Partnership, and the Partnership
shall accept as a contribution from Limited, pursuant to the Limited/Partnership
Assignment and Conveyance Agreement and other instruments of assignment and
conveyance as contemplated by the Limited/Partnership Assignment and Conveyance
Agreement in form attached as Exhibit J, the undivided one percent (1%) of the
Included Weatherford Assets, the undivided one percent (1%) of the Included
Global Assets contributed to Limited by WECC and Global, respectively and the
obligations under Sections 2.1(c)(4) and 2.1(d)(4) to contribute cash by WECC
and Global as provided therein.
Section 2.2. Closing. The closing of the transactions contemplated by
this Formation Agreement (the "Closing") shall take place at the offices of
Fulbright & Jaworski L.L.P., 1301 McKinney Street, Houston, Texas, beginning at
9 a.m. on the Closing Date. All actions to be taken at the Closing as set forth
herein and all agreements, documents and instruments delivered and payments made
with respect thereto shall be considered to have been taken or delivered or made
and shall be effective simultaneously at 5:00 p.m. on the Closing Date (except
as otherwise expressly provided in such agreements, documents and instruments),
and no such action, delivery or payment shall be considered as complete until
all such actions, delivery and payments incident to the Closing have been
completed.
Section 2.3. Audit and Adjustment. Promptly after the Closing Date, but
in no event later than sixty (60) days thereafter, the Partnership shall cause
(i) Arthur Andersen LLP to audit the combined consolidated financial statements
of the Weatherford Compression Business at and as of December 31, 1998, adjusted
to reflect transactions after that date to the Closing Date (the balance sheet
included in such financial statements is hereinafter referred to as the
"Weatherford Closing Date Balance Sheet"), and to provide an unqualified written
opinion on the financial statements at
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and as of December 31, 1998, and an opinion with respect to the Net Assets of
the Weatherford Compression Business as of the Closing Date based on the audit
of the financial statements at December 31, 1998, brought down to reflect
transactions after that date, and (ii) KPMG Peat Marwick LLP to audit the
combined consolidated financial statements of the Global Compression Business at
and as of December 31, 1998, adjusted to reflect transactions after that date to
the Closing Date (the balance sheet included in such financial statements is
hereinafter referred to as the "Global Closing Date Balance Sheet") and to
provide an unqualified written opinion on the financial statements at and as of
December 31, 1998 and an opinion with respect to the Net Assets of the Global
Compression Business as of the Closing Date based on the audit of the financial
statements at December 31, 1998, brought down to reflect transactions after that
date. The opinions resulting from such audits will be delivered by the
Partnership to Weatherford and GE Capital promptly upon receipt thereof, but in
no event later than one Business Day thereafter. If the Net Assets of the
Weatherford Compression Business set forth in the Weatherford Closing Date
Balance Sheet exceed $326,868,000, the Partnership shall pay WECC an amount
equal to such excess. If the Net Assets of the Weatherford Compression Business
set forth in the Weatherford Closing Date Balance Sheet are less than
$326,868,000, WECC shall pay the Partnership an amount equal to the amount by
which $326,868,000 exceeds the Net Assets of the Weatherford Compression
Business. If the Net Assets of the Global Compression Business set forth in the
Global Closing Date Balance Sheet exceed $199,950,000, Global shall have the
option to have the cash contribution to be made pursuant to Section 2.1(d)(4)
reduced by the excess (the "Global Excess") as provided therein. If the Net
Assets of the Global Compression Business set forth in the Global Closing Date
Balance Sheet are less than $199,950,000, Global shall pay the Partnership an
amount equal to the amount by which $199,950,000 exceeds the Net Assets of the
Global Compression Business. All payments pursuant to this Section 2.3 shall be
made within five Business Days following the delivery by the Partnership to
Weatherford and GE Capital of such written audit opinions. All such payments
shall be made in immediately available funds to an account designated by the
relevant recipient. Attached as Schedule 2.3 is an estimated calculation of the
Net Assets of each of the Weatherford Compression Business and the Global
Compression Business excluding adjustments for the Master Lease Expenses.
Section 2.4. Financing for the Partnership. As part of the formation of
the Partnership, the Partnership is assuming the obligations of WECC and
becoming a party to the Master Lease. In December 1998, WECC entered into a
portion of the Master Lease and sold and leased back certain of its assets and
received a payment of $100,000,000. As soon as practicable after the Closing
Date, but in no event later than sixty (60) days thereafter, the Partnership
will sell and lease back certain assets acquired from Global under the Master
Lease and will pay the Contributed Global Note and make the Payment Obligation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties of Weatherford and WECC.
Weatherford and WECC jointly and severally represent and warrant to GE Capital
and each other GE Entity as follows:
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(a) Organization. Each of Weatherford and WECC is a
corporation or limited partnership duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Weatherford owns,
directly or indirectly, all the outstanding equity interests in each Weatherford
Entity, free and clear of all Liens and all such interests have been validly
issued and are fully paid and nonassessable. The only jurisdictions in which any
Weatherford Entity is required to qualify to transact business as a foreign
entity as set forth on Schedule 3.1(a) attached hereto, and each Weatherford
Entity is in good standing under the laws of each such jurisdiction, other than
in such jurisdictions where the failure to be so qualified, individually or in
the aggregate, would not have a Material Adverse Effect on the Weatherford
Compression Business.
(b) Financial Statements. Weatherford has delivered to GE
Capital the following financial statements (the "Weatherford Financial
Statements") which Weatherford Financial Statements are attached as Schedule
3.1(b) hereto: (i) a combined consolidated balance sheet of the Weatherford
Compression Business at December 31, 1997, and the related consolidated
statements of income, stockholders' equity and changes in financial position for
the Weatherford Compression Business, all for the year then ended, together with
the related notes thereto, as examined by Arthur Andersen LLP, whose unqualified
opinion thereon is included therewith, and (ii) the unaudited consolidated
balance sheet of the Weatherford Compression Business at December 31, 1998, and
the related unaudited consolidated statements of income, stockholders' equity
and changes in financial position of the Weatherford Compression Business for
the year then ended, as certified by the Chief Financial Officer of WECC. The
Weatherford Financial Statements present fairly the consolidated financial
position of the Weatherford Compression Business at the dates indicated and the
consolidated results of its operations and the changes in its consolidated
financial position for the periods indicated, in accordance with GAAP applied on
a consistent basis during such periods, except as therein noted.
(c) Subsidiaries. WECC does not own, directly or indirectly,
any capital stock or other ownership interest in any subsidiary.
(d) Options. There are no outstanding or authorized
securities, options, warrants, calls, rights, commitments, preemptive rights,
agreements, arrangements or undertakings of any kind to which WECC is a party,
or by which it is bound, obligating any WECC to issue, deliver or sell, or cause
to be issued, delivered or sold, any shares of capital stock or other equity or
voting securities of, or other ownership interests in, WECC to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking.
(e) Authority; Non-contravention. Weatherford and each other
Weatherford Entity has the requisite corporate or partnership, as the case may
be, power and authority to enter into this Formation Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Formation Agreement by Weatherford and each other Weatherford Entity and the
consummation by Weatherford and each other Weatherford Entity of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Weatherford and each other Weatherford Entity.
This Formation Agreement has been duly and validly executed and delivered by
Weatherford and each other Weatherford Entity and constitutes a valid and
binding obligation of Weatherford and each other Weatherford Entity, enforceable
against Weatherford and each other Weatherford Entity in accordance with its
terms, except that (i) such
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<PAGE> 20
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws or judicial decisions now or hereafter in effect relating
to creditors' rights generally, (ii) the remedy of specific performance and
injunctive relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought and (iii) the
enforceability of any indemnification provision contained herein may be limited
by applicable federal or state laws. The execution and delivery of this
Formation Agreement by Weatherford and each other Weatherford Entity do not, and
the consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of or "put" right with
respect to any obligation or to loss of a material benefit under, or result in
the creation of any Lien, upon any of the properties or assets of the
Weatherford Compression Business under, any provision of (i) the Certificate of
Incorporation, Bylaws or other organizational documents of any Weatherford
Entity or the limited partnership agreement of WECC, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease, or other agreement,
instrument, permit, concession, franchise or license applicable to Weatherford
or any other Weatherford Entity or any of their respective properties or assets
or (iii) subject to the governmental filings and other matters referred to in
the following sentence any judgment, order, decree, statute, law, ordinance,
rule or regulation or arbitration award applicable to Weatherford or any other
Weatherford Entity or their respective properties or assets, other than, in the
case of clause (ii), any such conflicts, violations, defaults, rights or Liens
that individually or in the aggregate would not have a Material Adverse Effect
on the Weatherford Compression Business taken as a whole and would not
materially impair the ability of Weatherford or any other Weatherford Entity to
perform its obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Entity is
required by or with respect to Weatherford or any other Weatherford Entity in
connection with the execution and delivery of this Formation Agreement by
Weatherford or the consummation by Weatherford or any other Weatherford Entity
of the transactions contemplated hereby, except for the filing of premerger
notification information with the Canadian Competition Bureau and the expiration
of the applicable waiting period(s) under Part IX of the Competition Act
(Canada), and such other consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made would not have a Material Adverse Effect on the Weatherford Compression
Business taken as a whole.
(f) Absence of Certain Changes of Events. Except as set forth
on Schedule 3.1(f) attached hereto or as contemplated by this Formation
Agreement, since December 31, 1997, the Weatherford Compression Business has
been conducted only in the ordinary course consistent with past practice, and
there has not been (i) any material adverse change with respect to the
Weatherford Compression Business, (ii) (A) any granting by the Weatherford
Compression Business to any employee of the Weatherford Compression Business of
any increase in compensation, except in the ordinary course of the Weatherford
Compression Business consistent with prior practice or as was required under
employment agreements in effect as of December 31, 1997, (B) any granting by the
Weatherford Compression Business to any such employee of any increase in
severance or termination pay, except as was required under employment, severance
or termination agreements in effect as of December 31, 1997, or (C) any entry by
the Weatherford Compression Business into any employment, severance or
termination agreement with any such
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executive officer, (iii) any damage, destruction or loss, whether or not covered
by insurance, that has or reasonably could be expected to have a Material
Adverse Effect on the Weatherford Compression Business, taken as a whole or (iv)
any change in accounting methods, principles or practices by the Weatherford
Compression Business materially affecting its assets, liabilities or business,
except insofar as may have been required by a change in generally accepted
accounting principles.
(g) Brokers. Except for Credit Suisse First Boston
Corporation, whose fees are to be paid by Weatherford, no broker, investment
banker or other Person is entitled to receive from any Weatherford Entity or the
Weatherford Compression Business any investment banking, broker's, finder's or
similar fee or commission in connection with this Formation Agreement or the
transactions contemplated hereby.
(h) Litigation. Except as set forth in Schedule 3.1(h)
attached hereto, there is no claim, suit, action, proceeding or investigation
pending or, to the best of Weatherford's knowledge, threatened against or
affecting the Weatherford Compression Business that could reasonably be expected
to have a Material Adverse Effect on the Weatherford Compression Business, taken
as a whole, or prevent, hinder or materially delay the ability of Weatherford to
consummate the transactions contemplated by this Formation Agreement, nor is
there any judgment, decree, injunction, rule or order of any Governmental Entity
or arbitrator outstanding against Weatherford or any of its subsidiaries having,
or which, insofar as reasonably can be foreseen, in the future could have, any
such effect.
(i) Employee Benefit Matters.
(i) Set forth on Schedule 3.1(i) attached
hereto is a list of each of the following that is currently sponsored,
maintained or contributed to by Weatherford or any of its subsidiaries for the
benefit of the employees of the Weatherford Compression Business:
(A) each "employee benefit plan," as such
term is defined in Section 3(3) of ERISA (including, but not limited to,
employee benefit plans, such as foreign plans, which are not subject to the
provisions of ERISA) ("Weatherford Plan");
(B) each stock option plan, collective
bargaining agreement, bonus plan or arrangement, incentive award plan or
arrangement, severance pay plan, policy or agreement, deferred compensation
agreement or arrangement, executive compensation or supplemental income
arrangement, consulting and employment agreement, including without limitation
those covering employees outside the United States ("Weatherford Benefit Program
or Agreement").
The Weatherford Compression Business has no outstanding liability other than
accrued as a current liability on its balance sheet as of June 30, 1998 with
respect to any of the items described in clauses (a) and (b) above that are not
currently sponsored, maintained or contributed to by the Weatherford Compression
Business, but were so sponsored, maintained or contributed to by the Weatherford
Compression Business within the past six years.
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(ii) True, correct and complete copies of each
of the Weatherford Plans, the Weatherford Benefit Programs or Agreements and
related trusts, as in effect on the date hereof, have been furnished to GE
Capital. In addition, with respect to the Weatherford International, Inc. 401(k)
Savings Plan (the "Weatherford 401(k) Plan"), Weatherford has furnished to GE
Capital and Global true, correct and complete copies of the most recent Form
5500 (including all attachments), Summary Plan Description and IRS Determination
Letter.
(iii) Except as set forth on Schedule 3.1(i)
attached hereto:
(A) The Weatherford Compression Business has
substantially performed all obligations, whether arising by operation of law or
by contract, required to be performed by it in connection with the Weatherford
401(k) Plan and there have been no defaults or violations by any other party to
the Weatherford 401(k) Plan;
(B) The Weatherford 401(k) Plan has been
administered and operated in substantial compliance with its governing documents
and applicable law (including, where applicable, ERISA, and the Internal Revenue
Code of 1986, as amended (the "Code");
(C) The Weatherford 401(k) Plan intended to
be qualified under Section 401 of the Code and the Trust maintained pursuant to
the Weatherford 401(k) Plan is tax-exempt under Section 501 of the Code and has
received a favorable determination letter from the Internal Revenue Service
("IRS") regarding such qualified and tax-exempt status and has not, since
receipt of the most recent favorable determination letter, been amended or
operated in a way which is reasonably likely to adversely affect such qualified
and tax-exempt status;
(D) There are no actions, suits or claims
pending (other than routine claims for benefits) or threatened against, or with
respect to, the Weatherford 401(k) Plan or its assets, and there is no matter
pending (other than routine qualification determination filings) with respect to
the Weatherford 401(k) Plan before any Governmental Entity which are reasonably
likely to result in a material liability;
(j) Tax Matters.
(i) Except as set forth on Schedule 3.1(j)
hereto, (a) all Tax Returns of or with respect to any Tax that are required to
be filed on or before the Closing Date by or with respect to the Weatherford
Compression Business have been or will be duly and timely filed under the
statutes, rules and regulations of each jurisdiction in which such Tax Returns
are required to be filed, (b) all items of income, gain, loss, deduction and
credit or other items required to be included in each such Tax Return have been
or will be so included and all information provided in each such Tax Return is
or will be true, correct and complete in all material respects, (c) all Taxes
which have become or will become due with respect to the period covered by each
such Tax Return whether or not reflected on the Tax Returns have been or will be
timely paid in full, (d) all withholding Tax requirements imposed on or with
respect to the Weatherford Compression Business have been or will be satisfied
in full, and (e) no penalty, interest or other charge is or will become due with
respect to the late filing of any such Tax Return or late payment of any such
Tax.
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(ii) Except as set forth on Schedule 3.1(j)
hereto, all Tax Returns of, or with respect to the Weatherford Compression
Business or any Weatherford Group have been audited by the applicable
Governmental Entity or the applicable statute of limitations has expired, for
all periods up to and including the periods set forth in Schedule 3.1(j)
attached hereto. No member of the Weatherford Group is aware that assertion has
ever been made by a Governmental Authority in a jurisdiction where any member of
the Weatherford Group does not currently file Tax Returns that it is or may be
subject to taxation in that jurisdiction nor is any member of the Weatherford
Group aware that any such assertion is pending or threatened, in each case where
such assertion could reasonably be expected to have a Material Adverse Effect on
the Weatherford Compression Business.
(iii) There is no claim with respect to the
Weatherford Compression Business for any Taxes, and no assessment, deficiency or
adjustment has been asserted or proposed with respect to any Tax Return of or
with respect to the Weatherford Compression Business, other than those disclosed
(and to which are attached true and complete copies of all audit or similar
reports) on Schedule 3.1(j) attached hereto.
(iv) There is not in force any extension of
time with respect to the due date for the filing of any Tax Return of or with
respect to the Weatherford Compression Business or any waiver or agreement for
any extension of time for the assessment or payment of any Tax of or with
respect to the Weatherford Compression Business.
(v) Schedule 3.1(j) attached hereto contains a
true and complete copy of each written Tax allocation or sharing agreement and a
true and complete description of each unwritten Tax allocation or sharing
arrangement affecting the Weatherford Compression Business. All such agreements
shall be terminated prior to the Closing Date and no payments are due or will
become due on or after the Closing Date pursuant to any such agreement or
arrangement.
(vi) Except for WECC and as set forth on
Schedule 3.1(j), none of the property of the Weatherford Compression Business is
held in an arrangement that could be classified as a partnership for Tax
purposes, and the Weatherford Compression Business does not own any interest in
any controlled foreign corporation (as defined in Section 957 of the Code),
passive foreign investment company (as defined in Section 1297 of the Code) or
other entity the income of which is required to be included in the income of the
Weatherford Compression Business.
(vii) Except as set forth on Schedule 3.1(j)
hereto, none of the property of the Weatherford Compression Business is: (i)
subject to a safe-harbor lease (pursuant to Section 168(f)(8) of the Internal
Revenue Code of 1954 as amended and in effect immediately prior to the enactment
of the Tax Reform Act of 1986) or (ii) "tax-exempt use property" (within the
meaning of Section 168(h) of the Code) or (iii) "tax-exempt bond financed
property" (within the meaning of Section 168(g) of the Code) or (iv) "limited
use property" (as that term is used in Rev. Proc. 76- 30).
(viii) The Weatherford Compression Business
will not be required to include any amount in income for any taxable period
beginning after the Closing Date as a result of
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a change in accounting method for any taxable period ending on or before the
Closing Date or pursuant to any agreement with any Tax authority with respect to
any such taxable period.
(ix) No corporation whose stock is included in
the Weatherford Compression Business has consented to have the provisions of
Section 341(f)(2) of the Code apply with respect to a sale of its stock.
(x) No Liens (whether filed or arising by
operation of law) have been imposed upon or asserted against the Weatherford
Compression Business as a result of or in connection with the failure, or
alleged failure to pay any tax.
(k) No Excess Parachute Payments. No amount that could be
received (whether in cash or property or the vesting of property) as a result of
any of the transactions contemplated by this Formation Agreement by any
employee, officer or director of the Weatherford Compression Business or any of
its subsidiaries who is a "disqualified individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) under any employment, severance
or termination agreement, other compensation arrangement or Weatherford Plan
currently in effect would be characterized as an "excess parachute payment" (as
such term is defined in Section 280G(b) (1) of the Code) or would be
non-deductible by reason of Code Section 162(m).
(l) Environmental Matters. Except as set forth on Schedule
3.1(l) attached hereto or as described in the TRC Reports:
(i) The Weatherford Compression Business has
been and is in compliance with all Environmental Laws and there are no
conditions existing on or resulting from the operation of the businesses or
properties of the Weatherford Compression Business that may give rise to any
on-site or off-site remedial obligations under any Environmental Law, except for
such noncompliance or remedial obligations as would not have a Material Adverse
Effect on the Weatherford Compression Business;
(ii) Without limitation of clause (i) above,
the Weatherford Compression Business and its properties are not subject to any
existing, pending or, to the knowledge of Weatherford, threatened action, suit,
investigation, inquiry or proceeding by or before any Governmental Entity under
any Environmental Law.
(iii) All notices, permits, licenses or
similar authorizations, if any, required to be obtained or filed by the
Weatherford Compression Business under any Environmental Law, including without
limitation those relating to the treatment, storage, disposal or Release of any
substance, material or waste regulated under Environmental Laws into the
environment, have been duly obtained or filed, and the Weatherford Compression
Business is in compliance with the terms and conditions of all such permits and
authorizations, except as would not have a Material Adverse Effect on the
Weatherford Compression Business and no actions or appeals are pending or, to
the knowledge of Weatherford, threatened, to revoke or materially alter the
terms and conditions of such material permits;
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(iv) Except where such failure would not have
a Material Adverse Effect, since the effective date of the relevant requirements
of RCRA or other comparable Environmental Laws, all substances, materials or
wastes regulated under RCRA or another comparable Environmental Law that are
generated by the Weatherford Compression Business or at any properties of the
Weatherford Compression Business and require disposal or treatment have been
transported only by carriers maintaining valid authorizations under RCRA and any
other comparable Environmental Laws and treated and disposed of only at
treatment, storage and disposal facilities maintaining valid authorizations
under RCRA and any other comparable Environmental Law, and, to the knowledge of
Weatherford, such carriers and facilities have been and are operating in
compliance with such authorizations and are not the subject of any existing,
pending or overtly threatened action, investigation or inquiry by any
Governmental Authority in connection with any Environmental Laws;
(v) There are no asbestos-containing materials
or naturally occurring radioactive materials on or in any of the properties of
the Weatherford Compression Business that are required to be removed, remediated
or abated under Environmental Laws, and there are no storage tanks, open or
closed pits, sumps, or other containers on or under any of the properties of
Weatherford Compression Business from which any substances, materials or wastes
regulated under Environmental Laws have been Released into the surrounding
environment, except as would not have a Material Adverse Effect on the
Weatherford Compression Business; and
(vi) Without limiting the foregoing, there is
no liability to any non-governmental third party under Environmental Laws or
under common law tort, trespass and nuisance in connection with any Release or
threatened Release of any substances, materials or wastes regulated under
Environmental Laws into the environment as a result of or with respect to the
properties or businesses of Weatherford Compression Business, except as would
not have a Material Adverse Effect on the Weatherford Compression Business.
(m) Compliance with Laws. The Weatherford Compression Business
holds all required, necessary or applicable permits, licenses, variances,
exemptions, orders, franchises and approvals of all Governmental Entities,
except where the failure to so hold would not have a Material Adverse Effect on
the Weatherford Compression Business (the "Weatherford Compression Business
Permits"). The Weatherford Compression Business is in compliance with the terms
of the Weatherford Compression Business Permits except where the failure to so
comply would not have a Material Adverse Effect on the Weatherford Compression
Business taken as a whole. The Weatherford Compression Business has not violated
or failed to comply with any statute, law, ordinance, regulation, rule, permit
or order of any federal, state or local government, domestic or foreign, or any
Governmental Entity, any arbitration award or any judgment, decree or order of
any court or other Governmental Entity, applicable to the Weatherford
Compression Business or its businesses, assets or operations, except for
violations and failures to comply that could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Weatherford Compression Business.
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(n) Material Contracts and Agreements.
(i) Schedule 3.1(n) attached hereto lists the
following contracts and other agreements (written or oral) to which the
Weatherford Compression Business or any of its assets is a party or subject to:
(A) Any agreement (or group of related
agreements) for the purchase or sale of compressors, compressor parts or other
goods and services in an amount in excess of $500,000;
(B) any lease or rental of real or personal
property to or from any Person providing for lease payments in excess of
$500,000 per year or having a remaining term in excess of one year;
(C) any agreement concerning a partnership
or joint venture or agency relationship;
(D) any agreement (or group of related
agreements) involving the creation, incurrence, assumption or guarantee of any
indebtedness for borrowed money, any capital lease obligation or any sale lease
back obligation in an amount in excess of $100,000 or which a security interest
for any such obligations has been granted;
(E) any material agreement concerning
confidentiality or non-competition;
(F) any collective bargaining agreement or
other contract with any labor union;
(G) any separate employment agreement
providing for annual compensation in excess of $75,000 or providing severance
benefits outside the Weatherford Compression Business' customary severance
policy;
(H) any agreement under which the
Weatherford Compression Business has advanced or loaned any amount of money to
its directors, officers or employees outside the ordinary course of business; or
(I) any agreement under which the
consequences of a default or termination would have a Material Adverse Effect on
the Weatherford Compression Business taken as a whole.
All material contracts of the Weatherford Compression Business
are listed on Schedule 3.1(n) attached hereto and copies thereof have been made
available to GE Capital. For purposes of this provision, material contracts
shall be deemed to include all contracts that would be required to be filed by
the Weatherford Compression Business with the Securities and Exchange Commission
as exhibits to an Annual Report on Form 10-K if the Weatherford Compression
Business had equity securities registered under the Securities Exchange Act of
1934, as amended.
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(o) Title to Properties.
(i) The Weatherford Entities have indefeasible
title to all owned real properties in the Included Weatherford Assets and good
and marketable title to, or valid leasehold interests in, all of the other
Included Weatherford Assets, except for minor defects in title, easements,
restrictive covenants and similar encumbrances or impediments that, in the
aggregate, do not and will not materially interfere with its ability to conduct
its business as currently conducted or as reasonably expected to be conducted.
All the Included Weatherford Assets, other than Included Weatherford Assets in
which any Weatherford Entity has leasehold interests (but only to the extent of
such leasehold interests), are free and clear of all Liens, other than those set
forth on Schedule 3.1(o) attached hereto and those arising from purchase options
granted to lessees under rental contracts entered into in the ordinary course of
business, and except for Liens, that, in the aggregate, do not and will not
materially interfere with its ability to conduct its business as currently
conducted or as reasonably expected to be conducted.
(ii) Except as would not have a Material
Adverse Effect on the Weatherford Compression Business taken as a whole, each
Weatherford Entity has complied in all material respects with the terms of all
leases to which it is a party and under which it is in occupancy, and all such
leases are in full force and effect. The applicable Weatherford Entity enjoys
peaceful and undisturbed possession under all such leases.
(iii) Upon consummation of the transactions
contemplated hereby, (A) the Partnership will have acquired and own indefeasible
title to all owned real properties in the Included Weatherford Assets, and good
and marketable title to or valid leasehold interests in all of the other
Included Weatherford Assets, except for minor defects in title, easements,
restrictive covenants and similar encumbrances or impediments that, in the
aggregate, do not and will not materially interfere with the ability of the
Partnership to conduct its business as currently conducted or as reasonably
expected to be conducted, and (B) all the Included Weatherford Assets so
acquired by the Partnership, other than those in which the Partnership acquires
leasehold interests (but only to the extent of such leasehold interests) will be
free and clear of all Liens, except as set forth on Schedule 3.1(o) attached
hereto and those arising from purchase options granted to lessees under rental
contracts entered into in the ordinary course of business, and except for Liens,
that in the aggregate, do not and will not materially interfere with its ability
to conduct its business as currently conducted or as reasonably expected to be
conducted.
(p) Intellectual Property. The Weatherford Compression
Business owns or is licensed or otherwise has the right to use, all patents,
patent rights, trademarks, trademark rights, trade names, trade name rights,
service marks, service mark rights, copyrights, technology, know-how, processes
and other proprietary intellectual property rights and computer programs which
are material to the condition (financial or otherwise) or conduct of the
business and operations of the Weatherford Compression Business taken as a
whole. To Weatherford's knowledge, the use of such patents, patent rights,
trademarks, trademark rights, service marks, service mark rights, trade names,
copyrights, technology, know-how, processes and other proprietary intellectual
property rights and computer programs by the Weatherford Compression Business
does not infringe on the rights of any Person, subject to such claims and
infringements as do not, in the aggregate, give rise to any liability on the
part of the Weatherford Compression
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Business which could have a Material Adverse Effect with respect to the
Weatherford Compression Business taken as a whole.
(q) Labor Matters. Except as set forth on Schedule 3.1(q)
attached hereto, there are no collective bargaining agreements or other labor
union agreements or understandings to which the Weatherford Compression Business
is a party or by which any of them is bound, nor is the Weatherford Compression
Business the subject of any proceeding asserting that it or any subsidiary has
committed an unfair labor practice or seeking to compel it to bargain with any
labor organization as to wages or conditions. Except as set forth on Schedule
3.1(q), there is no union organization activity involving any of the employees
of the Weatherford Compression Business, pending or to the knowledge of any
Weatherford Entity, threatened. There is no picketing, strikes, or any material
slowdowns, work stoppages, other job actions, lockouts, arbitrations, grievances
or other labor disputes involving any of the employees of the Weatherford
Compression Business, pending or to the knowledge of any Weatherford Entity,
threatened. The Weatherford Compression Business is in material compliance with
all laws, regulations and orders relating to the employment of labor, including
all such laws, regulations and orders relating to wages, hours, the Worker
Adjustment and Retraining Notification Act and any similar state or local "mass
layoff" or "plant closing" law ("WARN"), collective bargaining, discrimination,
civil rights, safety and health, workers' compensation and the collection and
payment of withholding and/or social security taxes and any similar tax. There
has been no "mass layoff" or "plant closing" as defined by the WARN with respect
to the Weatherford Compression Business within the six (6) months prior to
Closing.
(r) Insurance. Schedule 3.1(r) attached hereto sets forth
information as of the date hereof with respect to each insurance policy
(including policies providing property, casualty, liability, and workers'
compensation coverage, and bond and surety arrangements) to which the
Weatherford Compression Business is a party, a named insured, or otherwise a
named beneficiary of coverage (excluding policies maintained by unaffiliated
third parties for the benefit of the Weatherford Compression Business). With
respect to each such insurance policy, and except as set forth on Schedule
3.1(r) attached hereto: (i) the policy is in full force and effect; (ii) to the
knowledge of Weatherford, the Weatherford Compression Business is not in breach
or default (including with respect to the payment of premiums nor the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination, modification,
or acceleration under the policy; and (iii) no party to the policy has
repudiated any provision thereof. The Weatherford Compression Business has not
reached or exceeded its policy limits for any insurance policies in effect at
any time during the past five years.
(s) Undisclosed Liabilities. Except as set forth on Schedule
3.1(s) attached hereto or as set forth in the Weatherford Financial Statements,
at the date of the most recent audited financial statements of the Weatherford
Compression Business, the Weatherford Compression Business had not, and since
such date the Weatherford Compression Business has not, incurred (except in the
ordinary course of business), any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise), which, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect on
the Weatherford Compression Business taken as a whole.
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(t) Year 2000 Compliance.
(i) Products and Services. Except as set forth
on Section 3.1(t) attached hereto, all of the Products and Services of the
Weatherford Entities are Year 2000 Compliant. If any Weatherford Entity is
obligated to repair or replace Products or Services previously provided thereby
that are not Year 2000 Compliant in order to meet its contractual obligations,
to avoid personal injury or other liability, to avoid misrepresentation claims,
or to satisfy any other obligations or requirements, such Weatherford Entity has
repaired or replaced those Products and Services to make them Year 2000
Compliant. Each Weatherford Entity has furnished GE Capital and Global with
true, correct and complete copies of any customer agreements and other materials
and correspondence in which such Weatherford Entity has furnished (or could be
deemed to have furnished) assurances as to the performance and/or functionality
of the Products or Services of such Weatherford Entity on or after January 1,
2000.
(ii) Internal MIS Systems and Facilities.
Except as set forth on Schedule 3.1(t) attached hereto, all of the Internal MIS
Systems and Facilities of each Weatherford Entity are Year 2000 Compliant.
(iii) Suppliers. Except as set forth on
Schedule 3.1(t) attached hereto, all vendors of products or services to each
Weatherford Entity, and its respective products, services and operations, are
Year 2000 Compliant. To the knowledge of Weatherford and each other Weatherford
Entity, after a reasonably diligent investigation, each such vendor will
continue to furnish its products or services to each Weatherford Entity, without
interruption or material delay, on and after January 1, 2000. Each Weatherford
Entity has entered into appropriate agreements with each of its vendors
certifying that all hardware, software or firmware, and any other products and
services furnished by such vendor, including any and all enhancements, upgrades,
customizations, modifications, maintenance and the like, are Year 2000
Compliant. All such vendor agreements include appropriate indemnification by the
vendor in favor of such Weatherford Entity and its respective successors if that
vendor or its products, services or operations fail to be Year 2000 Compliant or
if the products, services or operations fail to conform to or meet the terms of
the vendor warranties, representations, or other contractual terms.
(iv) Year 2000 Compliance Investigations and
Reports. Each Weatherford Entity has furnished GE Capital and Global with a
true, correct and complete copy of any internal investigations, memoranda,
budget plans, forecasts or reports concerning the Year 2000 Compliance of the
products, services, operations, systems, supplies, and facilities of such
Weatherford Entity and its vendors.
Section 3.2. Representations and Warranties of GE Capital and Global.
GE Capital and Global jointly and severally represent and warrant to Weatherford
and WECC as follows:
(a) Organization. Each of GE Capital and Global is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation. GE Capital owns, directly or indirectly,
all the outstanding equity interests in Global free and clear of any Liens and
such interests have been validly issued and are fully paid and nonassessable.
The only jurisdictions in which Global is required to qualify to transact
business as a foreign corporation
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are set forth on Schedule 3.2(a) attached hereto and Global is in good standing
under the laws of each such jurisdiction, other than in such jurisdictions where
the failure to be so qualified would not have a Material Adverse Effect on the
Global Compression Business.
(b) Financial Statements. GE Capital has delivered to
Weatherford the following financial statements (the "Global Financial
Statements"), which Global Financial Statements are attached as Schedule 3.2(b)
hereto, (i) a combined consolidated balance sheet of the Global Compression
Business at December 31, 1997, and the related consolidated statements of
income, stockholders' equity and changes in financial position for the Global
Compression Business other than with respect to GE Capital (Thailand), all for
the year then ended, together with the related notes thereto, as examined by
KPMG Peat Marwick LLP, whose unqualified opinion thereon is included therewith,
and (ii) the unaudited consolidated balance sheet of the Global Compression
Business at December 31, 1998, and the related unaudited consolidated statements
of income and stockholders' equity of the Global Compression Business for the
year then ended, as certified by the Chief Financial Officer of Global. The
Global Financial Statements present fairly the consolidated financial position
of the Global Compression Business at the dates indicated and the consolidated
results of its operations and the changes in its consolidated financial position
for the periods indicated, in accordance with GAAP applied on a consistent basis
during such periods, except as therein noted.
(c) Subsidiaries. Global does not own, directly or indirectly,
any capital stock or other ownership interest in any subsidiary.
(d) Options. There are no outstanding or authorized
securities, options, warrants, calls, rights, commitments, preemptive rights,
agreements, arrangements or undertakings of any kind to which Global is a party,
or by which it is bound, obligating Global to issue, deliver or sell, or cause
to be issued, delivered or sold, any shares of capital stock or other equity or
voting securities of, or other ownership interests in, Global or obligating
Global to issue, grant, extend or enter into any such security, option, warrant,
call, right, commitment, agreement, arrangement or undertaking.
(e) Authority; Non-contravention. Each of the GE Entities has
the requisite corporate power and authority to enter into this Formation
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Formation Agreement by each GE Entity and the consummation
by each GE Entity of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of each GE Entity. This
Formation Agreement has been duly and validly executed and delivered by each GE
Entity and constitutes a valid and binding obligation of each GE Entity,
enforceable against each GE Entity in accordance with its terms, except that (i)
such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws or judicial decisions now or hereafter in
effect relating to creditors' rights generally, (ii) the remedy of specific
performance and injunctive relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought
and (iii) the enforceability of any indemnification provision contained herein
may be limited by applicable federal or state laws. The execution and delivery
of this Formation Agreement by GE Capital do not, and the consummation of the
transactions contemplated hereby and compliance with the provisions hereof will
not, conflict with, or result in
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any violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
or "put" right with respect to any obligation or to loss of a material benefit
under, or result in the creation of any Lien, upon any of the properties or
assets of the Global Compression Business under, any provision of (i) the
Certificate of Incorporation or By-Laws of any GE Entity, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease, or other agreement,
instrument, permit, concession, franchise or license applicable to any GE Entity
or their respective properties or assets or (iii) subject to the governmental
filings and other matters referred to in the following sentence, any judgment,
order, decree, governmental filings, statute, law, ordinance, rule or regulation
or arbitration award applicable to any GE Entity or their respective properties
or assets, other than, in the case of clause (ii), any such conflicts,
violations, defaults, rights or Liens that individually or in the aggregate
would not have a Material Adverse Effect on the GE Entities collectively and
would not materially impair the ability of the GE Entities to perform their
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is required
by or with respect to any GE Entity in connection with the execution and
delivery of this Formation Agreement by GE Capital or the consummation by any GE
Entity of the transactions contemplated hereby, except for the filing of
premerger notification information with the Canadian Competition Bureau and the
expiration of the applicable waiting period(s) under Part IX of the Competition
Act (Canada) and such other consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made would not have a Material Adverse Effect on the GE Entities collectively.
(f) Absence of Certain Changes of Events. Except as set forth
on Schedule 3.2(f) attached hereto, since December 31, 1997, the Global
Compression Business has been conducted only in the ordinary course consistent
with past practice, and there has not been (i) any material adverse change with
respect to the Global Compression Business, (ii) (A) any granting by the Global
Compression Business to any employee of the Global Compression Business of any
increase in compensation, except in the ordinary course of the Global
Compression Business consistent with prior practice or as was required under
employment agreements in effect as of December 31, 1997, (B) any granting by the
Global Compression Business to any such employee of any increase in severance or
termination pay, except as was required under employment, severance or
termination agreements in effect as of December 31, 1997, or (C) any entry by
the Global Compression Business into any employment, severance or termination
agreement with any such executive officer, (iii) any damage, destruction or
loss, whether or not covered by insurance, that has or reasonably could be
expected to have a Material Adverse Effect on the Global Compression Business
taken as a whole or (iv) any change in accounting methods, principles or
practices by the Global Compression Business materially affecting its assets,
liabilities or business, except insofar as may have been required by a change in
generally accepted accounting principles.
(g) Brokers. Except for ING Baring Furman Selz LLC, whose fees
are to be paid by GE Capital, no broker, investment banker or other Person is
entitled to receive from any GE Entity or the Global Compression Business any
investment banking, broker's, finder's or similar fee or commission in
connection with this Formation Agreement or the transactions contemplated
hereby.
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(h) Litigation. Except as set forth on Schedule 3.2(h)
attached hereto, there is no claim, suit, action, proceeding or investigation
pending or, to the best of GE Capital's knowledge, threatened against or
affecting the Global Compression Business that could reasonably be expected to
have a Material Adverse Effect on the Global Compression Business taken as a
whole, or prevent, hinder or materially delay the ability of GE Capital to
consummate the transactions contemplated by this Formation Agreement, nor is
there any judgment, decree, injunction, rule or order of any Governmental Entity
or arbitrator outstanding against the Global Compression Business having, or
which, insofar as reasonably can be foreseen, in the future could have, any such
effect.
(i) Employee Benefit Matters.
(i) Set forth on Schedule 3.2(i) attached
hereto, is a list of each of the following that is currently sponsored,
maintained or contributed to by GE Capital or any of its subsidiaries for the
benefit of the employees of the Global Compression Business:
(A) each "employee benefit plan," as such
term is defined in Section 3(3) of ERISA (including, but not limited to,
employee benefit plans, such as foreign plans, which are not subject to the
provisions of ERISA) ("Global Plan");
(B) each stock option plan, collective
bargaining agreement, bonus plan or arrangement, incentive award plan or
arrangement, severance pay plan, policy or agreement, deferred compensation
agreement or arrangement, executive compensation or supplemental income
arrangement, consulting and employment agreement, including without limitation
those covering employees outside the United States ("Global Benefit Program or
Agreement").
The Global Compression Business has no outstanding liability other than accrued
as a current liability on its balance sheet as of June 30, 1998 with respect to
any of the items described in clauses (a) and (b) above that are not currently
sponsored, maintained or contributed to by the Global Compression Business, but
were so sponsored, maintained or contributed to by the Global Compression
Business within the past six years.
(ii) True, correct and complete copies of each
of the Global Plans, the Global Benefit Programs or Agreements and related
trusts, as in effect on the date hereof, have been furnished to Weatherford. In
addition, with respect to the Global Compression Services, Inc. 401(k) Plan (the
"Global 401(k) Plan"), Global has furnished to Weatherford true, correct and
complete copies of the most recent Form 5500, Summary Plan Description and the
submission to the IRS for Determination Letter.
(iii) Except as otherwise set forth on
Schedule 3.2(i) attached hereto:
(A) The Global Compression Business has
substantially performed all obligations, whether arising by operation of law or
by contract, required to be performed by it in connection with the Global 401(k)
Plan, and there have been no defaults or violations by any other party to the
Global 401(k) Plan;
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(B) The Global 401(k) Plan has been
administered and operated in substantial compliance with its governing documents
and applicable law (including, where applicable, ERISA, and the Code);
(C) The Global 401(k) Plan is intended to be
qualified under Section 401 of the Code and the Trust maintained pursuant to
such Plan intended to be tax-exempt under Section 501 of the Code satisfies the
requirements of such Sections and has an application pending for a favorable
determination letter from the Internal Revenue Service regarding such qualified
and tax-exempt status and has not, since receipt of the most recent favorable
determination letter, been amended or operated in a way which is reasonably
likely to adversely affect such qualified and tax-exempt status; and
(D) There are no actions, suits or claims
pending (other than routine claims for benefits) or threatened against, or with
respect to, the Global 401(k) Plan or its assets, and there is no matter pending
(other than routine qualification determination filings) with respect to the
Global 401(k) Plan before any Governmental Entity which are reasonably likely to
result in a material liability.
(j) Tax Matters.
(i) Except as set forth on Schedule 3.2(j)
attached hereto, (a) all Tax Returns of or with respect to any Tax that are
required to be filed on or before the Closing Date by or with respect to the
Global Compression Business have been or will be duly and timely filed under the
statutes, rules and regulations of each jurisdiction in which such Tax Returns
are required to be filed, (b) all items of income, gain, loss, deduction and
credit or other items required to be included in each such Tax Return have been
or will be so included and all information provided in each such Tax Return is
or will be true, correct and complete in all material respects, (c) all Taxes
which have become or will become due with respect to the period covered by each
such Tax Return whether or not reflected on the Tax Returns have been or will be
timely paid in full, (d) all withholding Tax requirements imposed on or with
respect to the Global Compression Business have been or will be satisfied in
full, and (e) no penalty, interest or other charge is or will become due with
respect to the late filing of any such Tax Return or late payment of any such
Tax.
(ii) Except as set forth on Schedule 3.2(j)
hereto, all Tax Returns of, or with respect to the Global Compression Business
or any Global Affiliated Group have been audited by the applicable Governmental
Entity, or the applicable statute of limitations has expired, for all periods up
to and including the periods set forth on Schedule 3.2(j) attached hereto. No
member of the GE Capital Group is aware that assertion has ever been made by a
Governmental Authority in a jurisdiction where any member of the GE Capital
Group does not currently file Tax Returns that is or may be subject to taxation
in that jurisdiction nor is any member of the GE Capital Group aware that any
such assertion is pending or threatened, in each case where such assertion could
reasonably be expected to have a Material Adverse Effect on the Global
Compression Business.
(iii) There is no claim with respect to the
Global Compression Business for any Taxes, and no assessment, deficiency or
adjustment has been asserted or proposed with respect to any Tax Return of or
with respect to the Global Compression Business, other than those
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disclosed (and to which are attached true and complete copies of all audit or
similar reports) set forth on Schedule 3.2(j) attached hereto.
(iv) There is not in force any extension of
time with respect to the due date for the filing of any Tax Return of or with
respect to the Global Compression Business or any waiver or agreement for any
extension of time for the assessment or payment of any Tax of or with respect to
the Global Compression Business.
(v) Schedule 3.2(j) attached hereto contains a
true and complete copy of each written Tax allocation or sharing agreement and a
true and complete description of each unwritten Tax allocation or sharing
arrangement affecting the GE Capital Compression Business. All such agreements
shall be terminated prior to the Closing Date and no payments are due or will
become due by on or after the Closing Date pursuant to any such agreement or
arrangement.
(vi) Except at set forth on Schedule 3.2(j)
hereto, none of the property of the Global Compression Business is held in an
arrangement that could be classified as a partnership for Tax purposes, and the
Global Compression Business does not own any interest in any controlled foreign
corporation (as defined in Section 957 of the Code), passive foreign investment
company (as defined in Section 1297 of the Code) or other entity the income of
which is required to be included in the income of the Global Compression
Business.
(vii) Except as set forth on Schedule 3.2(j)
hereto, none of the property of the Global Compression Business is: (i) subject
to a safe-harbor lease (pursuant to Section 168(f)(8) of the Internal Revenue
Code of 1954 as amended and in effect immediately prior to the enactment of the
Tax Reform Act of 1986), or (ii) "tax-exempt use property" (within the meaning
of Section 168(h) of the Code), or (iii) "tax-exempt bond financed property"
(within the meaning of Section 168(g)(5) of the Code) or (iv) "limited use
property" (as that term is used in Rev. Proc. 76-30).
(viii) The Global Compression Business will
not be required to include any amount in income for any taxable period beginning
after the Closing Date as a result of a change in accounting method for any
taxable period ending on or before the Closing Date or pursuant to any agreement
with any Tax authority with respect to any such taxable period.
(ix) No corporation whose stock is included in
the Global Compression Business has consented to have the provisions of Section
341(f)(2) of the Code apply with respect to a sale of its stock.
(x) No Liens (whether filed or arising by
operation of law) have been imposed upon or asserted against the Global
Compression Business as a result of or in connection with the failure, or
alleged failure to pay any tax.
(k) No Excess Parachute Payments. No amount that could be
received (whether in cash or property or the vesting of property) as a result of
any of the transactions contemplated by this Formation Agreement by any
employee, officer or director of the Global Compression Business who is a
"disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any employment, severance or termination
agreement, other compensation
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arrangement or Global Plan currently in effect would be characterized as an
"excess parachute payment" (as such term is defined in Section 280G(b) (1) of
the Code) or would be non-deductible by reason of Code Section 162(m).
(l) Environmental Matters. Except as set forth on Schedule
3.2(l) attached hereto or as described in the TRC Reports:
(i) The Global Compression Business has been
and is in compliance with all Environmental Laws, and there are no conditions
existing on or resulting from operation of the businesses or properties of the
Global Compression Business that may give rise to any on-site or off-site
remedial obligations under any Environmental Law, except for such noncompliance
or remedial obligations as would not have a Material Adverse Effect on the
Global Compression Business;
(ii) Without limitation of clause (i) above,
the Global Compression Business and its properties are not subject to any
existing, pending or, to the knowledge of GE Capital, threatened action, suit,
investigation, inquiry or proceeding by or before any Governmental Entity under
any Environmental Law.
(iii) All notices, permits, licenses or
similar authorizations, if any, required to be obtained or filed by the Global
Compression Business under any Environmental Law, including without limitation
those relating to the treatment, storage, disposal or Release of any substance,
material or waste regulated under Environmental Laws, into the environment, have
been duly obtained or filed, and the Global Compression Business is in
compliance with the terms and conditions of all such permits and authorizations,
except as would not have a Material Adverse Effect on the Global Compression
Business and no actions or appeals are pending or, to the knowledge of Global,
threatened to revoke or materially alter the terms and conditions of such
material permits;
(iv) Except where such failure would not have
a Material Adverse Effect, since the effective date of the relevant requirements
of RCRA, as amended, or other comparable Environmental Laws, all substances,
materials or wastes regulated under RCRA or another comparable Environmental Law
that are generated by the Global Compression Business or at any properties of
the Global Compression Business and require disposal or treatment have been
transported only by carriers maintaining valid authorizations under RCRA and any
other comparable Environmental Laws and treated and disposed of only at
treatment, storage and disposal facilities maintaining valid authorizations
under RCRA and any other comparable Environmental Law, and, to the knowledge of
GE Capital, such carriers and facilities have been and are operating in
compliance with such authorizations and are not the subject of any existing,
pending or overtly threatened action, investigation or inquiry by any
Governmental Entity in connection with any Environmental Laws.
(v) There are no asbestos-containing materials
or naturally occurring radioactive materials on or in any of the properties of
the Global Compression Business that are required to be removed, remediated or
abated under Environmental Laws, and there are no storage tanks, open or closed
pits, sumps, or other containers on or under any of the properties of the
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Global Compression Business from which any substances, materials or wastes
regulated under Environmental Laws have been Released into the surrounding
environment, except as would not have a Material Adverse Effect on the Global
Compression Business; and
(vi) Without limiting the foregoing, there is
no liability to any non-governmental third party under Environmental Laws or
under common law tort, trespass and nuisance in connection with any Release or
threatened Release of any substances, materials or wastes regulated under
Environmental Laws into the environment as a result of or with respect to the
properties or businesses of the Global Compression Business, except as would not
have a Material Adverse Effect on the Global Compression Business.
(m) Compliance with Laws. The Global Compression Business
holds all required, necessary or applicable permits, licenses, variances,
exemptions, orders, franchises and approvals of all Governmental Entities,
except where the failure to so hold would not have a Material Adverse Effect on
the Global Compression Business (the "Global Permits"). The Global Compression
Business is in compliance with the terms of the Global Permits except where the
failure to so comply would not have a Material Adverse Effect on Global and its
subsidiaries, taken as a whole. The Global Compression Business has not violated
or failed to comply with any statute, law, ordinance, regulation, rule, permit
or order of any federal, state or local government, domestic or foreign, or any
Governmental Entity, any arbitration award or any judgment, decree or order of
any court or other Governmental Entity, applicable to the Global Compression
Business or its businesses, assets or operations, except for violations and
failures to comply that could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the Global Compression
Business.
(n) Material Contracts and Agreements.
(i) Schedule 3.2(n) attached hereto lists the
following contracts and other agreements (written or oral) to which the Global
Compression Business or any of its assets is a party or subject to:
(A) Any agreement (or group of related
agreements) for the purchase or sale of compressors, compressor parts or other
goods and services in an amount in excess of $500,000;
(B) any lease or rental of real or personal
property to or from any Person providing for lease payments in excess of
$500,000 per year or having a remaining term in excess of one year;
(C) any agreement concerning a partnership
or joint venture or agency relationship;
(D) any agreement (or group of related
agreements) involving the creation, incurrence, assumption or guarantee of any
indebtedness for borrowed money, any capital lease obligation or any sale lease
back obligation in an amount in excess of $100,000 or which a security interest
for any such obligations has been granted;
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(E) any material agreement concerning
confidentiality or non-competition;
(F) any collective bargaining agreement or
other contract with any labor union;
(G) any separate employment agreement
providing for annual compensation in excess of $75,000 or providing severance
benefits outside the Global Compression Business' customary severance policy;
(H) any agreement under which the Global
Compression Business has advanced or loaned any amount of money to its
directors, officers or employees outside the ordinary course of business; or
(I) any agreement under which the
consequences of a default or termination would have a Material Adverse effect on
the Global Compression Business taken as a whole.
All material contracts of the Global Compression Business are listed on Schedule
3.2(n) attached hereto and copies thereof have been made available to
Weatherford. For purposes of this provision, material contracts shall be deemed
to include all contracts that would be required to be filed by the Global
Compression Business with the Securities and Exchange Commission as exhibits to
an Annual Report on Form 10-K if the Global Compression Business had equity
securities registered under the Securities Exchange Act of 1934, as amended.
(o) Title to Properties.
(i) Global has indefeasible title to all owned
real properties in the Included Global Assets and good and marketable title to,
or valid leasehold interests in, all of the other Included Global Assets, except
for minor defects in title, easements, restrictive covenants and similar
encumbrances or impediments that, in the aggregate, do not and will not
materially interfere with its ability to conduct its business as currently
conducted or as reasonably expected to be conducted. All the Included Global
Assets, other than Included Global Assets in which Global has leasehold
interests (but only to the extent of such leasehold interests), are free and
clear of all Liens, other than those set forth on Schedule 3.2(o) attached
hereto and those arising from purchase options granted to lessees under rental
contracts entered into in the ordinary course of business, and except for Liens
that, in the aggregate, do not and will not materially interfere with its
ability to conduct its business as currently conducted or as reasonably expected
to be conducted.
(ii) Except as would not have a Material
Adverse Effect on the Global Compression Business taken as a whole, Global has
complied in all material respects with the terms of all leases to which it is a
party and under which it is in occupancy, and all such leases are in full force
and effect. Global enjoys peaceful and undisturbed possession under all such
leases.
(iii) Upon consummation of the transactions
contemplated hereby, (A) the Partnership will have acquired and own indefeasible
title to all owned real properties in the Included
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Global Assets and good and marketable title to or valid leasehold interests in
all of the other Included Global Assets, except for minor defects in title,
easements, restrictive covenants and similar encumbrances or impediments that,
in the aggregate, do not and will not materially interfere with the ability of
the Partnership to conduct its business as currently conducted or as reasonably
expected to be conducted, and (B) all the Included Global Assets so acquired by
the Partnership, other than those in which the Partnership acquires leasehold
interests (but only to the extent of such leasehold interests) will be free and
clear of all Liens, except as set forth on Schedule 3.2(o) and those arising
from purchase options granted to lessees under rental contracts entered into in
the ordinary course of business attached hereto, and except for Liens, that, in
the aggregate, do not and will not materially interfere with its ability to
conduct its business as currently conducted or as reasonably expected to be
conducted.
(p) Intellectual Property. The Global Compression Business
owns, or is licensed or otherwise has the right to use, all patents, patent
rights, trademarks, trademark rights, trade names, trade name rights, service
marks, service mark rights, copyrights, technology, know-how, processes and
other proprietary intellectual property rights and computer programs which are
material to the condition (financial or otherwise) or conduct of the business
and operations of the Global Compression Business taken as a whole. To GE
Capital's knowledge, the use of such patents, patent rights, trademarks,
trademark rights, service marks, service mark rights, trade names, copyrights,
technology, know-how, processes and other proprietary intellectual property
rights and computer programs by the Global Compression Business does not
infringe on the rights of any Person, subject to such claims and infringements
as do not, in the aggregate, give rise to any liability on the part of the
Global Compression Business which could have a Material Adverse Effect with
respect to the Global Compression Business taken as a whole.
(q) Labor Matters. There are no collective bargaining
agreements or other labor union agreements or understandings to which the Global
Compression Business is a party or by which any of them is bound, nor is the
Global Compression Business the subject of any proceeding asserting that it or
any subsidiary has committed an unfair labor practice or seeking to compel it to
bargain with any labor organization as to wages or conditions. There is no union
organization activity involving any of the employees of the Global Compression
Business, pending or to the knowledge of any GE Entity, threatened. There is no
picketing, strikes, or any material slowdowns, work stoppages, other job
actions, lockouts, arbitrations, grievances or other labor disputes involving
any of the employees of the Global Compression Business, pending or to the
knowledge of any GE Entity, threatened. The Global Compression Business is in
material compliance with all laws, regulations and orders relating to wages,
hours, WARN, collective bargaining, discrimination, civil rights, safety and
health, workers' compensation and the collection and payment of withholding
and/or social security taxes and any similar tax. There has been no "mass
layoff" or "plant closing" as defined by WARN with respect to the Global
Compression Business within the six (6) months prior to Closing.
(r) Insurance. Set forth on Schedule 3.2(r) attached hereto is
information as of the date hereof with respect to each insurance policy
(including policies providing property, casualty, liability, and workers'
compensation coverage, and bond and surety arrangements) to which the Global
Compression Business is a party, a named insured, or otherwise a named
beneficiary of coverage (excluding policies maintained by unaffiliated third
parties for the benefit of
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the Global Compression Business). With respect to each such insurance policy,
and except as set forth on Schedule 3.2(r) attached hereto: (i) the policy is in
full force and effect; (ii) to the knowledge of GE Capital, the Global
Compression Business is not in breach or default (including with respect to the
payment of premiums nor the giving of notices), and no event has occurred which,
with notice or the lapse of time, would constitute such a breach or default, or
permit termination, modification, or acceleration under the policy; and (iii) no
party to the policy has repudiated any provision thereof. The Global Compression
Business has not reached or exceeded its policy limits for any insurance
policies in effect at any time during the past five years.
(s) Undisclosed Liabilities. Except as set forth on Schedule
3.2(s) attached hereto or as set forth in the Global Financial Statements, at
the date of the most recent audited financial statements of the Global
Compression Business, the Global Compression Business had not, and since such
date the Global Compression Business has not incurred (except in the ordinary
course of business), any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise), which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on the
Global Compression Business taken as a whole.
(t) Year 2000 Compliance.
(i) Products and Services. Except as set forth
on Schedule 3.2(t) attached hereto, all of the Products and Services of Global
are Year 2000 Compliant. If Global is obligated to repair or replace Products or
Services previously provided thereby that are not Year 2000 Compliant in order
to meet its contractual obligations, to avoid personal injury or other
liability, to avoid misrepresentation claims, or to satisfy any other
obligations or requirements, Global has repaired or replaced those Products and
Services to make them Year 2000 Compliant. Global has furnished Weatherford with
true, correct and complete copies of any customer agreements and other materials
and correspondence in which Global has furnished (or could be deemed to have
furnished) assurances as to the performance and/or functionality of the Products
or Services of Global on or after January 1, 2000.
(ii) Internal MIS Systems and Facilities.
Except as set forth on Schedule 3.2(t) attached hereto, all of the Internal MIS
Systems and Facilities of Global are Year 2000 Compliant.
(iii) Suppliers. Except as set forth on
Schedule 3.2(t) attached hereto, all vendors of products or services to Global,
and its products, services and operations, are Year 2000 Compliant. To the
knowledge of Global after a reasonably diligent investigation, each such vendor
will continue to furnish its products or services to Global, without
interruption or material delay, on and after January 1, 2000. Global has entered
into appropriate agreements with each of its vendors certifying that all
hardware, software or firmware, and any other products and services furnished by
such vendor, including any and all enhancements, upgrades, customizations,
modifications, maintenance and the like, are Year 2000 Compliant. All such
vendor agreements include appropriate indemnification by the vendor in favor of
Global and its successors if that vendor or its products, services or operations
fail to be Year 2000 Compliant or if the products, services or operations fail
to conform to or meet the terms of the vendor warranties, representations, or
other contractual terms.
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(iv) Year 2000 Compliance Investigations and
Reports. Global has furnished Weatherford with a true, correct and complete copy
of any internal investigations, memoranda, budget plans, forecasts or reports
concerning the Year 2000 Compliance of the products, services, operations,
systems, supplies, and facilities of Global and its vendors.
ARTICLE IV
CERTAIN COVENANTS
Section 4.1. Conduct of Weatherford Compression Business.
(a) Ordinary Course. During the period from the date of this
Formation Agreement to the Closing Date (except as otherwise specifically
contemplated by the terms of this Formation Agreement), Weatherford will cause
each Transferring Weatherford Entity to, and each Transferring Weatherford
Entity will, carry on its business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and, to the extent
consistent therewith, use all reasonable efforts to preserve intact its current
business organizations, keep available the services of its current officers and
employees and preserve its relationships with customers, suppliers, licensors,
licensees, distributors and others having business dealings with it, in each
case consistent with past practice, to the end that its goodwill and ongoing
business shall be unimpaired to the fullest extent possible at the Closing Date.
Without limiting the generality of the foregoing, and except as otherwise
expressly contemplated by this Formation Agreement, no Transferring Weatherford
Entity shall, and Weatherford shall not permit any Transferring Weatherford
Entity to:
(i) (A) declare, set aside or pay any
dividends on, or make any other distributions in respect of, any of its equity
securities or interests, other than dividends and distributions by any direct or
indirect wholly owned subsidiary of WECC to WECC or a wholly owned subsidiary of
WECC, (B) split, combine or reclassify any of its capital stock or other equity
interests or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock, or (C)
purchase, redeem or otherwise acquire any equity securities or interests of any
Transferring Weatherford Entity or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities or interests;
(ii) issue, deliver, sell, pledge or otherwise
encumber any shares of its capital stock or other equity interests, any other
voting securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, equity interests or securities, voting
securities or convertible securities;
(iii) amend its certificate or articles of
incorporation or similar charter documents, its bylaws or its limited
partnership agreement;
(iv) except for those contemplated
transactions described on Schedule 4.1(a)(iv) attached hereto, acquire or agree
to acquire any business, corporation, partnership, association, joint venture,
limited liability company or other entity or division thereof involving the
payment of consideration in excess of $1,000,000 individually or in the
aggregate (with respect to
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all such transactions by all Transferring Weatherford Entities) without the
written consent of GE Capital, which consent shall not be unreasonably withheld;
(v) incur any Indebtedness, whether or not
evidenced by a note, bond, debenture or similar instrument, except for such
borrowings that would be repaid in full at Closing;
(vi) sell, lease, mortgage, pledge or grant a
Lien on or otherwise encumber or dispose of any of its properties or assets,
except (A) sales or leases in the ordinary course of business consistent with
past practice, (B) as may be required under Weatherford's credit and debt
facilities, (C) with respect to purchase money security interests, and (D) other
immaterial transactions not in excess of $1,000,000 in the aggregate (with
respect to all such transactions by all Transferring Weatherford Entities);
(vii) make any change in any election relating
to Taxes or settle or compromise any Tax audit or controversy relating to any
Weatherford Entity or the Weatherford Compression Business;
(viii) except for those transactions
contemplated hereby, adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such a liquidation or a dissolution,
merger, consolidation, restructuring, recapitalization or reorganization;
(ix) change any material accounting principle
used by it, except as required by regulations promulgated by GAAP; or
(x) authorize any of, or commit or agree to
take any of, the foregoing actions.
(b) Changes in Employment Arrangements. Except as contemplated
by the Transaction Documents, Weatherford shall not permit the Weatherford
Compression Business to adopt or amend any bonus, profit sharing, compensation,
stock option, pension, retirement, deferred compensation, employment or other
employee benefit plan, agreement, trust, fund or other arrangement (including
any Weatherford Plan) for the benefit or welfare of any employee, director or
former director or employee, increase the compensation or fringe benefits of any
officer of the Weatherford Compression Business, or, except as provided in an
existing Weatherford Plan or in the ordinary course of business consistent with
past practice, increase the compensation or fringe benefits of any employee or
former employee or pay any benefit not required by any existing plan,
arrangement or agreement. Except as contemplated by the Transaction Documents,
Weatherford shall not permit the Weatherford Compression Business to grant any
new or modified severance or termination arrangement or increase or accelerate
any benefits payable under its severance or termination pay policies in effect
on the date hereof.
(c) Other Actions. Neither Weatherford nor any Transferring
Weatherford Entity shall take any action that would, or that could reasonably be
expected to, result in any of the representations and warranties of Weatherford
set forth in this Formation Agreement becoming untrue.
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Section 4.2. Conduct of Global Compression Business.
(a) Ordinary Course. During the period from the date of this
Formation Agreement to the Closing Date (except as otherwise specifically
contemplated by the terms of this Formation Agreement), GE Capital will cause
Global to, and Global will, carry on its business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and, to
the extent consistent therewith, use all reasonable efforts to preserve intact
its current business organizations, keep available the services of its current
officers and employees and preserve its relationships with customers, suppliers,
licensors, licensees, distributors and others having business dealings with it,
in each case consistent with past practice, to the end that its goodwill and
ongoing business shall be unimpaired to the fullest extent possible at the
Closing Date. Without limiting the generality of the foregoing, and except as
otherwise expressly contemplated by this Formation Agreement, Global shall not,
and GE Capital shall not permit Global to:
(i) (A) declare, set aside or pay any
dividends on, or make any other distributions in respect of, any of its capital
stock, (B) split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (C) purchase, redeem or
otherwise acquire any shares of capital stock of Global or any other securities
thereof or any rights, warrants or options to acquire any such shares or other
securities;
(ii) issue, deliver, sell, pledge or otherwise
encumber any shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to acquire, any
such shares, voting securities or convertible securities;
(iii) amend its Certificate of Incorporation
or By-laws;
(iv) except for those contemplated
transactions described on Schedule 4.2(a)(iv) attached hereto, acquire or agree
to acquire any business, corporation, partnership, association, joint venture,
limited liability company or other entity or division thereof involving the
payment of consideration in excess of $1,000,000, individually or in the
aggregate, without the written consent of Weatherford, which consent shall not
be unreasonably withheld;
(v) incur any Indebtedness, whether or not
evidenced by a note, bond, debenture or similar instrument, except for such
borrowings that would be repaid in full at Closing;
(vi) sell, lease, mortgage, pledge or grant a
Lien on or otherwise encumber or dispose of any of its properties or assets,
except (A) sales or leases in the ordinary course of business consistent with
past practice, (B) as may be required under Global's existing credit or debt
facilities, (C) with respect to purchase money security interests, and (D) other
transactions not in excess of $1,000,000 in the aggregate;
(vii) make any change in any election relating
to Taxes or settle or compromise any Tax audit or controversy relating to Global
or the Global Compression Business;
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(viii) except for those contemplated corporate
transactions described on Schedule 4.2(a)(viii) attached hereto, adopt a plan of
complete or partial liquidation or resolutions providing for or authorizing such
a liquidation or a dissolution, merger, consolidation, restructuring,
recapitalization or reorganization;
(ix) change any material accounting principle
used by it, except as required by GAAP; or
(x) authorize any of, or commit or agree to
take any of, the foregoing actions.
(b) Changes in Employment Arrangements. Except as contemplated
by the Transaction Documents, GE Capital shall not permit the Global Compression
Business to adopt or amend any bonus, profit sharing, compensation, stock
option, pension, retirement, deferred compensation, employment or other employee
benefit plan, agreement, trust, fund or other arrangement (including any Global
Plan) for the benefit or welfare of any employee, director or former director or
employee, increase the compensation or fringe benefits of any officer of the
Global Compression Business, or, except as provided in an existing Global Plan
or in the ordinary course of business consistent with past practice, increase
the compensation or fringe benefits of any employee or former employee or pay
any benefit not required by any existing plan, arrangement or agreement. Except
as contemplated by the Transaction Documents, GE Capital shall not permit the
Global Compression Business to grant any new or modified severance or
termination arrangement or increase or accelerate any benefits payable under its
severance or termination pay policies in effect on the date hereof.
(c) Other Actions. Neither GE Capital nor Global shall take
any action that would, or that could reasonably be expected to, result in any of
the representations and warranties of GE Capital or Global set forth in this
Formation Agreement becoming untrue.
Section 4.3. Certain Other Covenants.
(a) Further Assurances. Upon the terms and subject to the
conditions set forth in this Formation Agreement, except to the extent otherwise
required by United States regulatory considerations and otherwise provided in
this Section 4.3(a), each of the parties agrees to use reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the transactions contemplated by this Formation Agreement,
including, without limitation, (i) the obtaining of all necessary actions or
nonactions, waivers, consents and approvals from Governmental Authorities and
the making of all necessary registrations and filings (including filings with
Governmental Authorities, if any) and the taking of all reasonable steps as may
be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Authority, (ii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iii) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Formation Agreement or the consummation of the transactions
contemplated hereby, including seeking to have any stay or temporary restraining
order entered by any court or other Governmental
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Authority vacated or reversed and (iv) the execution and delivery of any
additional instruments necessary to consummate the transactions contemplated by
this Formation Agreement. Notwithstanding the foregoing, no party shall be
required to agree to any consent, approval or waiver that would require such
party to take an action that would impair the value that such party reasonably
attributes to the transactions contemplated hereby.
(b) Notice. Each Weatherford Entity shall give prompt written
notice to GE Capital, and each GE Entity shall give prompt written notice to
Weatherford of (i) any representation or warranty made by it contained in this
Formation Agreement becoming untrue or inaccurate in any respect or (ii) the
failure by it to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Formation Agreement; provided, however, that no such notification shall affect
the representations or warranties or covenants or agreements of the parties or
the conditions to the obligations of the parties hereunder.
(c) HSR Act.
(i) If required, each of the parties hereto
shall file a premerger notification and report form under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act")and under any
other similar applicable laws of any jurisdiction other than the United States
with respect to the transactions contemplated hereby as promptly as reasonably
possible following execution and delivery of this Formation Agreement. Each of
the parties agrees to use reasonable efforts to promptly respond to any request
for additional information pursuant to Section (e)(1) of the HSR Act or pursuant
to any such other applicable laws.
(ii) Except as otherwise required by United
States regulatory considerations, Weatherford will furnish to GE Capital copies
of all correspondence, filings or communications (or memoranda setting forth the
substance thereof (collectively, "Weatherford HSR Documents")) between any
Weatherford Entity, or any of its respective representatives, on the one hand,
and any Governmental Authority, or members of the staff of such agency or
authority, on the other hand, with respect to this Formation Agreement or the
transactions contemplated hereby; provided, however, that (x) with respect to
documents and other materials filed by or on behalf of any Weatherford Entity
with the Antitrust Division of the Department of Justice, the Federal Trade
Commission, or any state attorneys general that are available for review by GE
Capital, copies will not be required to be provided to GE Capital and (y) with
respect to any Weatherford HSR Documents (1) that contain any information which,
in the reasonable judgment of Fulbright & Jaworski L.L.P., should not be
furnished to GE Capital because of antitrust considerations or (2) relating to a
request for additional information pursuant to Section (e)(1) of the HSR Act,
the obligation of Weatherford to furnish any such Weatherford HSR Documents to
GE Capital shall be satisfied by the delivery of such Weatherford HSR Documents
on a confidential basis to Weil, Gotshal & Manges LLP pursuant to a
confidentiality agreement in form and substance reasonably satisfactory to GE
Capital. Except as otherwise required by United States regulatory
considerations, GE Capital will furnish to Weatherford copies of all
correspondence, filings or communications (or memoranda setting forth the
substance thereof (collectively, "GE Capital HSR Documents")) between any GE
Entity or any of its respective representatives, on the one hand, and any
Governmental Authority, or member of the staff of such agency or authority, on
the other hand,
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with respect to this Formation Agreement or the transactions contemplated
hereby; provided, however, that (x) with respect to documents and other
materials filed by or on behalf of any GE Entity with the Antitrust Division of
the Department of Justice, the Federal Trade Commission, or any state attorneys
general that are available for review by Weatherford, copies will not be
required to be provided to Weatherford, and (y) with respect to any GE Capital
HSR Documents (1) that contain any information which, in the reasonable judgment
of Weil, Gotshal & Manges LLP, should not be furnished to Weatherford because of
antitrust considerations or (2) relating to a request for additional information
pursuant to Section (e)(1) of the HSR Act, the obligation of GE Capital to
furnish any such GE Capital HSR Documents to Weatherford shall be satisfied by
the delivery of such GE Capital HSR Documents on a confidential basis to
Fulbright & Jaworski L.L.P. pursuant to a confidentiality agreement in form and
substance reasonably satisfactory to Weatherford.
(iii) Nothing contained in this Formation
Agreement shall be construed so as to require any GE Entity or any Weatherford
Entity, or any of their respective subsidiaries or affiliates, to sell, license,
dispose of, or hold separate, or to operate in any specified manner, any
material assets or businesses of the Global Compression Business, the
Weatherford Compression Business or the Partnership (or to require the Global
Compression Business or the Weatherford Compression Business to agree to any of
the foregoing). The obligations of each party under Section 4.3 to use
reasonable efforts with respect to antitrust matters shall be limited to
compliance with the reporting provisions of the HSR Act and with its obligations
under this Section 4.3(c)(iii).
(d) Bulk Sales Waiver. The Weatherford Entities and the GE
Entities waive compliance with all applicable bulk sales and/or bulk transfer
laws in connection with the formation of the Partnership and Limited. Each Party
hereto shall indemnify and hold harmless the Partnership, Limited and each other
Party hereto from and against any and all losses, claims, damages and
liabilities (including legal and other expenses reasonably incurred in
connection with defending any such claims) incurred as a result of such party's
non-compliance with such laws; provided, however, that the foregoing shall not
affect the obligation of the Partnership to pay, perform and discharge the
Partnership Assumed Liabilities and no indemnity is made hereunder.
(e) Access. After the Closing, Weatherford will provide the
Partnership and Limited with access to such historical accounting and other
records relating to the Weatherford Compression Business prior to Closing as
reasonably requested by the Partnership or Limited. After the Closing, Global
will provide the Partnership and Limited with access to such historical
accounting and other records relating to the Global Compression Business prior
to Closing as reasonably requested by the Partnership and Limited.
(f) With respect to any of the Canadian entities to be formed
pursuant to Section 2.1(c)(4)(b), WECC covenants that, as of the date such
entities are acquired by the Partnership, with respect to any Employee Benefit
Plans of such entities, (i) all such plans will be duly registered where
required by, and will be in good standing under, all applicable laws, and any
regulations thereunder, and no events will have occurred or conditions will
exist that would reasonably be likely to jeopardize such status, (ii) all such
plans will be in material compliance and will have been maintained in accordance
with their terms and applicable law, (iii) all such plans will be properly
funded in accordance with their terms and applicable law, (iv) there will exist
no unfunded actuarial liabilities or solvency deficiencies, (v) no actuarial
surplus will have ever been removed nor will
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have any surplus ever been used to offset any contribution obligations of
Weatherford or any of its subsidiaries under any such plan, and (vi) all
contributions (including all employer contributions and employee salary
reduction contributions) required to have been made under such plans or by law
to any funds or trusts established thereunder or in connection therewith will
have been made by the due date thereof (including any valid extension), and all
contributions for any period ending on or before the date such entities are
acquired by the Partnership which are not yet due will have been paid or accrued
on or prior to such date.
Section 4.4. Curing Adverse Environmental Conditions.
(a) Weatherford agrees to undertake or cause to be undertaken,
promptly and at its sole cost and expense, all actions set forth on Schedule
3.1(l) to this Formation Agreement.
(b) GE Capital agrees to undertake or cause to be undertaken,
promptly and at its sole cost and expense, all actions set forth on Schedule
3.2(l) to this Formation Agreement.
(c) To the extent any corrective action required by Section
4.4(a) or Section 4.4(b) is undertaken or performed by the Partnership or the
Partnership causes such corrective actions to be undertaken or performed, either
because Weatherford or GE Capital requests the Partnership to take such action
on its behalf or because Weatherford or GE Capital fails to complete such
corrective action, (i) Weatherford shall promptly reimburse the Partnership for
all reasonable out-of-pocket costs associated with such corrective action at the
properties or facilities contributed to the Partnership by any Contributing
Weatherford Entity, and (ii) GE Capital shall promptly reimburse the Partnership
for all reasonable out-of-pocket costs associated with such corrective action at
the properties or facilities contributed to the Partnership by Global.
(d) The obligations under this Section 4.4 are in addition to
and in no way limit the Parties' respective indemnification obligations set
forth in Article VIII of this Formation Agreement.
ARTICLE V
CONDITIONS
Section 5.1. Conditions Precedent to Each Party's Obligations. The
respective obligations of each Weatherford Entity and each GE Entity to
consummate the transactions contemplated by this Formation Agreement are subject
to the satisfaction or waiver on or prior to the Closing Date of each of the
following conditions:
(a) HSR Act. The waiting period (and any extension thereof),
if applicable to the transactions contemplated by this Formation Agreement,
under the HSR Act shall have been terminated or shall have expired.
(b) Competition Act (Canada). The waiting period (and any
extension thereof) applicable to the transactions contemplated by this Formation
Agreement under Part IX of the Competition Act (Canada) shall have been
terminated or shall have expired.
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(c) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the transactions contemplated by this Formation Agreement shall
be in effect; provided, however, that the Weatherford Entities and the GE
Entities shall, subject to Section 7(c), use reasonable efforts to have any such
injunction, order, restraint or prohibition vacated.
Section 5.2. Conditions Precedent to Obligations of Weatherford and the
other Weatherford Entities. The obligations of Weatherford and each other
Weatherford Entity to consummate the transactions contemplated by this Formation
Agreement are further subject to the satisfaction or waiver on or prior to the
Closing Date, of each of the following conditions:
(a) Compliance. The agreement and covenants of GE Capital and
Global to be complied with or performed on or before the Closing Date pursuant
to the terms hereof shall have been duly complied with or performed in all
material respects and Weatherford shall have received a certificate to that
effect dated the Closing Date and executed on behalf of (i) GE Capital, by an
authorized officer of GE Capital, and (ii) Global, by the chief executive
officer and the chief financial officer of Global.
(b) Certifications and Opinion. GE Capital shall have
furnished Weatherford with:
(i) a certified copy of a resolution or
resolutions duly adopted by the Board of Directors of Global approving the
Transaction Documents to which it is a party and consummation of the
transactions contemplated hereby;
(ii) a favorable opinion, dated the Closing
Date, in customary form and substance of Victor Guaglianone, Esq., Vice
President and Associate General Counsel for GE Capital, to the effect that:
(A) GE Capital is a corporation duly
organized, existing and in good standing under the laws of the State of New York
and has all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as now being conducted. (B) GE
Capital has all requisite corporate power and authority to execute and deliver
each of the Transaction Documents to which it is a party and to perform its
obligations thereunder. The execution, delivery and performance by GE Capital of
the Transaction Documents to which it is a party have been duly and validly
authorized by all necessary corporate action on the part of GE Capital. Each of
the Transaction Documents to which GE Capital is a party has been duly and
validly executed and delivered by GE Capital; and
(C) The execution and delivery by GE Capital
of the Transaction Documents to which it is a party and performance by GE
Capital of its obligations thereunder will not violate or conflict with any
provision of the Articles of Incorporation or Bylaws of GE Capital.
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(iii) a favorable opinion, dated the Closing
Date, in customary form and substance of Robert Sarfatis, Esq., Counsel for
Global, to the effect that:
(A) Global is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has all requisite corporate power and authority to own its
properties and to carry on its business as now being conducted;
(B) Global has all requisite corporate power
and authority to execute and deliver the Transaction Documents to which it is a
party and to perform its obligations thereunder. The execution, delivery and
performance by Global of the Transaction Documents to which it is a party and
the consummation by Global of the transactions contemplated thereby have been
duly authorized by all necessary corporate action on the part of Global. Each of
the Transaction Documents to which Global is a party has been duly and validly
executed and delivered by Global; and
(C) The execution and delivery by Global of
the Transaction Documents to which it is a party, the consummation of the
transactions contemplated hereby and compliance by Global with the provisions
thereof will not conflict with, constitute a default under or violate any of the
terms, conditions or provisions of Global's Certificate of Incorporation or
ByLaws; and
(iv) an opinion of Weil, Gotshal & Manges LLP,
counsel for GE Capital and Global, dated the Closing Date, to the effect that
the Transaction Documents to which GE Capital or Global is a party are valid and
binding agreements of GE Capital and Global enforceable against GE Capital and
Global in accordance with their terms, except that (i) such enforcement may be
subject to bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws or judicial decisions now or hereafter in
effect relating to creditors' rights and remedies generally, (ii) such
enforcement may be subject to general principles of equity, including principles
of commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity), (iii) the remedy of
specific performance and injunctive relief may be subject to equitable defenses
and to the discretion of the court before which any proceeding therefor may be
brought, (iv) the enforceability of any indemnification and contribution
provision contained therein may be limited by applicable federal or state laws
or public policy relating thereto and (v) such enforcement may be affected by
the failure of the GE Entities to comply with the bulk sales laws of any
jurisdiction.
(c) Representations and Warranties True. The representations
and warranties of GE Capital and Global contained in this Formation Agreement
(other than any representations and warranties made as of a specific date) shall
be true in all material respects (except to the extent the representation or
warranty is already qualified by materiality, in which case it shall be true in
all respects) on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, except as
contemplated or permitted by this Formation Agreement, and Weatherford shall
have received a certificate to that effect dated the Closing Date and executed
on behalf of (i) GE Capital, by an authorized officer of GE Capital, and (ii)
Global by the chief executive officer and the chief financial officer of Global.
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(d) Consents, etc.. Weatherford shall have received evidence,
in form and substance reasonably satisfactory to it, that such licenses,
permits, consents, approvals, authorizations, qualifications and orders of
Governmental Authorities and other third parties as are necessary in connection
with the transactions contemplated hereby have been obtained, except such
licenses, permits, consents, approvals, authorizations, qualifications and
orders which are not, individually or in the aggregate, material to the
Partnership and its subsidiaries, taken as a whole, or the failure of which to
have received would not (as compared to the situation in which such license,
permit, consent, approval, authorization, qualification or order had been
obtained) have a Material Adverse Effect on the Partnership and its
subsidiaries, taken as a whole, after giving effect to the transactions
contemplated hereby.
(e) No Litigation. There shall not be pending or threatened by
any Governmental Authority any suit, action or proceeding (or by any other
Person any pending suit, action or proceeding which has a reasonable likelihood
of success), (i) challenging or seeking to restrain or prohibit the consummation
of the transactions contemplated by this Formation Agreement or seeking to
obtain from Weatherford or any of the other Weatherford Entities any damages
that are material in relation to Weatherford and the other Weatherford Entities
taken as a whole, (ii) seeking to prohibit or limit the ownership or operation
by the Partnership or any of its subsidiaries of any material portion of the
Global Compression Business or the Weatherford Compression Business or to
dispose of or hold separate any material portion of the business or assets of
the Global Compression Business or the Weatherford Compression Business, as a
result of the transactions contemplated by this Formation Agreement or (iii)
seeking to prohibit the Partnership or any of its subsidiaries from effectively
controlling in any material respect the Global Compression Business or the
Weatherford Compression Business.
(f) No Material Adverse Change. There shall not have occurred
any material adverse change with respect to the Global Compression Business
since the date hereof.
Section 5.3. Conditions Precedent to Obligations of GE Capital and the
other GE Entities. The obligations of GE Capital and each other GE Entity to
consummate the transactions contemplated by this Formation Agreement are further
subject to the satisfaction or waiver on or prior to the Closing Date, of each
of the following conditions:
(a) Compliance. The agreements and covenants of Weatherford
and each other Weatherford Entity to be complied with or performed on or before
the Closing Date pursuant to the terms hereof shall have been duly complied with
or performed in all material respects and GE Capital shall have received a
certificate to that effect dated the Closing Date executed on behalf of
Weatherford and each other Weatherford Entity by the chief executive officers
and the chief financial officers of Weatherford and each other Weatherford
Entity (or of the general partner thereof with respect to Weatherford Entities
that are limited partnerships).
(b) Certification and Opinions. Weatherford shall have
furnished GE Capital with:
(i) a certified copy of a resolution or
resolutions duly adopted by the Board of Directors or a duly authorized
committee thereof or the general partner thereof of each
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Weatherford Entity approving the Transaction Documents to which it is a party,
and consummation of the transactions contemplated hereby;
(ii) a favorable opinion, dated the Closing
Date, in customary form and substance, of Fulbright & Jaworski L.L.P., counsel
for the Weatherford Entities to the effect that:
(A) Each Weatherford Entity is duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has corporate or partnership, as the case may be, power to own its
properties and to carry on its business as now being conducted;
(B) Each Weatherford Entity has the
requisite corporate or partnership, as the case may be, power to effect the
transactions contemplated by the Transaction Documents to which it is a party;
the execution and delivery of such Transaction Documents Agreement did not, and
the consummation of the transactions contemplated thereby will not, violate any
provision of, with respect to Weatherford, Weatherford's certificate of
incorporation, or ByLaws, and with respect to WECC, WECC's limited partnership
agreement; and
(C) the Board of Directors of Weatherford
has taken all action required under the DGCL, its certificate of incorporation,
or its By-Laws and the general partner of WECC has taken all action required
under the DRULPA or its limited partnership agreement to authorize the execution
and delivery of the Transaction Documents to which it is a party and the
transactions contemplated thereby; and each such Transaction Document (other
than those governed by the laws of the State of Delaware) is a valid and binding
agreement of such Weatherford Entity enforceable against such Weatherford Entity
in accordance with its terms, except that (i) such enforcement may be subject to
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws or judicial decisions now or hereafter in effect relating to
creditors' rights and remedies generally, (ii) such enforcement may be subject
to general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether enforcement
is sought in a proceeding at law or in equity), (iii) the remedy of specific
performance and injunctive relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought,
(iv) the enforceability of any indemnification provision contained therein may
be limited by applicable federal or state laws or public policy relating thereto
and (v) such enforcement may be affected by the failure of the Weatherford
Entities to comply with the bulk sales laws of any jurisdiction.
(c) Representations and Warranties True. The representations
and warranties of each Weatherford Entity contained in this Formation Agreement
(other than any representations and warranties made as of a specific date) shall
be true in all material respects (except to the extent the representation or
warranty is already qualified by materiality, in which case it shall be true in
all respects) on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, except as
contemplated or permitted by this Formation Agreement, and GE Capital shall have
received a certificate to that effect dated the Closing Date and executed on
behalf of Weatherford and WECC by an authorized officer of Weatherford and of
the general partner of WECC.
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(d) Consents, etc.. GE Capital shall have received evidence,
in form and substance reasonably satisfactory to it, that such licenses,
permits, consents, approvals, authorizations, qualifications and orders of
Governmental Authorities and other third parties as are necessary in connection
with the transactions contemplated hereby have been obtained, except such
licenses, permits, consents, approvals, authorizations, qualifications and
orders that are not, individually or in the aggregate, material to the
Partnership and its subsidiaries, taken as a whole, or the failure of which to
have received would not (as compared to the situation in which such license,
permit, consent, approval, authorization, qualification or order had been
obtained) have a Material Adverse Effect on the Partnership and its subsidiaries
taken as a whole after giving effect to the transactions contemplated hereby.
(e) No Litigation. There shall not be pending or threatened by
any Governmental Authority any suit, action or proceeding (or by any other
Person any pending suit, action or proceeding which has a reasonable likelihood
of success) (i) challenging or seeking to restrain or prohibit the consummation
of the transactions contemplated by this Formation Agreement or seeking to
obtain from GE Capital or Global any damages that are material in relation to GE
Capital and Global taken as a whole, (ii) seeking to prohibit or limit the
ownership or operation by the Partnership or any of its subsidiaries of any
material portion of the Global Compression Business or the Weatherford
Compression Business or to dispose of or hold separate any material portion of
the business or assets of the Global Compression Business or the Weatherford
Compression Business, as a result of the transactions contemplated by this
Formation Agreement or (iii) seeking to prohibit the Partnership or any of its
subsidiaries from effectively controlling in any material respect the Global
Compression Business or the Weatherford Compression Business.
(f) No Material Adverse Change. There shall not have occurred
any material adverse change with respect to the Weatherford Compression Business
since the date hereof.
ARTICLE VI
TERMINATION; AMENDMENT; WAIVER
Section 6.1. Termination. (a) This Formation Agreement may be
terminated at any time prior to the Closing Date:
(i) by mutual written consent of the Parties
hereto;
(ii) by either Weatherford or GE Capital:
(A) if any court of competent jurisdiction
or any Governmental Authority shall have issued an order, decree or ruling or
taken any other action permanently enjoining, restraining or otherwise
prohibiting the transactions contemplated hereby; or
(B) if the transactions contemplated hereby
shall not have been consummated on or before February 15, 1999, unless the
failure to consummate the transactions
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contemplated hereby is the result of a material breach of this Formation
Agreement by the Party seeking to terminate this Formation Agreement.
(iii) by Weatherford, if GE Capital or
Global breaches any of its representations or warranties herein or fails to
perform in any material respect any of its covenants, agreements or obligations
under this Formation Agreement; and
(iv) by GE Capital, if Weatherford or any
other Weatherford Entity breaches any of its representations or warranties
herein or fails to perform in any material respect any of its covenants,
agreements or obligations under this Formation Agreement.
(b) In the event of termination of this Formation Agreement as
provided in Section 6.1(a), this Formation Agreement shall forthwith become void
and have no effect, without any liability or obligation on the part of
Weatherford or any other Weatherford Entity or GE Capital or any other GE
Entity, other than (i) the provisions of Sections 6.1., 6.3, 9.1, 9.2 and 9.6
and (ii) such termination shall not relieve any party hereto for any breach of
this Formation Agreement prior to such termination by a Party of any of its
representations or warranties or any of its covenants, agreements or obligations
set forth in this Formation Agreement.
Section 6.2. Amendment. This Formation Agreement may be amended by the
Parties at any time.
Section 6.3. Procedure for Termination, Amendment, Extension or Waiver.
A termination of this Formation Agreement pursuant to Section 6.1(a)(i), an
amendment of this Formation Agreement pursuant to Section 6.2 or an extension or
waiver pursuant hereof shall, in order to be effective, require the duly
authorized signature of all Parties.
ARTICLE VII
TAX MATTERS
Section 7.1. Certain Tax Matters. The Parties agree as follows with
respect to the period following the Closing:
(a) Access to Information.
(1) Weatherford and each member of the Weatherford
Group shall grant to the Partnership (or its designees) access at all reasonable
times to all of the information, books and records relating to the Weatherford
Compression Business within the possession of Weatherford or any member of the
Weatherford Group (including workpapers and correspondence with taxing
authorities), and shall afford the Partnership (or its designees) the right (at
their expense) to take extracts therefrom and make copies thereof, to the extent
reasonably necessary to permit the Partnership (or its designees) to prepare Tax
Returns, to conduct negotiations with Tax authorities, and to implement the
provisions of, or to investigate or defend any claims between the parties
arising under this Formation Agreement.
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(2) GE Capital and each member of the GE Capital
Group shall grant to the Partnership (or its designees) access at all reasonable
times to all of the information, books and records relating to the Global
Compression Business within the possession of GE Capital or any member of the GE
Capital Group (including workpapers and correspondence with taxing authorities),
and shall afford (or its designees) the right (at their expense) to take
extracts therefrom and make copies thereof, to the extent reasonably necessary
to permit the Partnership (or its designees) to prepare Tax Returns, to conduct
negotiations with Tax authorities, and to implement the provisions of, or to
investigate or defend any claims between the parties arising under this
Formation Agreement.
(3) The Partnership shall grant to Weatherford (or
its designees) access at all reasonable times to all of the information, books
and records relating to the Weatherford Compression Business and its
subsidiaries within the possession of the Partnership (including workpapers and
correspondence with taxing authorities), and shall afford Weatherford (or its
designees) the right (at Weatherford's expense) to take extracts therefrom and
to make copies thereof, to the extent reasonably necessary to permit Weatherford
(or its designees) to prepare Tax Returns, to conduct negotiations with Tax
authorities, and to implement the provisions of, or to investigate or defend any
claims between the parties arising under, this Formation Agreement.
(4) The Partnership shall grant to GE Capital (or its
designees) access at all reasonable times to all of the information, books and
records relating to the Global Compression Business and its subsidiaries within
the possession of the Partnership (including workpapers and correspondence with
taxing authorities), and shall afford GE Capital (or its designees) the right
(at GE Capital's expense) to take extracts therefrom and to make copies thereof,
to the extent reasonably necessary to permit GE Capital (or its designees) to
prepare Tax Returns, to conduct negotiations with Tax authorities, and to
implement the provisions of, or to investigate or defend any claims between the
parties arising under, this Formation Agreement.
(5) Each of the Parties will preserve and retain all
schedules, workpapers and other documents relating to any Tax Returns of or with
respect to the Global Compression Business, in the case of GE Capital and the
Partnership, and the Weatherford Compression Business, in the case of
Weatherford and the Partnership, or to any claims, audits or other proceedings
affecting such Businesses until the expiration of the statute of limitations
(including extensions) applicable to the taxable period to which such documents
relate or until the final determination of any controversy with respect to such
taxable period, and until the final determination of any payments that may be
required with respect to such taxable period under this Formation Agreement.
(b) Indemnification Provisions for the Benefit of the
Partnership, Global and GE Capital. Weatherford hereby agrees to defend,
indemnify and hold harmless the Partnership, Global and GE Capital from and
against, and agrees to pay, all Taxes imposed and all costs and expenses
(including, without limitation, litigation costs and reasonable attorneys' and
accountants' fees and disbursements) incurred (all herein referred to as "Tax
Losses") as a result of:
(1) a claim, notice of deficiency, or assessment by,
or any obligation owing to, any Governmental Authority for:
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any Taxes of the Weatherford Group including, without limitation (i) any and all
Taxes of any entity the assets of which are subsequently acquired, whether by
purchase or otherwise, by the Partnership from any entity controlling or
controlled by, under common control with, or otherwise affiliated with any
Weatherford Entity, and (ii) any and all Taxes of any entity the equity
interests of which are acquired, whether by purchase or otherwise, by the
Partnership, from any entity controlling or controlled by, under common control
with, or otherwise affiliated with any Weatherford Entity in each case to the
extent that such Taxes are attributable to any period prior to the Closing Date;
and
any and all Taxes of any other entity (other than the Weatherford Compression
Business) that is or was a member of a consolidated, combined or unitary group
of which any Weatherford Entity (or any predecessor) is or was a member on or
prior to the Closing Date, by reason of the liability of any Weatherford Entity
or any entity controlling or controlled by, under common control with, or
otherwise affiliated with any Weatherford Entity, the equity interests of which
are subsequently acquired by the Partnership, whether by purchase or otherwise
pursuant to Treasury Regulation Section 1.1502-6(a) or any analogous or similar
state, local or foreign law or regulation if and to the extent that such
liability exceeds Taxes attributable to taxable periods ending on or before the
Closing Date reflected as current liabilities on the Weatherford Closing Date
Balance Sheet.
(2) any breach of any representation, warranty or
obligation of Weatherford under Section 3.1(j) or 3.1(k) of this Formation
Agreement.
(c) Indemnification Provisions for the Benefit of the
Partnership, WECC and Weatherford. GE Capital hereby agrees to defend, indemnify
and hold harmless the Partnership, WECC and Weatherford from and against, and
agrees to pay, all Tax Losses as a result of:
(1) a claim, notice of deficiency, or assessment by,
or any obligation owing to, any taxing authority for:
any Taxes of the GE Capital Group including, without limitation (i) any and all
Taxes of any entity the assets of which are subsequently acquired, whether by
purchase or otherwise, by the Partnership from any entity controlling or
controlled by, under common control with, or otherwise affiliated with any
Global Entity, and (ii) any and all Taxes of any entity the equity interests of
which are acquired, whether by purchase or otherwise, by the Partnership, from
any entity controlling or controlled by, under common control with, or otherwise
affiliated with any Global Entity to the extent that such Taxes are attributable
to any period prior to the acquisition of such equity interests by the
Partnership, unless, in the case of the Partnership, to the extent an accrual
therefor is reflected in the Global Closing Date Balance Sheet and any and all
Taxes of any corporation (other than the Global Compression Business) that is or
was a member of a consolidated, combined or unitary group of which any GE Entity
(or any predecessor) is or was a member on or prior to the Closing Date, by
reason of the liability of any GE Entity or any entity controlling or controlled
by, under common control with, or otherwise affiliated with any Global Entity,
the equity interests of which are subsequently acquired by the Partnership,
whether by purchase or otherwise pursuant to Treasury Regulation Section
1.1502-6(a) or any analogous or similar state, local or foreign law or
regulation if and to the extent such liability exceeds Taxes attributable to
taxable periods ending on or before the Closing Date reflected as current
liabilities on the Global Closing Date Balance Sheet.
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(2) any breach of any representation, warranty or
obligation of GE Capital under Section 3.2(j) or 3.2(k) of this Formation
Agreement.
(d) Indemnification Procedures.
(1) If a claim shall be made by any Governmental
Entity that, if successful, would result in the indemnification of a Party under
this Formation Agreement (referred to herein as the "Tax Indemnified Party"),
the Tax Indemnified Party shall promptly notify the party obligated under this
Formation Agreement to so indemnify (referred to herein as the "Tax Indemnifying
Party") in writing; provided, however, that no delay on the part of the Tax
Indemnified Party in notifying the Tax Indemnifying Party shall relieve the Tax
Indemnifying Party from any obligation hereunder unless (and then solely to the
extent) the Tax Indemnifying Party is prejudiced thereby.
(2) The Tax Indemnified Party shall take such action
in connection with contesting such claim as the Tax Indemnifying Party shall
reasonably request in writing from time to time, including the selection of
counsel and experts and the execution of powers of attorney, provided that (A)
within 30 days after the notice described in Section 7.1(d)(1) has been
delivered (or such earlier date that any payment of Taxes is due by the Tax
Indemnified Party but in no event sooner than five days after the Tax
Indemnifying Party's receipt of such notice), the Tax Indemnifying Party
requests that such claim be contested, (B) the Tax Indemnifying Party shall have
agreed to pay to the Tax Indemnified Party all costs and expenses that the Tax
Indemnified Party incurs in connection with contesting such claim, including,
without limitation, reasonable attorneys' and accountants' fees and
disbursements, and (C) if the Tax Indemnified Party is requested by the Tax
Indemnifying Party to pay the Tax claimed and sue for a refund, the Tax
Indemnifying Party shall have advanced to the Tax Indemnified Party, on an
interest-free basis, the amount of such claim. The Tax Indemnified Party shall
not make any payment of such claim for at least 30 days (or such shorter period
as may be required by applicable law) after the giving of the notice required by
Section 7.1(d)(1), shall give to the Tax Indemnifying Party any information
reasonably requested relating to such claim, and otherwise shall cooperate with
the Tax Indemnifying Party in good faith in order to contest effectively any
such claim.
(3) Subject to the provisions of Section 7.1(d)(2),
the Tax Indemnified Party shall enter into a settlement of such contest with the
applicable Governmental Entity or prosecute such contest to a determination in a
court or other tribunal of initial or appellate jurisdiction, all as the Tax
Indemnifying Party may request.
(4) If, after actual receipt by the Tax Indemnified
Party of an amount advanced by the Tax Indemnifying Party pursuant to Section
7.1(d)(2), the extent of the liability of the Tax Indemnified Party with respect
to the claim shall be established by the final judgment or decree of court or
other tribunal or final and binding settlement with an administrative agency
having jurisdiction thereof, the Tax Indemnified Party shall promptly repay to
the Tax Indemnifying Party the amount advanced to the extent of any refund
received by the Tax Indemnified Party with respect to the claim together with
any interest received thereon from the applicable Governmental Entity and any
recovery of legal fees from such taxing authority, net of any Taxes as are
required to be paid by the Tax Indemnified Party with respect to such refund,
interest or legal fees (calculated
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at the maximum applicable statutory rate of Tax without regard to any other Tax
Items). Notwithstanding the foregoing, the Tax Indemnified Party shall not be
required to make any payment hereunder before such time as the Tax Indemnifying
Party shall have made all payments or indemnities then due with respect to the
Tax Indemnified Party pursuant to this Formation Agreement.
(5) Promptly after a final determination the Tax
Indemnifying Party shall pay to the Tax Indemnified Party the amount of any Tax
Losses to which the Tax Indemnified Party may become entitled by reason of the
provisions of this Section 7.1.
ARTICLE VIII
INDEMNIFICATION
Section 8.1. Survival of Certain Representations and Warranties. Except
for the representations and warranties set forth in Sections 3.1(e), 3.1(g),
3.1(o), 3.2(e), 3.2(g) and 3.2(o) of this Formation Agreement, which
representations and warranties will continue without limitation notwithstanding
any otherwise applicable statute of limitations, and the representations and
warranties set forth in Section 3.1(i), 3.1(j), 3.1(k), 3.2(i), 3.2(j) and
3.2(k), which representations and warranties will continue until the expiration
of the applicable statute of limitations, all written representations and
warranties contained in or made pursuant to this Formation Agreement shall
survive the Closing, but shall terminate and be of no further force or effect on
the date three years after the Closing Date, provided, however, that the
representations and warranties set forth in Sections 3.1(b) and 3.2(b) with
respect to unaudited financial statements shall not survive the Closing.
Section 8.2. Indemnification by Weatherford and WECC.
(a) Weatherford and WECC shall, jointly and severally, subject
to the terms and conditions set forth in this Section 8.2, hold harmless and
indemnify each of the Partnership, the General Partner, GE Capital and Global,
and each of their respective directors, officers, employees and agents (each, a
"Weatherford Indemnity Party"), from and against and in respect of any and all
losses, liabilities, claims, damages and reasonable expenses of defense thereof
(including without limitation expenses of investigation and defense and fees and
disbursements of counsel, but excluding ordinary course compensation paid to
employees of a Weatherford Indemnity Party), liens or other obligations of any
nature whatsoever (collectively, "GE Losses"), other than GE Losses to the
extent recovered by the applicable Weatherford Indemnity Party under any
applicable insurance policy, which may be incurred by a Weatherford Indemnity
Party and which relates to or results from:
(i) any breach by Weatherford or WECC of any
representation or warranty of Weatherford or WECC contained in this Formation
Agreement, other than a breach of the representations and warranties set forth
in Sections 3.1(j) and 3.1(k) of this Formation Agreement, the breach of which
Sections 3.1(j) and 3.1(k) shall be governed by Section 8.2(a)(iv), or a breach
of Section 3.1(b) with respect to unaudited financial statements; or
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(ii) any breach by Weatherford or WECC of any
covenant or agreement of Weatherford or WECC contained in this Formation
Agreement; or
(iii) any Excluded Weatherford Liability;
provided that if the Weatherford Indemnity Party is the Partnership or the
General Partner only to the extent such Excluded Weatherford Liability was not
accrued on the Weatherford Closing Date Balance Sheet prepared pursuant to
Section 2.3 of this Formation Agreement; or
(iv) Taxes to the extent provided for in
Section 7.1(b) of this Formation Agreement, or any breach by Weatherford or WECC
of any representation or warranty contained in Section 3.1(j) or 3.1(k) of this
Formation Agreement; or
(v) any matter set forth on Schedule 3.1(h)
attached to this Formation Agreement.
(b) No claim for indemnification shall be made by any
Weatherford Indemnity Party pursuant to Section 8.2(a) unless notice of such
claim (describing in reasonable specificity the basic facts or events underlying
such claim) has been given to Weatherford.
(c) No claim for indemnification shall be made by any
Weatherford Indemnity Party pursuant to Section 8.2(a)(i) until such claim,
individually, is in excess of $500,000; provided, however, that there shall be
no such minimum dollar limitation to any claim made pursuant to Section
8.2(a)(ii), 8.2(a)(iii), 8.2(a)(iv) or 8.2(a)(v).
(d) Except as provided in Article VII with respect to Tax
matters, any claim for indemnification under this Section 8.2 shall be made in
accordance with this Section 8.2(d). A Weatherford Indemnity Party shall give
prompt written notice to Weatherford of any claim or demand of which it has
knowledge and as to which it may request indemnification under this Section 8.2.
Weatherford and WECC shall have the right to defend and to direct the defense
against any claim or demand for which a claim for indemnification is made under
this Section 8.2, including the right to conduct any remediation or other
corrective action required under Environmental Laws to resolve such claim or
demand, in its name or in the name of the applicable Weatherford Indemnity
Party, as the case may be, at the sole expense of Weatherford and WECC, and with
counsel selected by Weatherford; provided that, Weatherford and WECC may not
settle or compromise any such claim or demand without the prior written consent
of the applicable Weatherford Indemnity Party (which consent may not be
unreasonably withheld). Notwithstanding anything in this Formation Agreement to
the contrary, the applicable Weatherford Indemnity Party shall cooperate with
Weatherford and WECC, and keep Weatherford fully informed in the defense of any
such claim or demand. The applicable Weatherford Indemnity Party shall have the
right to participate in the defense of any claim or demand with counsel employed
by such Weatherford Indemnity Party at the sole expense of Weatherford. Neither
Weatherford nor WECC shall have any indemnification obligations with respect to
any such claim or demand which shall be settled by a Weatherford Indemnity Party
without the prior written consent of Weatherford (which consent may not be
unreasonably withheld).
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(e) Except as provided in Article VII with respect to Tax
matters, the rights of the Weatherford Indemnity Parties under Section 8.2 shall
be the exclusive remedy of the Weatherford Indemnity Parties with respect to
breaches of representations, warranties, covenants and agreements by Weatherford
or WECC contained in or made pursuant to this Formation Agreement.
(f) In the event that Weatherford or WECC shall be obligated
to indemnify any Weatherford Indemnity Party pursuant to this Section 8.2, the
applicable Weatherford Entity shall, upon payment of such indemnity, be
subrogated to all rights of the Weatherford Indemnity Party with respect to
claims to which such indemnification relates.
Section 8.3. Indemnification by GE Capital and Global.
(a) GE Capital and Global shall, jointly and severally,
subject to the terms and conditions set forth in this Section 8.3, hold harmless
and indemnify each of the Partnership, the General Partner, Weatherford and
WECC, and each of their respective directors, officers, employees and agents
(each, a "GE Indemnity Party"), from and against and in respect of any and all
losses, liabilities, claims, damages and reasonable expenses of defense thereof
(including without limitation expenses of investigation and defense and fees and
disbursements of counsel, but excluding ordinary course compensation paid to
employees of a GE Indemnity Party), liens or other obligations of any nature
whatsoever (collectively, "Weatherford Losses"), other than Weatherford Losses
to the extent recovered by the applicable GE Indemnity Party under any
applicable insurance policy, which may be incurred by a GE Indemnity Party and
which relates to or results from:
(i) any breach by GE Capital or Global of any
representation or warranty of GE Capital or Global contained in this Formation
Agreement other than breach of representations and warranties set forth in
Sections 3.2(j) and 3.2(k) of this Formation Agreement, the breach of which
Sections 3.2(j) and 3.2(k) shall be governed by Section 8.3(a)(iv), or a breach
of Section 3.2(b) with respect to unaudited financial statements; or
(ii) any breach by GE Capital or Global of any
covenant or agreement of GE Capital or Global contained in this Formation
Agreement; or
(iii) any Excluded Global Liability; provided
that if the GE Indemnity Party is the Partnership or the General Partner only to
the extent such Excluded Global Liability was not accrued on the Global Closing
Date Balance Sheet prepared pursuant to Section 2.3 of the Formation Agreement;
or
(iv) Taxes to the extent provided for in
Section 7.1(c) of this Formation Agreement, or any breach by GE Capital or
Global of any representation or warranty contained in Sections 3.2(j) or 3.2(k)
of this Formation Agreement.
(b) No claim for indemnification shall be made by any GE
Indemnity Party pursuant to Section 8.3(a) unless notice of such claim
(describing in reasonable specificity the basic facts or events underlying such
claim) has been given to GE Capital.
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(c) No claim for indemnification shall be made by any GE
Indemnity Party pursuant to Section 8.3(a)(i) until such claim, individually, is
in excess of $500,000; provided, however, that there shall be no such minimum
dollar limitation to any claim made pursuant to Section 8.3(a)(ii), 8.3(a)(iii)
or 8.3(a)(iv).
(d) Except as provided in Article VII with respect to Tax
matters, any claim for indemnification under this Section 8.3 shall be made in
accordance with this Section 8.3(d). A GE Indemnity Party shall give prompt
written notice to GE Capital of any claim or demand of which it has knowledge
and as to which it may request indemnification under this Section 8.3. GE
Capital and Global shall have the right to defend and to direct the defense
against any claim or demand for which a claim for indemnification is made under
this Section 8.3, including the right to conduct any remediation or other
corrective action required under Environmental Laws to resolve such claim or
demand, in its name or in the name of the applicable GE Indemnity Party, as the
case may be, at the sole expense of GE Capital and Global, and with counsel
selected by GE Capital; provided that, GE Capital and Global may not settle or
compromise any such claim or demand without the prior written consent of the
applicable GE Indemnity Party (which consent may not be unreasonably withheld).
Notwithstanding anything in this Formation Agreement to the contrary, the
applicable GE Indemnity Party shall cooperate with GE Capital and Global, and
keep GE Capital fully informed in the defense of any such claim or demand. The
applicable GE Indemnity Party shall have the right to participate in the defense
of any claim or demand with counsel employed by such GE Indemnity Party at the
sole expense of GE Capital. Neither GE Capital nor Global shall have any
indemnification obligations with respect to any such claim or demand which shall
be settled by a GE Indemnity Party without the prior written consent of GE
Capital (which consent may not be unreasonably withheld).
(e) Except as provided in Article VII with respect to Tax
matters, the rights of the GE Indemnity Parties under Section 8.3 shall be the
exclusive remedy of the GE Indemnity Parties with respect to breaches of
representations, warranties, covenants and agreements by GE Capital or Global
contained in or made pursuant to this Formation Agreement.
(f) In the event that GE Capital or Global shall be obligated
to indemnify any GE Indemnity Party pursuant to this Section 8.3, the applicable
GE Entity shall, upon payment of such indemnity, be subrogated to all rights of
the GE Indemnity Party with respect to claims to which such indemnification
relates.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Expenses. Whether or not the transactions contemplated by
this Formation Agreement are consummated, all costs and expenses incurred in
connection with this Formation Agreement and the transactions contemplated
hereby shall be paid by the Party incurring such expenses.
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Section 9.2. Dispute Resolution and Arbitration.
(a) Dispute Resolution and Arbitration.
(1) In the event of any controversy or claim, whether
based in contract, tort or otherwise, arising out of or relating to any
Transaction Document or the scope, breach, termination or validity of any
Transaction Document (a "Claim"), the parties thereto involved in such Claim
shall promptly seek to resolve any such Claim by negotiations between senior
executives of such parties who have authority to settle the Claim. When a party
to a Transaction Document believes there is a Claim thereunder, that party will
give all other parties to such Transaction Document written notice of the Claim.
Within 30 days after receipt of such notice, the receiving parties shall submit
to all other parties thereto a written response. Both the notice and response
shall include (A) a statement of each party's position and a summary of the
evidence and arguments supporting its position, and (B) the name, title, fax
number, and telephone number of the executive who will represent that party. In
the event the Claim involves a claim arising out of the actions of any Person
not a signatory to the relevant Transaction Document, the receiving parties
shall have such additional time as necessary, not to exceed an additional 60
days, to investigate the Claim before submitting a written response. The
executives shall meet at a mutually acceptable time and place within 15 days
after the date of the response and thereafter as often as they reasonably deem
necessary to exchange relevant information and to attempt to resolve the Claim.
If one of the executives intends to be accompanied at a meeting by an attorney,
the other executive shall be given at least five Business Days' notice of such
intention and may also be accompanied by an attorney. All negotiations and
communications pursuant to this Section 9.2 shall be treated and maintained by
such parties as confidential information and shall be treated as compromise and
settlement negotiations for the purposes of the Federal Rules of Evidence and
state rules of evidence.
(2) If the Claim has not been resolved within 60 days
after the date of the response given pursuant to Section 9.2(a)(1) above, or
such additional time, if any, that the parties mutually agree to in writing, or
if a party receiving such notice denies the applicability of the provisions of
Section 9.2(a)(1) above or otherwise refuses to participate under the provisions
of Section 9.2(a)(1) above, any party may initiate binding arbitration pursuant
to the provisions of Section 9.2(a)(3) below.
(3) Any Claims not settled pursuant to the foregoing
provisions shall be submitted to binding arbitration in accordance with the
following provisions.
(i) The party desiring to initiate arbitration
in connection with any Claim shall notify all other parties in writing, which
notice shall demand arbitration, and include a statement of the matter in
controversy.
(ii) Within 15 days after receipt of such
demand, the receiving parties and the sending party shall attempt to jointly
agree on three arbitrators from the panel made available by the American
Arbitration Association. If the parties are unable to so agree within such
period, such arbitrators shall be appointed, upon request of the party demanding
arbitration, by the Chief U.S. District Court Judge for the Southern District of
Texas or such other person designated by such judge. In the event the Judge
declines to appoint such arbitrators, appointment shall be
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made, upon application of the party demanding arbitration, pursuant to the
Commercial Arbitration Rules of the American Arbitration Association.
(iii) The parties to the Transaction Documents
hereby request and consent to the three arbitrators conducting a hearing in
Houston, Texas no later than 60 days following their selection or 30 days after
all prehearing discovery has been completed, whichever is later, at which the
parties to the relevant Transaction Documents shall present such evidence and
witnesses as they may choose, with or without counsel.
(iv) Arbitration shall be conducted in
accordance with the Commercial Arbitration Rules and procedures of the American
Arbitration Association.
(v) The Federal Rules of Civil Procedure, as
modified or supplemented by the local rules of civil procedure for the U.S.
District Court, Southern District of Texas, shall apply in the arbitration. The
parties to the relevant Transaction Documents shall make their witnesses
available in a timely manner for discovery pursuant to such rules. If a party
fails to comply with this discovery agreement within the time established by the
arbitrators, after resolving any discovery disputes, the arbitrators may take
such failure to comply into consideration in reaching their decision. All
discovery disputes shall be resolved by the arbitrators pursuant to the
procedures set forth in the Federal Rules of Civil Procedure. Discovery shall be
limited to a 60-day period.
(vi) Adherence to formal rules of evidence
shall not be required. The arbitrators shall consider any evidence and testimony
that they determine to be relevant.
(vii) The parties to the Transaction Documents
hereby request that the arbitrators render their decision within 30 calendar
days following conclusion of the hearing.
(viii) Any decision by a majority of the
arbitration panel shall be set forth in a written opinion thereof which shall
set forth the reasons for such decision and shall be final, binding and
non-appealable. Any such decision may be filed in any court of competent
jurisdiction and may be enforced by any party to the relevant Transaction
Documents as a final judgment in such court. There shall be no grounds for
appeal of any arbitration award hereunder.
(ix) The defenses of statute of limitations
and laches shall be tolled with respect to a Claim of which a party to the
relevant Transaction Documents gives the other parties thereto written notice,
from the date of notice as provided in Section 9.2(a)(1) above until such time
as the Claim has been resolved pursuant to Section 9.2(a)(1) or an arbitration
award has been entered pursuant to this Section 9.2(a)(3).
(x) The arbitrators shall have no authority to
award special, exemplary, or consequential damages.
(b) Recovery of Costs and Attorneys' Fees. In the event
arbitration (or, despite the agreement of the parties to the Transaction
Documents to settle Claims through binding arbitration, litigation) arising out
of any Transaction Document is initiated by any party thereto, the
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prevailing party or parties, after the entry of a final non-appealable order,
shall be entitled to recover from the non-prevailing party or parties, as a part
of said order, all court costs, fees and expenses of such arbitration (or
litigation), including reasonable attorneys' fees.
(c) Choice of Forum. If, despite the agreement of the parties
to the Transaction Documents to submit any Claims to binding arbitration, there
are any court proceedings arising out of or relating to any Transaction Document
or the transactions contemplated hereby, such proceedings shall be brought and
tried exclusively in the federal or state courts situated in Harris County,
Texas. THE PARTIES TO THE TRANSACTION DOCUMENTS HEREBY WAIVE IRREVOCABLY ANY AND
ALL RIGHTS TO DEMAND A TRIAL BY JURY.
Section 9.3. Notice. Any notice, request or statement provided for in
this Formation Agreement shall be in writing and shall be conclusively deemed to
have been given, made or delivered if sent by prepaid certified mail, return
receipt requested, to any Party at the address set opposite the name of such
Party on the signature page of this Formation Agreement, or at such other
address as any such Party shall hereinafter designate by notices to all other
Parties. Each notice, request or statement given, made or delivered as aforesaid
shall be conclusively deemed to have been given, made or delivered when
deposited in the United States mail.
Section 9.4. Assignment. This Formation Agreement may not be assigned
by any Party without the prior written consent of the other Parties.
Section 9.5. Successors Bound. Subject to the provisions of Section
9.4, this Formation Agreement shall be binding upon and inure to the benefit of
the Parties and their respective successors and assigns.
Section 9.6. Governing Law. This Formation Agreement shall be governed
by, and construed in accordance with, the internal laws of the State of Texas,
without reference to or application of any conflicts of laws principles.
[SIGNATURES APPEAR ON FOLLOW PAGE]
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IN WITNESS WHEREOF, the Parties have executed or caused to be executed
this Formation Agreement as of the date first above written.
Address Weatherford Entities:
5 Post Oak Park Weatherford International, Inc.
Suite 1760
Houston, Texas 77027 By: /s/ CURTIS W. HUFF
Telecopy: (713) 297-8488 ----------------------------------------
Attention: General Counsel Curtis W. Huff
Senior Vice President
Weatherford Enterra Compression Company, L.P.
By: Enterra Compression Company,
as sole General Partner
By: /s/ CURTIS W. HUFF
---------------------------------------
Curtis W. Huff
Senior Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
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GE Entities:
General Electric Capital
Corporation General Electric Capital Corporation
260 Long Ridge Road
Stamford, Connecticut 06927 By: /s/ NIGEL D.T. ANDREWS
Attention: General Counsel ---------------------------------------
Telecopy: (203) 357-3365 Name: Nigel D.T. Andrews
--------------------------------------
Title: Executive Vice President
-------------------------------------
with copies to:
Charles E. Harrell
Weil, Gotshal & Manges L.L.P.
700 Louisiana, Suite 1600
Houston, Texas 77002
Telephone: (713) 546-5000
Telecopy: (713) 224-9511
Global Compression Services, Inc. Global Compression Services, Inc.
c/o General Electrical Capital
Corporation
260 Long Ridge Road By: /s/ PAUL J. FRIESEN
Stamford, Connecticut 06927 ----------------------------------------
Attention: General Counsel Name: Paul J. Friesen
Telecopy: (203) 357-3367 --------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
with copies to:
Charles E. Harrell
Weil, Gotshal & Manges L.L.P.
700 Louisiana, Suite 1600
Houston, Texas 77002
Telephone: (713) 546-5000
Telecopy: (713) 224-9511
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ANNEX I
Glossary of Terms
As used in the document to which this Annex I is attached, unless
specified to the contrary in such document, the terms set forth below shall (i)
be so used with the meanings assigned thereto below, (ii) apply equally to both
the singular and plural forms of such terms, and (iii) with respect to any such
term that is a pronoun, whenever the context may require, include the
corresponding masculine, feminine and neuter forms.
"Additional Global Assets " shall have the meaning assigned to
such term in Section 2.1(d) of the Formation Agreement.
"Additional Weatherford Assets " shall have the meaning
assigned to such term in Section 2.1(c) of the Formation Agreement.
"Adjusted Capital Account Deficit" shall mean, with respect to
any Partner, the deficit balance, if any, in such Partner's Capital Account as
of the relevant Partnership Fiscal Year, after giving effect to the following
adjustments: (i) crediting to such Capital Account any amounts which such
Partner is obligated to restore pursuant to any provision of the LP Agreement or
is deemed obligated to restore pursuant to the penultimate sentences of
Regulations Section 1.704- 2(g)(1) and 1.704-2(i)(5); and (ii) debiting to such
Capital Account the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6). The foregoing definition of Adjusted
Capital Account Deficit is intended to comply with the provisions of Regulations
Section 1.704- 1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
"Adjustment Amount" shall have the meaning assigned to such
term in Section 11.3.2 of the LP Agreement.
"Affiliate" shall mean, with respect to any Person, a second
Person that, directly or indirectly, is in control of, is controlled by,
controls or is under common control with such first Person or is an officer,
director, general partner, managing member or trustee of such Person or
Affiliate of such Person. For purposes of this definition, control shall include
the ownership of 50% or more of the legal or beneficial interest in any Person
or the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; provided that for purposes of Sections 5.2 and 5.9 of the LP
Agreement and Section 4.6 of the LLC Agreement only, such percentage shall be
10%.
"Annual Business Plan" shall mean, with respect to any
Partnership Fiscal Year, the annual business plan of the Partnership for such
Partnership Fiscal Year that the Partnership is required to operate under
pursuant to the terms of the LP Agreement.
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"Assumed Retention and Severance Obligations" shall mean those
obligations set forth on Schedule 6.3 to the LP Agreement.
"Auditors" shall have the meaning assigned to such term in
Section 7.2 of the LP Agreement.
"Available Cash" shall mean, on any date of determination, the
cash and cash equivalents (i.e., investments with a maturity of one year or
less) of the Partnership on hand on such date (other than Capital Contributions
of a Partner) less such amounts as the General Partner shall, in good faith,
determine to be necessary to be set aside for (i) the payment of liabilities and
obligations of the Partnership, contingent or otherwise (including the Lease
Payments, the Contributed Global Note and the Payment Obligation, (ii) working
capital purposes and (iii) Capital Budget Expenditures.
"Bankruptcy Action" shall mean:
(a) Taking any action that might cause the Partnership or the
General Partner to become insolvent; or
(b) (i) Commencing any case, proceeding or other action by or
on behalf of the Partnership or the General Partner under any existing or future
law of any jurisdiction relating to bankruptcy, insolvency, reorganization or
relief of debtors;
(ii) Instituting proceedings to have the Partnership
or the General Partner adjudicated a bankrupt or insolvent;
(iii) Consenting to, or acquiescing in, the
institution of bankruptcy, insolvency or reorganization proceedings against the
Partnership or the General Partner;
(iv) Filing a petition or consent to a petition
seeking reorganization, arrangement, adjustment or other relief on behalf of the
Partnership or the General Partner of its debts under any existing or future law
of any jurisdiction relating to bankruptcy, insolvency or reorganization;
(v) Seeking or consenting to the appointment of a
receiver, liquidator, conservator, assignee, trustee, sequestrator, custodian or
any similar official for the Partnership or the General Partner or a substantial
portion of the assets or properties of the Partnership or the General Partner;
(vi) Making any assignment for the benefit of the
Partnership's or the General Partner's creditors; or
(vii) Taking any action or causing the Partnership or
the General Partner to take any action in furtherance of any of the foregoing.
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"Board" and "Board of Directors" shall mean the Board of
Directors of Limited, as appointed pursuant to the terms of the LLC Agreement.
"Book Item" shall have the meaning set forth in Section
4.6(a)(i) of the LP Agreement.
"Business" shall mean (i) the manufacture, fabrication, sale,
rental, lease, servicing and disposition of compression equipment, (ii) the
provision of compression and related services, (iii) the entering into and
performance of contracts and agreements relating to the foregoing and (iv) other
activities incidental thereto, as a continuation of the Weatherford Compression
Business and the Global Compression Business, in each case as contributed to the
Partnership pursuant to and in accordance with the terms of the Formation
Agreement, the LP Agreement and the LLC Agreement.
"Business Day" shall mean any day other than a Saturday,
Sunday or other day on which commercial banks in Houston, Texas are authorized
or required to close.
"Capital Account" shall mean:
(a) with respect to any Partner, the Capital Account
maintained for such Partner in accordance with the following provisions:
(i) To each Partner's Capital Account there shall be
credited such Partner's Capital Contribution, such Partner's distributive share
of Net Profit or any item in the nature of income or gain which are specially
allocated pursuant to Section 4.3 of the LP Agreement, and the amount of any
Partnership liabilities assumed by such Partner or which are secured by any
property distributed to such Partner;
(ii) To each Partner's Capital Account there shall
be debited the amount of cash and the Gross Asset Value of any property
distributed to such Partner pursuant to any provision of the LP Agreement, such
Partner's distributive share of Net Loss and any item in the nature of expenses
or losses which are specially allocated pursuant to Section 4.3 of the LP
Agreement, and the amount of any liabilities of such Partner assumed by the
Partnership or which are secured by any property contributed by such Partner to
the Partnership;
(iii) In the event all or a portion of a Partnership
Interest is transferred in accordance with the terms of the LP Agreement, the
transferee shall succeed to the Capital Account of the transferor to the extent
that it relates to the transferred Partnership Interest; and
(iv) In determining the amount of any liability
for purposes of subparagraphs (a)(i) and (a)(ii) there shall be taken into
account Code Section 752(c) and any other applicable provisions of the Code and
Regulations; and
(b) with respect to any Member, the Capital Account maintained
for such Member in accordance with the following provisions:
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(i) To each Member's Capital Account there shall be
credited such Member's Capital Contribution, such Member's distributive share of
Net Profit or any item in the nature of income or gain which are specially
allocated pursuant to Section 3.5.2 of the LLC Agreement, and the amount of any
Limited liabilities assumed by such Member or which are secured by any property
distributed to such Member;
(ii) To each Member's Capital Account there shall be
debited the amount of cash and the Gross Asset Value of any property distributed
to such Member pursuant to any provision of the LLC Agreement, such Member's
distributive share of Net Loss and any item in the nature of expenses or losses
which are specially allocated pursuant to Section 3.5.2 of the LLC Agreement,
and the amount of any liabilities of such Member assumed by Limited or which are
secured by any property contributed by such Member to Limited;
(iii) In the event all or a portion of a Membership
Interest is transferred in accordance with the terms of the LLC Agreement, the
transferee shall succeed to the Capital Account of the transferor to the extent
that it relates to the transferred Membership Interest; and
(iv) In determining the amount of any liability for
purposes of subparagraphs (b)(i) and (b)(ii) there shall be taken into account
Code Section 752(c) and any other applicable provisions of the Code and
Regulations.
The foregoing provision and other provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Regulations Section
1.704-1(b) and shall be interpreted and applied in a manner consistent with such
Regulations.
"Capital Budget Expenditures" shall mean, for any period of
determination, the aggregate amount expended or to be expended by the
Partnership (in any case as provided for in the Partnership's Annual Business
Plan) during such period for purchasing new or used equipment for sale or lease
during such period, including capitalized repairs and modifications and facility
repairs and modifications.
"Capital Contribution" shall mean, with respect to any
Partner, the amount of money and the initial Gross Asset Value of any asset
(other than money) contributed to the Partnership by such Partner (or its
predecessors in interest) with respect to the Partnership Interests held by such
Partner.
"Certificate of Formation" shall mean the Certificate of
Formation of Limited to be filed with the Secretary of State of Delaware on the
Closing Date, in the form and substance attached as Exhibit A to the Formation
Agreement.
"Certificate of Limited Partnership" shall mean the
Certificate of Limited Partnership of the Partnership to be filed with the
Secretary of State of Delaware on the Closing Date, in the form and substance
attached as Exhibit B to the Formation Agreement.
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"CFD" shall have the meaning assigned to such term in Section
4.8 of the LP Agreement.
"Claim" shall have the meaning assigned to such term in
Section 9.2(a) of the Formation Agreement.
"Closing" shall have the meaning assigned to such term in
Section 2.2 of the Formation Agreement.
"Closing Date" shall mean February 2, 1999, or such other date
as all Parties shall agree to in writing.
"Code" shall mean the Internal Revenue Code of 1986, as it may
be amended from time to time, or any successor statute.
"Commission" shall have the meaning assigned to such term in
Section 11.1 of the LP Agreement.
"Consolidated Interest Expense" shall mean, for any period of
determination, and without duplication, the aggregate amount of interest
recognized by the Partnership and its subsidiaries on a consolidated basis in
respect of Indebtedness of the Partnership and such subsidiaries, determined on
a consolidated basis in accordance with GAAP, plus the portion of the Lease
Payments that is equivalent to interest for such period.
"Consolidated Net Income" shall mean, for any period of
determination, the aggregate net income (or loss, as the case may be) of the
Partnership and its subsidiaries for such period on a consolidated basis,
determined in accordance with GAAP, excluding any extraordinary or non-recurring
items.
"Contracts" shall mean, with respect to any Person, any
contract, agreement, commitment, arrangement or instrument of any type
whatsoever, whether oral or written, express or implied, including without
limitation any mortgages, security agreements, deeds of trust, notes,
warranties, guaranties, leases, pledge agreements, license agreements,
non-competition agreements, conditional sales agreements or purchase and sales
orders to which such Person is a party or by which any of its properties or
assets may be bound.
"Contractual Obligation" shall mean, with respect to any
Person, any security issued by such Person or any agreement, contract,
understanding, instrument or undertaking to which such Person is a party or by
which it or any of its property is bound, or any provision of any of the
foregoing.
"Contributed Global Note" shall mean the promissory note
payable by Global to Global Compression Holdings, Inc. in the principal amount
of $36,000,000 contributed to the Partnership pursuant to the Formation
Agreement.
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"DBSA" shall have the meaning assigned to such term in Section
4.8 of the LP Agreement.
"Defaulting Member" shall the meaning assigned to such term in
Section 8.1(a) of the LLC Agreement.
"Defaulting Partner" shall have the meaning assigned to such
term in Section 10.1(a) of the LP Agreement.
"Depreciation" shall mean, for each Partnership Fiscal Year or
Limited Fiscal Year, as the case may be, an amount equal to the depreciation,
amortization, or other cost recovery deduction allowable for federal income tax
purposes with respect to an asset for such Partnership Fiscal Year or Limited
Fiscal Year, as the case may be, except that if the Gross Asset Value of an
asset differs from its adjusted tax basis for federal income tax purposes at the
beginning of such Partnership Fiscal Year or Limited Fiscal Year, as the case
may be, Depreciation shall be an amount which bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such Partnership Fiscal Year
or Limited Fiscal Year, as the case may be, bears to such beginning adjusted tax
basis; provided, however, that if the adjusted tax basis for federal income tax
purposes of an asset at the beginning of such Partnership Fiscal Year or Limited
Fiscal Year, as the case may be, is zero, Depreciation shall be determined with
reference to such beginning Gross Asset Value using any reasonable method
selected, in the case of the Partnership, by the General Partner, and in the
case of Limited, by the Board of Directors.
"Distribution Date" shall mean the first day of each calendar
quarter, or, if such day is not a Business Day, the next succeeding Business
Day.
"DLLCA" shall have the meaning assigned to such term in
Section 2.1.1 of the LLC Agreement.
"DRULPA" shall have the meaning assigned to such term in
Section 2.1.1 of the LP Agreement.
"EBIT" shall mean, for any period of determination, the
Consolidated Net Income of the Partnership and its subsidiaries for such period
on a consolidated basis, plus, to the extent reflected in the income statement
of the Partnership and its consolidated subsidiaries for such period from which
such Consolidated Net Income is determined, and without duplication, (i) the
Consolidated Interest Expense of the Partnership and its subsidiaries for such
period, and (ii) income and franchise tax expense of the Partnership and its
subsidiaries for such period, in each case determined on a consolidated basis in
accordance with GAAP.
"ECC" shall have the meaning assigned to such term in the
introductory paragraph to the Formation Agreement.
"11.1 Appraisal Process Commencement Date" shall have the
meaning assigned to such term in Section 11.1(b) of the LLC Agreement.
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"11.1 Appraisal Report" shall have the meaning assigned to
such term in Section 11.1(b) of the LLC Agreement.
"11.1 Initial Opinion Values" shall have the meaning assigned
to such term in Section 11.1(b) of the LLC Agreement.
"11.1 Subsequent Appraisal Process Commencement Date" shall
have the meaning assigned to such term in Section 11.1(b) of the LLC Agreement.
"11.1 Third Opinion Value" shall have the meaning assigned to
such term in Section 11.1(b) of the LLC Agreement.
"Employee Lease Agreement" shall mean that certain Employee
Lease Agreement dated as of the Closing Date by and among the Partnership, GE
Capital and Global, in the form and substance attached to the Formation
Agreement as Exhibit ___, as the same may be amended or otherwise modified from
time to time pursuant to the terms thereof.
"Environmental Laws" shall mean any and all applicable Laws
pertaining to or otherwise regulating the environment, natural resources or
human health and safety currently in effect, including without limitation, the
Clean Air Act, as amended, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980, as amended ("CERCLA"), the Federal
Water Pollution Control Act, as amended, the Occupational Safety and Health Act
of 1970, as amended, the Resource Conservation and Recovery Act, as amended
("RCRA"), the Safe Drinking Water Act, as amended, the Toxic Substances Control
Act, as amended, the Hazardous & Solid Waste Amendments Act of 1984, as amended,
the Superfund Amendments and Reauthorization Act of 1986, as amended, the
Hazardous Materials Transportation Act, as amended, the Oil Pollution Act, as
amended, any analogous state laws, any Laws pertaining to or otherwise
regulating the handling of oil and gas exploration and production wastes or the
use, maintenance, and closure of pits and impoundments, and other environmental
conservation or protection laws.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Excluded Global Assets" shall have the meaning assigned to
such term in Section 2.1(d)(2) of the Formation Agreement.
"Excluded Global Liabilities" shall mean:
(a) Any liability or obligation relating to the Global
Compression Business (including, without limitation, any Taxes and any liability
or obligation arising under or pursuant to any Environmental Laws or common law
and the employment, failure to employ or termination of employment (including
constructive termination) by any GE Entity of any individual, including an
employee of any GE Entity)) to the extent such liability or obligation arises
from or relates to the ownership or lease of the assets owned or used in
connection with, or the operation of, the Global Compression Business prior to
the Closing Date (other than Warranty Claims), in any case whether known or
unknown, contingent or matured;
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(b) Any litigation or claims (other than Warranty Claims)
involving the Global Compression Business to the extent such litigation or
claims relate to matters that occurred prior to the Closing Date;
(c) Any obligation to indemnify or contribute to another
Person under common law or any Contract of the Global Compression Business to
the extent such obligations relate to matters prior to the Closing Date;
(d) Any claim, liability or obligation under or pursuant to
any Environmental Law or common law relating to any matter or condition
identified in the TRC Reports at any property owned, operated or leased by the
Global Compression Business, provided such claim, liability or obligation does
not result from changes in Environmental Laws that occur subsequent to the
Closing Date;
(e) Any liability or obligation relating to the Global Plans
or Global Benefit Programs and Agreements and all other liability or obligation
under ERISA and the Code in connection with any employee benefit plan as defined
in Section 3(3) of ERISA or any other employee benefit plan, agreement or
arrangement, maintained, sponsored by or contributed to by any corporation,
trade, business or entity under common control with the Global Compression
Business or GE Capital (Thailand) within the meaning of Section 414(b), (c), (m)
or (o) of the Code or Section 4001 of ERISA other than with respect to the
Global Compression Services, Inc. 401(k) Plan;
(f) Any liability or obligation of or relating to the
business, assets or operations of a Global Noncompression Business;
(g) The legal, accounting and investment banking fees and
expenses incurred by the GE Entities, the Global Compression Business or GE
Capital (Thailand) relating to the formation of the Partnership and the other
transactions contemplated by the Formation Agreement;
(h) Except for the Contributed Global Note, any obligation
under any capital lease, sale lease back arrangement or note, bond or other
obligation for borrowed money to any GE Entity or GE Capital (Thailand) or the
Global Compression Business is subject; and
(i) Any liability or obligation relating to an Excluded Global
Asset.
provided, however, that the Excluded Global Liabilities shall not include any
Partnership Assumed Liabilities. All references to the Global Compression
Business or any GE Entity contained in this definition of "Excluded Global
Liabilities" include all predecessors in interest or title to the Global
Compression Business or any GE Entity.
"Excluded Weatherford Assets" shall have the meaning assigned
to such term in Section 2.1(c)(2) of the Formation Agreement.
"Excluded Weatherford Liabilities" shall mean:
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(a) any liability or obligation relating to the Weatherford
Compression Business (including, without limitation any Taxes and any liability
or obligation arising under or pursuant to any Environmental Laws or common law
and the employment, failure to employ or termination of employment (including
constructive termination) by any Weatherford Entity of any individual (including
an employee of any Weatherford Entity)) to the extent such liability or
obligation arises from or relates to the ownership or lease of the assets owned
or used in connection with, or the operation of, the Weatherford Compression
Business, prior to the Closing Date (other than Warranty Claims), in any case
whether known or unknown, contingent or matured;
(b) Any litigation or claims (other than Warranty Claims)
involving the Weatherford Compression Business to the extent such litigation or
claims relate to matters that occurred prior to the Closing Date;
(c) Any obligation to indemnify or contribute to another
Person under common law or any Contract of the Weatherford Compression Business
to the extent such obligations relate to matters prior to the Closing Date;
(d) Any claim, liability or obligation under or pursuant to
any Environmental Law or common law relating to any matter or condition
identified in the TRC Reports at any property owned, operated or leased by the
Weatherford Compression Business, provided such claim, liability or obligation
does not result from changes in Environmental Laws that occur subsequent to the
Closing Date;
(e) Any liability or obligation relating to the Weatherford
Plans or Weatherford Benefit Programs and Agreements and all other liability or
obligation under ERISA and the Code in connection with any employee benefit plan
as defined in Section 3(3) of ERISA or any other employee benefit plan,
agreement or arrangement, maintained, sponsored by or contributed to by any
corporation, trade, business or entity under common control with the Weatherford
Compression Business or the Transferring Weatherford Entities within the meaning
of Section 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA;
(f) Any liability or obligation of or relating to the
business, assets or operations of a Weatherford Noncompression Business;
(g) The legal, accounting and investment banking fees and
expenses incurred by Weatherford, the Transferring Weatherford Entities or the
Weatherford Compression Business relating to the formation of the Partnership
and the other transactions contemplated by the Formation Agreement;
(h) Except for the Master Lease, any obligation under capital
lease, sale lease back arrangement or note, bond or other obligation for
borrowed money to which Weatherford or any Transferring Weatherford Entity or
the Weatherford Compression Business is subject; and
(i) Any liability or obligation relating to an Excluded
Weatherford Asset.
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provided, however, that the Excluded Weatherford Liabilities shall not include
any Partnership Assumed Liabilities. All references to the Weatherford
Compression Business or Weatherford or any Transferring Weatherford Entity
contained in this definition of "Excluded Weatherford Liabilities" include all
predecessors in interest or title to the Weatherford Compression Business or
Weatherford or any Transferring Weatherford Entity.
"Facilities" means any facilities or equipment used by any
Weatherford Entity or Global, as the case may be, in any location, including
HVAC systems, mechanical systems, elevators, security systems, fire suppression
systems, telecommunications systems, fax machines, copy machines, and equipment,
whether or not Owned thereby.
"Formation Agreement" shall mean that certain Formation
Agreement dated as of February 2, 1999 by and among the Weatherford Entities on
the one hand, and the GE Entities on the other hand, as the same may be amended
or otherwise modified from time to time pursuant to the terms thereof.
"GAAP" shall have the meaning assigned to such term in Section
7.1 of the LP Agreement.
"GCSI" shall mean Global Compression Services International,
Inc., an Oklahoma corporation.
"GE Capital" shall have the meaning assigned to such term in
the introductory paragraph to the Formation Agreement.
"GE Capital Group" shall mean any group of corporations that
includes GE Capital and the Global Compression Business.
"GE Capital HSR Documents" shall have the meaning assigned to
such term in Section 4.3(c)(ii) of the Formation Agreement.
"GE Capital (Thailand)" shall mean GE Capital (Thailand) Ltd.,
a company incorporated under the laws of the Kingdom of Thailand and a wholly
owned subsidiary of GE Capital.
"GE Entities" shall have the meaning assigned to such term in
the introductory paragraph to the Formation Agreement, and "GE Entity" shall
mean, individually, any of the GE Entities.
"GE Losses" shall have the meaning assigned to such term in
Section 8.2(a) of the Formation Agreement.
"GE Indemnity Party" shall have the meaning assigned to such
term in Section 8.3(a) of the Formation Agreement.
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"General Partner" shall have the meaning assigned to such term
in the introductory paragraph to the LP Agreement.
"Global" shall have the meaning assigned to such term in the
introductory paragraph to the Formation Agreement.
"Global Benefit Program or Agreement" shall have the meaning
set forth in Section 3.2(i)(i)(B) of the Formation Agreement.
"Global Closing Date Balance Sheet" shall have the meaning
assigned to such term in Section 2.3 of the Formation Agreement.
"Global Compression Business" shall mean the compression
business conducted by Global and the compression assets owned by GE Capital
(Thailand).
"Global Compression Business Assumed Contracts" shall have the
meaning assigned to such term in Section 2.1(d)(2)(ii) of the Formation
Agreement.
"Global Compression Business Intellectual Property" shall have
the meaning assigned to such term in Section 2.1(d)(2)(x) of the Formation
Agreement.
"Global Compression Business Inventories" shall have the
meaning assigned to such term in Section 2.1(d)(2)(v) of the Formation
Agreement.
"Global Compression Business Know-How Property" shall have the
meaning assigned to such term in Section 2.1(d)(2)(x) of the Formation
Agreement.
"Global Compression Business Records" shall have the meaning
assigned to such term in Section 2.1(d)(2)(vi) of the Formation Agreement.
"Global Excess" shall have the meaning assigned to such term
in Section 2.3 of the Formation Agreement.
"Global/Limited Assignment and Conveyance Agreement" shall
mean that certain Assignment and Conveyance Agreement dated as of the Closing
Date executed by Global, in the form and substance attached as Exhibit J to the
Formation Agreement.
"Global Noncompression Business" shall mean the businesses
conducted by any Affiliate (including without limitation any subsidiary, whether
or not wholly, directly or indirectly owned), division, unit or segment of GE
Capital other than the Global Compression Business.
"Global/Partnership Assignment and Conveyance Agreement" shall
mean that certain Assignment and Conveyance Agreement dated as of the Closing
Date executed by Global, in the form and substance attached as Exhibit J to the
Formation Agreement.
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"Global Permits" shall have the meaning set forth in Section
3.2(m) of the Formation Agreement.
"Global Plan" shall have the meaning set forth in Section
3.2(i)(i)(d) of the Formation Agreement.
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Gross Asset Value" shall mean, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as follows:
(i) The Gross Asset Value of any asset contributed by a
Partner to the Partnership, or a Member to Limited, as the case may be, is the
gross fair market value of such asset as determined at the time of contribution;
(ii) The Gross Asset Value of all Partnership assets or
all of Limited's assets, as the case may be, shall be adjusted to equal their
respective gross fair market values, as determined by, with respect to the
Partnership, the General Partner, and with respect to Limited, the Board of
Directors, in each case as of the following times: (A) the acquisition of any
additional interest in the Partnership by any new or existing Partner, or in
Limited by any new or existing Member, in exchange for more than a de minimis
Capital Contribution; (B) the distribution by the Partnership to the Partner, or
by Limited to the Member, of more than a de minimis amount of property as
consideration for an interest in the Partnership or Limited, respectively; and
(C) the liquidation of the Partnership or Limited within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g); provided, however, that the
adjustments pursuant to clauses (A) and (B) above shall be made only if, with
respect to the Partnership, the General Partner, or with respect to Limited, the
Board of Directors, reasonably determines that such adjustments are necessary or
appropriate to reflect the relative economic interests of the Partners or the
Members, as the case may be, in the Partnership or Limited, as the case may be;
and
(iii) The Gross Asset Value of any asset of the
Partnership distributed to any Partner, or any asset of Limited distributed to
any Member, shall be adjusted to equal the gross fair market value of such asset
on the date of distribution as determined by, with respect to the Partnership,
the General Partner, or with respect to Limited, the Board of Directors.
If the Gross Asset Value of an asset of the Partnership or
Limited has been determined or adjusted pursuant to clause (A) or (B) above,
such Gross Asset Value shall thereafter be adjusted by the Depreciation taken
into account with respect to such asset for purposes of computing Net Profit or
Net Loss.
"HSR Act" shall have the meaning set forth in Section 3.1(e)
of the Formation Agreement.
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"Included Global Assets" shall have the meaning assigned to
such term in Section 2.1(d)(2) of the Formation Agreement.
"Included Weatherford Assets" shall have the meaning assigned
to such term in Section 2.1(c)(2) of the Formation Agreement.
"Indebtedness" of a Person shall mean any (a) indebtedness or
liability for borrowed money; (b) obligations evidenced by bonds, debentures,
notes, or other similar instruments; (c) obligations for the deferred purchase
price of property or services (including trade obligations); (d) obligations
under letters of credit; (e) obligations under acceptance facilities; (f)
guaranties, endorsements (other than for collection or deposit in the ordinary
course of business), and other contingent obligations to purchase, to provide
funds for payment, to supply funds to invest in any Person, or otherwise to
assure a creditor against loss; (g) obligations under any lease which have been
or should be capitalized under GAAP; and (h) obligations secured by any Liens,
whether or not the obligations have been assumed, but such term shall not
include the obligations of the Partnership under the Master Lease.
"Indemnified Person" shall have the meaning assigned to such
term in Section 4.7.2 of the LLC Agreement.
"Internal MIS Systems" shall mean, with reference to any
Weatherford Entity or any GE Entity, any computer software and systems
(including hardware, firmware, operating system software, utilities, and
applications software) used in the ordinary course of business by or on behalf
of such Weatherford Entity or GE Entity, as the case may be, including payroll,
accounting, billing/receivables, inventory, asset tracking, customer service,
human resources, and e-mail systems.
"IPO" shall have the meaning assigned to such term in Section
11.2(a) of the LP Agreement.
"IPO Notice" shall have the meaning assigned to such term in
Section 11.1 of the LP Agreement.
"IRS" shall have the meaning assigned to such term in Section
3.1(i)(iii)(C) of the Formation Agreement.
"Knowledge" shall mean, with respect to any matter stated
herein to be "to the knowledge of any Weatherford Entity," or similar language,
the actual knowledge of the Chairman of the Board, the Chief Executive Officer,
President, any Vice President, Chief Financial Officer or General Counsel of any
Weatherford Entity, and with respect to any matter stated herein to be "to the
knowledge of any GE Entity," or similar language, the actual knowledge of the
Chairman of the Board, the Chief Executive Officer, President, any Vice
President, Chief Financial Officer or Counsel of any such entity.
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"Laws" shall mean, collectively, federal, foreign, state,
provincial, municipal and local laws (including common law), statutes,
ordinances, rules, regulations, orders, determinations or other legal
requirements.
"Lease Payment" shall mean all payments required to be made
under the Master Lease.
"Leased Assets" shall mean those assets used in the
Weatherford Compression Business or the Global Compression Business that are
leased from a third party pursuant to operating leases entered into in the
ordinary course of business and those assets leased pursuant to the Master
Lease.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, security interest, encumbrance, lien (statutory or other),
charge, claim, rights of third parties or preference, priority or other pledge
agreement or preferential arrangement of any kind or nature whatsoever,
including without limitation any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction in respect of any of the
foregoing.
"Limited" shall mean Weatherford Global Compression Holding,
L.L.C., a Delaware limited liability company.
"Limited Fiscal Year" shall be the same as the taxable year of
Limited for federal income tax purposes, which taxable year shall be the
calendar year unless otherwise required by the Code.
"Limited Minimum Gain" shall have the same meaning as the term
"partnership minimum gain" set forth in Regulation Sections 1.704-2(b)(2) and
1.704-2(d).
"Limited/Partnership Assignment and Conveyance Agreement"
shall mean that certain Assignment and Conveyance Agreement dated as of the
Closing Date executed by Limited, in the form and substance attached as Exhibit
J to the Formation Agreement.
"Limited Partners" shall have the meaning assigned to such
term in Section 2.4 of the LP Agreement, and "Limited Partner" shall mean,
individually, any of the Limited Partners.
"LLC Agreement" shall mean that certain Limited Liability
Company Agreement of Weatherford Global Compression Holding, L.L.C., dated as of
the Closing Date, by and between WECC and Global, as Members thereunder, in the
form and substance attached as Exhibit C to the Formation Agreement, as the same
may be amended or otherwise modified from time to time pursuant to the terms
thereof.
"LLC Event of Default" shall have the meaning assigned to such
term in Section 8.1(a) of the LLC Agreement.
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"LLC Event of Withdrawal" shall have the meaning assigned to
such term in Section 8.1(b) of the LLC Agreement.
"LP Agreement" shall mean that certain Limited Partnership
Agreement of the Partnership, dated as of the Closing Date, by and among
Limited, as the sole General Partner thereof, WECC as a Limited Partner thereof,
Global as a Limited Partner thereof, and Weatherford, solely for purposes of
Section 11.2 thereof, in the form and substance attached as Exhibit D to the
Formation Agreement, as the same may be amended or otherwise modified from time
to time pursuant to the terms thereof.
"LP Event of Default" shall have the meaning assigned to such
term in Section 10.1(a) of the LP Agreement.
"LP Event of Withdrawal" shall have the meaning assigned to
such term in Section 10.1(b) of the LP Agreement.
"Manufacturing Business" shall mean any business line, area or
segment of the Partnership or any direct or indirect wholly owned subsidiary
thereof a majority of the activity of which involves the manufacturing or
fabrication of equipment or component parts thereof, including without
limitation the manufacturing of the Gemini line of compressors, compressor
frames and other components and the fabrication of compressor units or any
components thereof.
"Market Value of Limited" shall have the meaning assigned to
such term in Section 11.1(c) of the LLC Agreement.
"Market Value of the Partnership" shall have the meaning
assigned to such term in Section 13.1(c) of the LP Agreement.
"Master Lease" shall mean that (i) Master Lease Intended as
Security dated as of December 8, 1998, between WECC and ABN AMRO Bank N.A., as
Administrative Agent for the Lessors, (ii) Participation Agreement dated as of
December 8, 1998, between WECC, as Lessee, ABN AMRO Bank, not individually,
except as expressly set forth therein, but as Administrative Agent, Arranger and
Syndication Agent, Chase Bank of Texas, National Association, as Documentation
Agent, and the Lessors listed on Schedule I to such Participation Agreement, and
(iii) Schedule X to Participation Agreement, (x) as amended by the Assignment
and Assumption and First Amendment to Participation Agreement Master Lease
Intended as Security and Schedule X between WECC, the Lessors named therein, ABN
AMRO Bank N.V., not individually, but solely as Administrative Agent for the
Lessors, Syndication Agent and Arranger, and Chase Bank of Texas, National
Association, as Documentation Agent for the Lessors, and the Partnership, as
Assignee, and (y) as further amended or otherwise modified from time to time
pursuant to the terms thereof.
"Material Adverse Effect" or "material adverse change" shall
mean, when used in connection with any Person, the Weatherford Compression
Business or the Global Compression Business, any change or effect (or any
development that, insofar as can reasonably be foreseen, is likely to result in
any change or effect) that is materially adverse to the business, properties,
assets,
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condition (financial or otherwise) or results of operations of that Person and
its subsidiaries, taken as a whole, or of the Weatherford Compression Business
or the Global Compression Business, as the case may be; provided, however, a
Material Adverse Effect or material adverse change with respect to the
Weatherford Compression Business or the Global Compression Business shall not
include (i) any effect or change relating to or affecting the oil and gas
service industry, including the contract compression segment thereof, as a
whole, (ii) changes in national or international economic conditions or industry
conditions generally, (iii) changes, or possible changes, in foreign, federal,
state or local statutes and regulations applicable to the Weatherford
Compression Business or the Global Compression Business, as the case may be, or
(iv) the loss of employees, customers or suppliers thereby as a direct or
indirect consequence of any announcement or expectation of the transactions
contemplated hereby.
"Member" and "Members" shall have the meanings assigned to
such terms in Section 2.1.1 of the LLC Agreement.
"Member Affiliated Purchaser" shall have the meaning assigned
to such term in Section 8.2(b) of the LLC Agreement.
"Member Nonrecourse Debt" shall have the meaning as the term
"partner nonrecourse debt" set forth in Regulation Section 1.704-2(b)(4).
"Member Nonrecourse Debt Minimum Gain" means an amount, with
respect to each Member Nonrecourse Debt, equal to the Limited Minimum Gain that
would result if the Member Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Regulation Section 1.704-2(i)(3).
"Member Nonrecourse Deductions" shall have the same meaning as
the term "partner nonrecourse deduction" set forth in Regulation Sections
1.704-2(i)(1) and 1.704-2(i)(2).
"Membership Interest" shall have the meaning assigned to such
term in Section 3.1.1 of the LLC Agreement.
"Net Assets" shall mean with respect to either the Weatherford
Compression Business or the Global Compression Business the total assets of such
businesses less the total liabilities of such businesses as reflected in the
Weatherford Closing Date Balance Sheet and the Global Closing Date Balance
Sheet, respectively; provided, however, in calculating Net Assets: (i) the
increase in the value of any assets or the reduction in any liabilities since
December 31, 1998 as a result of the reversal of any accruals associated with
such assets or liabilities shall not be included except to the extent such
accruals are actually utilized, (ii) there shall not be included any increases
in assets since December 31, 1998 as a result of any write up of such assets,
(iii) there shall be no adjustments to the assets or liabilities of either of
such businesses as a result of any changes in accounting practices or policies
since December 31, 1998, (iv) there shall not be included any liabilities of
either entity for which Weatherford or GE Capital shall have assumed the payment
thereof, including without limitation, the Excluded Weatherford Liabilities and
the Excluded Global Liabilities, (v) there shall not be included as assets any
Excluded Weatherford Assets or Excluded Global Assets, (vi) there
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shall be recorded as a liability or obligation the amount of any deposits or
payments that are received by the Weatherford Compression Business or the Global
Compression Business prior to the Closing for goods or services to be provided
after the Closing or for rental periods after the Closing to the extent such
sales or rentals shall not have been as of the Closing, (vii) there shall not be
included any amounts for deferred taxes, (viii) the obligations under the Master
Lease shall be excluded from the Weatherford Closing Date Balance Sheet as a
liability, (ix) the difference between the prior book value of the assets of
WECC that are now subject to the Master Lease and the funds made available under
the Master Lease ($119,000,000) with respect to those assets will be reflected
as a liability on the Weatherford Closing Date Balance Sheet; (x) the difference
between the funds made available under the Master Lease ($119,000,000) and $100
million will be reflected as an asset on the Weatherford Closing Date Balance
Sheet; (xi) the fees and expenses of the Weatherford Entities in connection with
the establishment and assignment of the Master Lease shall be included as an
asset on the Weatherford Closing Date Balance Sheet; (xii) the full amount of
the Contributed Global Note and the Payment Obligation will be reflected as a
liability on the Global Closing Date Balance Sheet; (xiii) the net book value as
of the Closing Date of the Additional Weatherford Assets will be included as an
asset on the Weatherford Closing Date Balance Sheet; (xiv) the net book value as
of the Closing Date of the Additional Global Assets will be included as an asset
on the Global Closing Date Balance Sheet; and (xv) all applications of GAAP as
applied to the Weatherford Compression Business and the Global Compression
Business shall be applied in the identical manner in which such accounting
principles were applied for purposes of the audited financial statements of such
Businesses as of December 31, 1997 and for the year then ended.
"Net Book Value" shall mean, with respect to any Partnership
Interests, the net book value thereof as of the date of calculation determined
in accordance with GAAP.
"Net Loss" and "Net Profits" shall mean, for each Partnership
Fiscal Year, Limited Fiscal Year or other period, an amount equal to, with
respect to the Partnership, the Partnership's taxable income or loss for such
Partnership Fiscal Year or period, and with respect to Limited, Limited's
taxable income or loss for such Limited Fiscal Year or period, in each case
determined in accordance with Section 703(a) of the Code (for this purpose, all
items of income, gain, loss, deduction or credit required to be stated
separately pursuant to Section 703(a)(1) of the Code shall be included in
taxable income or loss) with the following adjustments:
(a) any income of the Partnership, or Limited, as the
case may be, for such period that is exempt from federal income tax and not
otherwise taken into account in computing Net Profit or Net Loss pursuant to
this definition shall be added to such taxable income or loss;
(b) any expenditures of the Partnership, or Limited,
as the case may be, described in Section 705(a)(2)(B) of the Code or treated as
Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section
1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Net
Profit or Net Loss pursuant to this definition, shall be subtracted from such
taxable income or loss;
(c) in the event the Gross Asset Value of any asset
of the Partnership or Limited, as the case may be, is adjusted pursuant to
subparagraphs (ii)(A) or (ii)(B) of the definition
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of "Gross Asset Value" the amount of such adjustment shall be taken into account
as gain or loss from the disposition of such asset for purposes of computing Net
Profit or Net Loss;
(d) gain or loss resulting from any disposition of
assets of the Partnership or Limited, as the case may be, with respect to which
gain or loss is recognized for federal income tax purposes shall be computed by
reference to the Gross Asset Value of the property disposed of, notwithstanding
that the adjusted tax basis of such property differs from its Gross Asset Value;
(e) in lieu of the depreciation, amortization, and
other cost recovery deductions taken into account in computing such taxable
income or loss, there shall be taken into account Depreciation for such
Partnership Fiscal Year, Limited Fiscal Year or other period, computed in
accordance with the definition of "Depreciation"; and
(f) any items specially allocated in respect of such
period pursuant to Section 4.3 of the LP Agreement or Section 3.5.2 of the LLC
Agreement shall not be considered in determining Net Profits and Net Loss.
The amounts of any Partnership income, gain, loss or
deduction available to be specially allocated pursuant to Section 4.3 of the LP
Agreement, or Limited income, gain, loss or deduction available to be specially
allocated pursuant to Section 3.5.2 of the LLC Agreement, shall be determined by
applying rules analogous to those set forth in such paragraphs (i) through (vi)
above.
"Newco" shall have the meaning assigned to such term in the
Registration Rights Agreement.
"Nondefaulting Member" shall have the meaning assigned to such
term in Section 8.1(a) of the LLC Agreement.
"Nondefaulting Partner" shall have the meaning assigned to
such term in Section 10.1(a) of the LP Agreement.
"Nonrecourse Deductions" shall have the meaning set forth in
Section 1.704-2(b)(1) and 1.704-2(c) of the Regulations.
"Nonrecourse Liability" has the meaning set forth in
Regulation Section 1.704-2(b)(3) of the Regulations.
"Nonsurviving Member" shall have the meaning assigned to such
term in Section 8.5 of the LLC Agreement.
"Nonwithdrawing Member" shall have the meaning assigned to
such term in Section 8.1(b) of the LLC Agreement.
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"Nonwithdrawing Partner" shall have the meaning assigned to
such term in Section 10.1(b) of the LP Agreement.
"Organizational Restructure" shall have the meaning assigned
to such term in the Registration Rights Agreement.
"Outside the Ordinary Course of Business" shall mean, (i) with
respect to any acquisition of assets or properties by the Partnership or any
Subsidiary thereof, or any capital expenditure by the Partnership or any
Subsidiary thereof, (A) any such acquisition or expenditure for such purpose
that, together with all other such acquisitions or expenditures during such
Partnership Fiscal Year, exceeds 150% of the Partnership's depreciation and
amortization of assets under GAAP plus the depreciation and amortization that
would have been realized under GAAP for any such assets subject to a
sale/leaseback arrangement but for that sale/leaseback arrangement for the
immediately preceding Partnership Fiscal Year; provided that, for the first
year, such amount shall be $64,185,000, or (B) any such acquisition or
expenditure not in the Same Line of Business; and (ii) with respect to any
transfer, sale, assignment, conveyance or other disposition, or any pledge,
mortgage, hypothecation or other encumbrance, or any lease, of any assets or
properties of the Partnership or any Subsidiary thereof, (A) any such transfer,
sale, assignment, conveyance or other disposition, or any such pledge, mortgage,
hypothecation or other encumbrance, or any such lease, of the Manufacturing
Business or any part of the Manufacturing Business (other than an individual
component thereof that is not material to the Manufacturing Business) or (B) any
such transfer, sale, assignment, conveyance or other disposition, or any such
pledge, mortgage, hypothecation or other encumbrance, or any such lease, other
than ordinary course sales or rentals of inventory to customers, during any
Partnership Fiscal Year having a value in excess of the greater of (1) 200% of
the average dollar amount of dispositions effected by Global and WECC during the
three calendar years prior to the formation of the Partnership on a pro forma
basis or (2) 50% of the Partnership's average capital expenditures for the prior
two Partnership Fiscal Years.
"Owned" shall mean, with respect to any Person, those assets,
properties, rights, titles, interests, contracts, claims and estates owned,
leased, licensed or otherwise held by such Person, but if jointly owned, leased,
licensed or held with another Person, then in each such case only to the extent
of the ownership interest of the Person identified in the Formation Agreement as
the owner.
"Parties" shall mean, collectively, all parties to the
Formation Agreement, and "Party" shall mean, individually, any one of the
Parties.
"Partner Affiliated Purchaser" shall have the meaning assigned
to such term in Section 10.2(b) of the LP Agreement.
"Partner Nonrecourse Debt" shall have the meaning set forth in
Section 1.704-2(b)(4) of the Regulations.
"Partner Nonrecourse Debt Minimum Gain" shall mean an amount,
with respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum
Gain that would result if the
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<PAGE> 84
Partner Nonrecourse Debt were treated as a Nonrecourse Liability, determined in
accordance with Section 1.704-2(i)(3) of the Regulations.
"Partner Nonrecourse Deductions" shall have the meaning set
forth in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations.
"Partners" shall have the meaning assigned to such term in
Section 2.4 of the LP Agreement.
"Partnership" shall mean Weatherford Global Compression
Services, L.P., a Delaware limited partnership.
"Partnership Assumed Liabilities" shall mean:
(a) Obligations under contracts and agreements of the
Weatherford Compression Business and the Global Compression Business to the
extent (i) such obligations have been accrued and reflected as current
liabilities on the Weatherford Closing Date Balance Sheet or the Global Closing
Date Balance Sheet, or (ii) involve obligations to be performed after the
Closing Date (excluding indemnity and similar obligations that are attributable
to the ownership, lease or operation of the Weatherford Compression Business and
the Global Compression Business prior to the Closing Date);
(b) Any claim by an employee of the Weatherford Compression
Business or the Global Compression Business to the extent such person continues
as an employee of the Business after the Closing Date and to the extent such
claim relates to matters occurring after the Closing Date and including the
Assumed Retention and Severance Obligations;
(c) The obligations under the Master Lease and the Contributed
Global Note, the obligations under the contracts and agreements listed in
Schedules 2.1(c)(2)(ii) and 3.2(n) and the contracts and agreements of the
Weatherford Compression Business and the Global Compression Business, and all
obligations relating to the future performance under the operating leases
associated with the Leased Assets;
(d) All sales and rental obligations of the Weatherford
Compression Business and the Global Compression Business; provided, however,
that if any deposits or payments are received by the Weatherford Compression
Business or the Global Compression Business prior to the Closing for goods or
services to be provided after the Closing or for rental periods after the
Closing, the amount of such deposit or prepayment shall be recorded as a current
liability or obligation as provided in the definition of Net Assets; and
(e) All Warranty Claims with respect to the Weatherford
Compression Business and the Global Compression Business.
"Partnership Expenses" shall mean all costs, expenses,
liabilities, damages, obligations and charges of any nature whatsoever incurred
by the Partnership relating to the Partnership's
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business or properties, including without limitation, (i) all costs and expenses
arising from or pertaining to the transactions contemplated by the Formation
Agreement, the LP Agreement, the LLC Agreement, the Registration Rights
Agreement, the Shared Services Agreement and the Transition Agreement; (ii)
costs for Capital Budget Expenditures; (iii) operating costs relating to the
Properties of the Partnership; (iv) all costs and expenses arising under the
indemnity provisions of the LP Agreement, and (v) the legal and accounting fees,
charges and expenses incurred by the Partnership in connection with any of the
foregoing (but excluding any such fees, charges and expenses incurred by the
Partners or their Affiliates in connection with the consummation of the
transactions contemplated by the Formation Agreement but not excluding such
fees, charges and expenses incurred in connection with the Master Lease).
"Partnership Fiscal Year" shall be the same as the taxable
year of the Partnership for federal income tax purposes, which taxable year
shall be the calendar year unless otherwise required by the Code.
"Partnership 401(k) Plan" shall mean the Weatherford Global
Compression Services, L.P. 401(k) Plan.
"Partnership Interests" shall have the meaning assigned to
such term in Section 3.3 of the LP Agreement.
"Partnership Minimum Gain" shall have the meaning set forth in
Sections 1.704-2(b)(2) and 1.704-2(d) of the Regulations.
"Payment Obligation" shall mean the obligation of the
Partnership to make a payment of $20,250,000 to Global pursuant to Section 2.4
of the Formation Agreement and Section 6.1(__) of the LP Agreement.
"Percentage Interest" shall mean, (i) with respect to any
Partner, such Partner's percentage interest in the Partnership, which shall mean
such Partner's Partnership Interest percentages (as set forth on Schedule 3.1 to
the LP Agreement), as the same may change from time to time pursuant to a
Transfer of all or any portion of such Partner's Partnership Interests in
accordance with Article IX of the LP Agreement, and (ii) with respect to any
Member, such Member's percentage interest in Limited, which shall mean such
Member's Membership Interest percentage (as set forth in Section 3.1.1 of the
LLC Agreement), as the same may change from time to time pursuant to a Transfer
of all or any portion of such Member's Membership Interests in accordance with
Article VII of the LLC Agreement.
"Person" shall mean an individual, partnership, corporation,
business trust, limited liability company, limited liability partnership, joint
stock company, trust, unincorporated association, joint venture, Governmental
Authority or other entity of whatever nature.
"Preapproved Contracts" shall mean the documents governing the
Master Lease, the Shared Services Agreement, the Transition Services Agreement,
the Employee Lease Agreement and all contracts between the Partnership and any
Partner or Affiliate thereof approved unanimously in
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writing by the Partners pursuant to a blanket approval of a particular type of
arrangement with specified contractual parameters; provided that, all
modifications, amendments or other changes to any Preapproved Contract must be
unanimously approved by all Partners except to the extent such modifications,
amendments or other changes are within such preapproved contractual parameters.
"Products" shall mean any products offered or furnished by any
Transferring Weatherford Entity or Global, as the case may be, or any
predecessor in interest thereof, currently or at any time in the past, including
without limitation each item of hardware, software, or firmware; any system,
equipment, or products consisting of or containing one or more thereof; and any
and all enhancements, upgrades, customizations, modifications, and maintenance
thereto.
"Properties" shall mean all assets and properties of the
Partnership, whether tangible or intangible, real or personal.
"Registrant" shall have the meaning assigned to such term in
the Registration Rights Agreement.
"Registration Rights Agreement" shall mean that certain
Registration Rights Agreement dated as of the Closing Date by and among WECC,
Global and the Partnership, in the form and substance attached as Exhibit E to
the Formation Agreement, as the same may be amended or otherwise modified from
time to time pursuant to the terms thereof.
"Regulation" or "Regulations" shall mean the United States
Treasury Regulations promulgated under the Code.
"Release" shall have the meaning ascribed to it in CERCLA
unless the state law of a jurisdiction in which a property is located has a
broader meaning, in which case the broader meaning shall apply.
"Requisite Approvals" shall have the meaning assigned to such
term in Section 11.2(b) of the LP Agreement.
"resign" shall mean, with respect to any Partner or Member,
the resignation or withdrawal thereof from the Partnership or Limited, as the
case may be.
"Same Line of Business" shall mean any of (i) the
manufacturing, fabrication, leasing or servicing of and disposition of
compressors and related equipment and components and (ii) the provision of
compressor related services.
"Securities Act" shall have the meaning assigned to such term
in Section 11.1 of the LP Agreement.
"Services" shall mean any compression services offered or
furnished by any Weatherford Entity or Global, as the case may be, or any
predecessor in interest thereof, currently or at any time in the past.
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<PAGE> 87
"Shared Services Agreement" shall mean that certain Shared
Services Agreement dated as of the Closing Date by and among Weatherford and the
Partnership, in the form and substance attached to the Formation Agreement as
Exhibit H, as the same may be amended or otherwise modified from time to time
pursuant to the terms thereof.
"Significant subsidiary" has the meaning assigned to such term
in the Securities Exchange Act of 1934, as amended.
"Significant Transaction" shall have the meaning assigned to
such term in Section 11.3.2 of the LP Agreement.
"subsidiary"" of a Person means any corporation, partnership
or other legal entity of which securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
Persons performing similar functions are directly or indirectly owned by such
first mentioned Person.
"Surviving Member" shall have the meaning assigned to such
term in Section 8.5 of the LLC Agreement.
"Tax" or "Taxes" shall mean all federal, state, local or
foreign taxes, assessments, duties, levies or similar charges of any kind,
including, without limitation, those on or measured by or referred to as income,
gross receipt, sales, use, ad valorem, franchise, profits, license, withholding,
payroll, employment, estimated, excise, severance, stamp, occupation, premium,
value added, property or windfall profits taxes, customs, duties or similar
fees, assessments or charges of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts imposed by any
Governmental Authority, domestic or foreign, whether disputed or not.
"Tax Indemnified Party" shall have the meaning assigned to
such term in Section 7.1(d)(l) of the Formation Agreement.
"Tax Indemnifying Party" shall have the meaning assigned to
such term in Section 7.1(d)(l) of the Formation Agreement.
"Tax Losses" shall have the meaning assigned to such term in
Section 7.1(b) of the Formation Agreement.
"Tax Return" shall mean any return, report, declaration,
statement, claim for refund or information return or statement required to be
filed with any Governmental Authority with respect to Taxes, or any amendment
thereto, including any schedule or attachment thereto.
"13.1 Appraisal Process Commencement Date" shall have the
meaning assigned to such term in Section 13.1(b) of the LP Agreement.
"13.1 Appraisal Report" shall have the meaning assigned to
such term in Section 13.1(b) of the LP Agreement.
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"13.1 Initial Opinion Values" shall have the meaning assigned
to such term in Section 13.1(b) of the LP Agreement.
"13.1 Subsequent Appraisal Process Commencement Date" shall
have the meaning assigned to such term in Section 13.1(b) of the LP Agreement.
"13.1 Third Opinion Value" shall have the meaning assigned to
such term in Section 13.1(b) of the LP Agreement.
"Transaction Documents" shall mean, collectively, the
Formation Agreement, the LLC Agreement, the LP Agreement, the Registration
Rights Agreement, the Transition Services Agreement, the Shared Services
Agreement and the Employee Lease Agreement.
"Transfer" shall mean, with respect to all or any part of any
Partnership Interest or any Membership Interest, the direct or indirect sale,
transfer, assignment, pledge, hypothecation or other disposition thereof, and
shall include with respect to all or any part of any Partnership Interest of any
Partner, or any Membership Interest of any Member, any merger, consolidation,
reorganization or share exchange involving such Partner or Member, as the case
may be, or any change of control of such Partner or Member, as the case may be;
provided, however, that in no event shall "Transfer" include (i) any merger,
consolidation, reorganization or share exchange involving, or any change of
control of, Weatherford, GE Capital or General Electric Company, a New York
corporation, or (ii) any merger, consolidation, reorganization, share exchange
or similar transactions so long as after such transaction, all Partnership
Interests indirectly owned by Weatherford or GE Capital continue to be owned by
an entity, the ownership interest of which is wholly owned directly or
indirectly by Weatherford or GE Capital.
"Transferring Weatherford Entities" shall mean, collectively,
WECC and each of Enterra Compression Company, a Delaware corporation,
Weatherford Compression Canada, Ltd., an Alberta corporation, Weatherford Canada
Ltd., an Alberta corporation, Weatherford Latin American, S.A., a Venezuela
corporation, Weatherford Enterra S.A., an Argentina corporation, and Weatherford
Australia Pty. Limited, an Australia corporation.
"Transition Services Agreement" shall mean that certain
Transition Agreement dated as of the Closing Date by and among the Parties, in
the form and substance attached to the Formation Agreement as Exhibit I, as the
same may be amended or otherwise modified from time to time pursuant to the
terms thereof.
"TRC Reports" shall mean that certain Phase I Environmental,
Health and Safety Assessment dated October 1998 and that certain Phase II Site
Investigation Report dated December 1998, prepared by TRC Environmental
Corporation for the use and benefit of GE Capital and Weatherford.
"Unanimous Consent of Directors" shall mean the Unanimous
Consent of Directors of the General Partner in the form and substance attached
to the Formation Agreement as Exhibit F.
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"Unreturned Capital" shall have the meaning assigned to such
term in Section 3.1(e) of the LP Agreement.
"Used" shall mean, with respect to the Business, Assets,
Contracts or Governmental Authorizations of any Person, those Owned by such
Person that are used, have been acquired for use but not yet placed in use, or
that were formerly used and now held for disposition, by such Person.
"WAP" shall have the meaning assigned to such term in the
introductory paragraph of the Formation Agreement.
"Warranty Claims" shall mean any claim (whether made before or
after the Closing Date) by a customer, distributor, wholesaler or end user of a
product manufactured, fabricated, assembled, distributed, sold or serviced, or
of any services provided thereto in which a warranty is provided on the material
or workmanship of such service, in any case manufactured, fabricated, assembled,
distributed, sold, serviced or provided prior to the Closing Date by any
Transferring Weatherford Entity, or the Weatherford Compression Business (or any
of the respective predecessors thereto), or by Global or the Global Compression
Business (or any of the respective predecessors thereto), which claim relates
directly or indirectly to an express or implied warranty of material and/or
workmanship, or any product liability claims, applicable to such product or
service.
"Weatherford" shall have the meaning assigned to such term in
the introductory paragraph to the Formation Agreement.
"Weatherford Benefit Program or Agreement" shall have the
meaning assigned to such term in Section 3.1(i)(i)(B) of the Formation
Agreement.
"Weatherford Closing Date Balance Sheet" shall have the
meaning assigned to such term in Section 2.3 of the Formation Agreement.
"Weatherford Compression Business" shall mean, collectively,
the compression businesses conducted by WECC and each other Transferring
Weatherford Entity.
"Weatherford Compression Business Assumed Contracts" shall
have the meaning assigned to such term in Section 2.1(c)(2)(ii) of the Formation
Agreement.
"Weatherford Compression Business Intellectual Property" shall
have the meaning assigned to such term in Section 2.1(c)(2)(x) of the Formation
Agreement.
"Weatherford Compression Business Inventories" shall have the
meaning assigned to such term in Section 2.1(c)(2)(v) of the Formation
Agreement.
"Weatherford Compression Business Know-How Property" shall
have the meaning assigned to such term in Section 2.1(c)(2)(x) of the Formation
Agreement.
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"Weatherford Compression Business Permits" shall have the
meaning set forth in Section 3.1(m) of the Formation Agreement.
"Weatherford Compression Business Records" shall have the
meaning assigned to such term in Section 2.1(c)(2)(vi) of the Formation
Agreement.
"Weatherford Entities" shall have the meaning assigned to such
term in the introductory paragraph to the Formation Agreement, and "Weatherford
Entity" shall mean, individually, any of the Weatherford Entities.
"Weatherford Financial Statements" shall have the meaning
assigned to such term in Section 3.1(b) of the Formation Agreement.
"Weatherford Group" shall mean any group of entities that
includes any Weatherford Entity or the Weatherford Compression Business.
"Weatherford HSR Documents" shall have the meaning assigned to
such term in Section 4.3(c)(ii) of the Formation Agreement.
"Weatherford Indemnity Party" shall have the meaning assigned
to such term in Section 8.2(a) of the Formation Agreement.
"Weatherford/Limited Assignment and Conveyance Agreement"
shall mean that certain Assignment and Conveyance Agreement dated as of the
Closing Date executed by WECC and each other Transferring Weatherford Entity, in
the form and substance attached as Exhibit J to the Formation Agreement.
"Weatherford Losses" shall have the meaning assigned to such
term in Section 8.3(a) of the Formation Agreement.
"Weatherford Noncompression Business" shall mean the
businesses conducted by any subsidiary or division of Weatherford other than the
Weatherford Compression Businesses.
"Weatherford/Partnership Assignment and Conveyance Agreement"
shall mean that certain Assignment and Conveyance Agreement dated as of the
Closing Date executed by WECC and each other Transferring Weatherford Entity, in
the form and substance attached as Exhibit J to the Formation Agreement.
"Weatherford Plan" shall have the meaning assigned to such
term in Section 3.1(i)(i)(A) of the Formation Agreement.
"WECC" shall have the meaning assigned to such term in the
introductory paragraph to the Formation Agreement.
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"Withdrawing Member" shall have the meaning assigned to such
term in Section 8.1(b) of the LLC Agreement.
"Withdrawing Partner" shall have the meaning assigned to such
term in Section 10.1(b) of the Formation Agreement.
"Year 2000 Compliant" shall mean, with respect to any Person,
that (1) the products, services, or other item(s) at issue accurately process,
provide and/or receive all date/time data (including calculating, comparing,
sequencing, processing, and outputting) within, from, into, and between
centuries (including the twentieth and twenty-first centuries and the years 1999
and 2000), including leap year calculations, and (2) neither the performance nor
the functionality nor provision by such Person of the products, services, and
other item(s) at issue will be affected by any dates/times prior to, on, after,
or spanning January 1, 2000. The design of the products, services, and other
item(s) at issue to ensure compliance with the foregoing warranties and
representations includes proper date/time data century recognition and
recognition of 1999 and 2000, calculations that accommodate single century and
multi-century formulae and date/time values before, on, after, and spanning
January 1, 2000, and date/time data interface values that reflect the century,
1999, and 2000. In particular, but without limitation, (i) no value for current
date/time will cause any error, interruption, or decreased performance in or for
such product(s), service(s), and other item(s), (ii) all manipulations of date
and time related data (including calculating, comparing, sequencing, processing,
and outputting) will produce correct results for all valid dates and times when
used independently or in combination with other products, services, and/or
items, (iii) date/time elements in interfaces and data storage will specify the
century to eliminate date ambiguity without human intervention, including leap
year calculations, (iv) where any date/time element is represented without a
century, the correct century will be unambiguous for all manipulations involving
that element, (v) authorization codes, passwords, and zaps (purge functions)
will function normally and in the same manner during, prior to, on, and after
January 1, 2000, including the manner in which they function with respect to
expiration dates and CPU serial numbers, and (vi) such Person's supply of the
product(s), service(s), and other item(s) will not be interrupted, delayed,
decreased, or otherwise affected by the advent of the year 2000.
27
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The Company has not filed any schedules or exhibits with this Exhibit No. 10.1.
Listed below is a brief description of the omitted schedules and exhibits. The
Company agrees to furnish supplementally a copy of any of such omitted schedules
and exhibits to the Commission upon request.
EXHIBITS
Exhibit A Certificate of Formation
Exhibit B Certificate of Limited Partnership
Exhibit C LLC Agreement (see Exhibit 10.3)
Exhibit D LP Agreement (see Exhibit 10.2)
Exhibit E Registration Rights Agreement
Exhibit F Unanimous Consent of Directors
Exhibit G [Reserved]
Exhibit H Shared Services Agreement
Exhibit I Transition Agreement
Exhibit J Assignment, Conveyance and Assumption Documents
SCHEDULES
Schedule 2.1(c)(2)(A) - Included Weatherford Assets
Schedule 2.1(c)(2)(B) - Excluded Weatherford Assets
Schedule 2.1(c)(2)(i) - Weatherford Real Property Interests
Schedule 2.1(c)(2)(ii) - Weatherford Contracts
Schedule 2.1(c)(2)(iii) - Weatherford Other Property Interests
Schedule 2.1(c)(2)(vi) - Weatherford Business Records
Schedule 2.1(c)(2)(vii) - Weatherford Miscellaneous Assets
Schedule 2.1(c)(2)(ix) - Weatherford Licenses
Schedule 2.1(c)(2)(x) - Weatherford Intellectual Property
Schedule 2.1(c)(2)(xii) - Weatherford Bank Accounts
Schedule 2.1(c)(3) - "Twelve-Step" Transfer
Schedule 2.1(d)(2)(A) - Excluded Global Assets
Schedule 2.1(d)(2)(i) - Global Real Property Interests
Schedule 2.1(d)(2)(ii) - Global Contracts
Schedule 2.1(d)(2)(iii) - Global Other Property Interests
Schedule 2.1(d)(2)(vi) - Global Business Records
Schedule 2.1(d)(2)(vii) - Global Miscellaneous Assets
Schedule 2.1(d)(2)(ix) - Global Licenses
Schedule 2.1(d)(2)(x) - Global Intellectual Property
Schedule 2.1(d)(2)(xii) - Global Bank Accounts
<PAGE> 93
Schedule 2.3 - Calculation of Net Assets
Schedule 3.1(a) - Weatherford Foreign Qualifications
Schedule 3.1(b) - Weatherford Financial Statements
Schedule 3.1(f) - Weatherford Business Exceptions
Schedule 3.1(h) - Weatherford Litigation
Schedule 3.1(i) - Weatherford Employee Benefit Matters
Schedule 3.1(j) - Weatherford Tax Matters
Schedule 3.1(l) - Weatherford Environmental Matters
Schedule 3.1(n) - Weatherford Material Contracts and Agreements
Schedule 3.1(o) - Weatherford Property Encumbrances
Schedule 3.1(q) - Weatherford Labor Matters
Schedule 3.1(r) - Weatherford Insurance Policies
Schedule 3.1(s) - Weatherford Undisclosed Liabilities
Schedule 3.1(t) - Weatherford Year 2000 Compliance
Schedule 3.2(a) - Global Foreign Qualifications
Schedule 3.2(b) - Global Financial Statements
Schedule 3.2(f) - Global Business Exceptions
Schedule 3.2(h) - Global Litigation
Schedule 3.2(i) - Global Employee Benefit Matters
Schedule 3.2(j) - Global Tax Matters
Schedule 3.2(l) - Global Environmental Matters
Schedule 3.2(n) - Global Material Contracts and Agreements
Schedule 3.2(o) - Global Property Encumbrances
Schedule 3.2(r) - Global Insurance Policies
Schedule 3.2(s) - Global Undisclosed Liabilities
Schedule 3.2(t) - Global Year 2000 Compliance
Schedule 4.1(a)(iv) - Weatherford Acquisition Transactions
Schedule 4.2(a)(iv) - Global Acquisition Transactions
Schedule 4.2(a)(viii) - Global Contemplated Transactions
<PAGE> 1
EXHIBIT 10.2
LP AGREEMENT
<PAGE> 2
Limited Partnership Agreement of
Weatherford Global Compression Services, L.P.,
By and Among
Weatherford Global Compression Holding, L.L.C.,
a Delaware limited liability company, as the sole General Partner,
Weatherford Enterra Compression Company, L.P.,
a Delaware limited partnership, as a Limited Partner,
and
Global Compression Services, Inc.,
a Delaware corporation, as a Limited Partner
Dated as of February 2, 1999
THE LIMITED PARTNERSHIP INTERESTS OF THE PARTNERSHIP UNDER THIS PARTNERSHIP
AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR UNDER ANY APPLICABLE STATE SECURITIES LAWS. THESE INTERESTS MAY NOT BE SOLD,
ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF AT ANY TIME WITHOUT (i) EFFECTIVE
REGISTRATION UNDER SUCH ACT AND LAWS OR EXEMPTIONS THEREFROM AND (ii) IN
COMPLIANCE WITH THIS PARTNERSHIP AGREEMENT.
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS..........................................................................................1
Section 1.1. Definitions............................................................................1
ARTICLE II
FORMATION; PURPOSES; DURATION........................................................................2
Section 2.1. Formation and Name.....................................................................2
2.1.1. Formation........................................................................2
2.1.2. Name.............................................................................2
2.1.3. Governmental Filings.............................................................2
2.1.4. Registered Office and Registered Agent...........................................2
Section 2.2. Purpose of the Partnership.............................................................2
Section 2.3. Place of Business......................................................................2
Section 2.4. Designation of Partners................................................................2
Section 2.5. Term of Partnership....................................................................3
Section 2.6. Certain Restrictions...................................................................3
2.6.1. Resignation......................................................................3
2.6.2. Other Restrictions on Partners...................................................3
Section 3.1. Capital Contributions..................................................................3
(a) General Partner.....................................................................3
(b) By WECC.............................................................................3
(c) By Global...........................................................................3
(d) Partnership Expenses................................................................3
(e) Partner Capital Contribution and Return Schedule....................................3
Section 3.2. Return of Capital Contributions........................................................4
Section 3.3. Partnership Interests..................................................................4
Section 3.4. Liability of General Partner...........................................................4
ARTICLE IV
ALLOCATIONS AND DISTRIBUTIONS........................................................................5
Section 4.1. General Application....................................................................5
Section 4.2. General Allocations....................................................................5
(a) General Allocations.................................................................5
(b) Determination of Items Comprising Allocations.......................................5
(c) Loss Limitation.....................................................................5
Section 4.3. Special Allocations....................................................................6
Section 4.4. Allocation of Nonrecourse Liabilities..................................................6
Section 4.5. Transfer of Interest...................................................................7
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Section 4.6. Tax Allocations........................................................................7
(a) Section 704(b) Allocations..........................................................7
(b) Section 704(c) Allocations..........................................................7
(c) Tax Purposes........................................................................8
Section 4.7. Non-Liquidation Event Distributions on Partnership Interests...........................8
(a) Distributions of Cash...............................................................8
(b) Limitation..........................................................................8
(c) Demand for Distribution.............................................................9
Section 4.8. Interest on Depreciation Benefit Shortfall.............................................9
Section 4.9. Distribution of Lease Proceeds.........................................................9
ARTICLE V
OPERATION OF PARTNERSHIP............................................................................10
Section 5.1. Management of Partnership.............................................................10
Section 5.2. Restrictions on General Partner's Authority; Certain Duties of General
Partner.................................................................................10
(a) Restrictions on General Partner's Authority........................................10
(b) Void Action........................................................................10
Section 5.3. Finance Committee.....................................................................12
Section 5.4. Compensation of General Partner.......................................................13
Section 5.5. Specific Obligations of General Partner...............................................13
Section 5.6. Protection of Third Parties...........................................................13
Section 5.7. Outside Ventures of Partners..........................................................14
Section 5.8. Liability; Protection; Indemnity......................................................14
(a) General Partner....................................................................15
(b) Limited Partners...................................................................15
(c) Partnership........................................................................15
(d) Non-exclusive......................................................................16
Section 5.9. Contracts With Related Parties........................................................16
ARTICLE VI
CERTAIN COVENANTS OF THE PARTNERSHIP................................................................17
Section 6.1. Certain Affirmative Covenants.........................................................17
Section 6.2. Certain Negative Covenants............................................................17
Section 6.3. Employee Benefits and Employment Covenants............................................18
ARTICLE VII
ACCOUNTING AND FISCAL AFFAIRS; INSPECTIONS..........................................................18
Section 7.1. Accounting............................................................................21
Section 7.2. Audit.................................................................................21
Section 7.3. Annual Reports; Monthly Reports.......................................................21
Section 7.4. Tax Information and Elections.........................................................21
Section 7.5. Method of Accounting..................................................................22
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Section 7.6. Rights of Inspection; Audit...........................................................22
Section 7.7. General Partner's Books and Records...................................................22
Section 7.8. Bank Accounts.........................................................................22
Section 7.9. Withdrawals of Capital and Additional Contributions...................................22
ARTICLE VIII
TAX MATTERS.........................................................................................23
Section 8.1. Partnership for Tax Purposes..........................................................23
Section 8.2. Tax Elections.........................................................................23
Section 8.3. Notice of Tax Audit...................................................................23
ARTICLE IX
SALE, TRANSFER OR MORTGAGE..........................................................................23
Section 9.1. Transfer Restrictions and Procedures..................................................23
Section 9.2. Sale by WECC..........................................................................23
ARTICLE X
DEFAULT AND DISSOLUTION.............................................................................24
Section 10.1. Events of Default and Withdrawal.....................................................24
(a) LP Event of Default................................................................24
(b) Event of Withdrawal................................................................24
Section 10.2. Election of Nondefaulting or Nonwithdrawing Partner..................................25
(a) Purchase in LP Event of Withdrawal.................................................26
(b) Affiliated Purchaser...............................................................26
(c) Closing............................................................................26
(d) Election to Dissolve for LP Event of Default.......................................26
Section 10.3. Causes of Dissolution................................................................26
Section 10.4. Procedure in Dissolution and Liquidation.............................................27
(a) Winding Up.........................................................................27
(b) Management Rights During Winding Up................................................27
(c) Distributions in Liquidation.......................................................27
(d) Noncash Assets.....................................................................28
Section 10.5. Disposition of Documents and Records.................................................28
Section 10.6. Termination..........................................................................28
ARTICLE XI
PUBLIC OFFERING; PUT; CALL..........................................................................29
Section 11.1. Registration Right...................................................................29
Section 11.2. Put..................................................................................29
(a) Two-year Put.......................................................................29
(b) Put Closing........................................................................29
(c) Weatherford Put Obligation.........................................................30
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(d) Nonexclusive remedy on default.....................................................30
Section 11.3. Call.................................................................................30
11.3.1. Initial Price..................................................................30
11.3.2. Adjusted Price.................................................................30
ARTICLE XII
ARBITRATION.........................................................................................31
Section 12.1. Dispute Resolution; Arbitration......................................................32
ARTICLE XIII
DETERMINATION OF THE MARKET VALUE OF THE PARTNERSHIP................................................32
Section 13.1. Determination of Market Value of the Partnership.....................................32
(a) Negotiation Period.................................................................32
(b) Appraisal Process..................................................................32
(c) Definition of Market Value of the Partnership......................................32
ARTICLE XIV
GENERAL PROVISIONS..................................................................................33
Section 14.1. Complete Agreement; Amendment........................................................34
Section 14.2. Notices..............................................................................34
14.2.1. Addresses......................................................................34
14.2.2. Effective Date of Notices, etc.................................................34
14.2.3. Changes........................................................................35
Section 14.3. Validity.............................................................................35
Section 14.4. Survival of Rights...................................................................35
Section 14.5. Governing Law........................................................................35
Section 14.6. Waiver...............................................................................35
Section 14.7. Remedies in Equity...................................................................35
Section 14.8. No Member Liability..................................................................36
Section 14.9. Terminology..........................................................................36
Section 14.10. Counterparts........................................................................36
Section 14.11. Further Assurances..................................................................36
Annex
Annex I Glossary of Terms
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Exhibits
Exhibit A [Reserved]
Exhibit B 1999 Partnership Annual Business Plan
Exhibit C Ethics/Integrity Policy
Schedules
Schedule 3.1 Capital Contributions and Returns
Schedule 5.2(a)(iv) Same Line of Business
Schedule 7.1 Accounting Policies, Controls and Procedures
Schedule 10.4(d) Investment Banking Firms
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LIMITED PARTNERSHIP AGREEMENT
This Limited Partnership Agreement of Weatherford Global
Compression Services, L.P., a Delaware limited partnership, dated as of February
2, 1999, is entered into by and among Weatherford Global Compression Holding,
L.L.C., a Delaware limited liability company, as sole General Partner ("General
Partner"), Weatherford Enterra Compression Company, L.P., a Delaware limited
partnership, as a Limited Partner, and Global Compression Services, Inc., a
Delaware corporation, as a Limited Partner.
R E C I T A L S
WHEREAS, WECC, Global, Weatherford, and GE Capital are parties
to the Formation Agreement, regarding the formation of the Partnership, the
formation of the General Partner, and the acquisition by the Partnership, by
means of contribution, of certain gas compression assets of WECC and the other
Transferring Weatherford Entities and Global in exchange for Partnership
Interests;
WHEREAS, the Partnership and the General Partner have been
formed by filing the Certificate of Limited Partnership and the Certificate of
Formation, respectively, with the Secretary of State of the State of Delaware;
and
WHEREAS, it is a condition precedent to the consummation of
the transactions contemplated by the Formation Agreement that the General
Partner, WECC, as a Limited Partner, and Global, as a Limited Partner, enter
into this LP Agreement;
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. All capitalized or other defined terms used
but not defined in this LP Agreement are used in this LP Agreement with the
meanings assigned thereto in Annex I to this LP Agreement.
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ARTICLE II
FORMATION; PURPOSES; DURATION
Section 2.1. Formation and Name.
2.1.1. Formation. Effective as of the filing of the
Certificate of Limited Partnership under and pursuant to the Delaware Revised
Uniform Limited Partnership Act (as amended from time to time, the "DRULPA"),
Limited, WECC and Global have formed the Partnership as a Delaware limited
partnership for the purposes set forth in this LP Agreement. The Partnership
shall be governed by the DRULPA, except as expressly provided herein to the
contrary.
2.1.2. Name. The name of the Partnership shall be Weatherford
Global Compression Services, L.P.
2.1.3. Governmental Filings. The General Partner shall
promptly execute and acknowledge all certificates and other instruments
conforming with this LP Agreement that are necessary or appropriate to comply
with applicable laws of the State of Delaware and/or the jurisdictions in which
the Partnership conducts business.
2.1.4. Registered Office and Registered Agent. The registered
office of the Partnership in the State of Delaware shall be the initial
registered office designated in the Certificate of Limited Partnership or such
other office (which need not be a place of business of the Partnership) as the
General Partner may designate from time to time in the manner provided by law.
The registered agent of the Partnership in the State of Delaware shall be the
initial registered agent designated in the Certificate of Limited Partnership or
such other Person (as defined in the DRULPA) or Persons as the General Partner
may designate from time to time in the manner provided by law.
Section 2.2. Purpose of the Partnership. The purpose of the Partnership
is to engage, directly or indirectly through subsidiaries, in the Business and
in any activities incidental thereto.
Section 2.3. Place of Business. The principal place of business of the
Partnership shall be located in Dallas, Texas, or in such other location as may
be determined unanimously by the Partners. The Partnership may also conduct
business at such other places both within and without the State of Texas
(including without limitation outside of the United States) as determined by the
General Partner. In the event the Partnership changes the location of its
principal place of business (with the consent of all the Partners), the General
Partner will promptly notify all Limited Partners thereof.
Section 2.4. Designation of Partners. The term "Limited Partners" shall
mean, collectively, each of WECC and Global, and each of their respective
permitted successors and permitted assigns. The term "Partners" shall mean,
collectively, the General Partner and the Limited Partners.
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Section 2.5. Term of Partnership. The term of the Partnership shall be
perpetual unless sooner liquidated or dissolved in accordance with this LP
Agreement.
Section 2.6. Certain Restrictions.
2.6.1. Resignation. No Partner shall have the right, and each
Partner hereby agrees not, to resign from the Partnership; provided, however, a
Partner shall have the power to resign from the Partnership at any time in
violation of this LP Agreement. If a Partner exercises such power in violation
of this LP Agreement, such Partner shall be liable to the Partnership and the
other Partners for all monetary damages suffered by them as a result of such
resignation. In no event shall the Partnership or any Partner have the right,
through specific performance or otherwise, to prevent a Partner from resigning
in violation of this LP Agreement.
2.6.2. Other Restrictions on Partners. No Partner shall have
the right to dissolve, terminate or liquidate, or to petition a court for the
dissolution, termination or liquidation of, the Partnership, except as provided
in this LP Agreement; provided, however, that nothing in this Section 2.6.2
shall impair a Partner's power to resign from the Partnership pursuant to
Section 2.6.1. No Partner at any time shall have the right to petition or to
take any action to subject the Partnership assets or any part thereof to the
authority of any court or other governmental body in connection with any
bankruptcy, insolvency, receivership or similar proceeding.
ARTICLE III
CAPITAL CONTRIBUTIONS; PARTNERSHIP
INTERESTS; LIABILITY OF GENERAL PARTNER
Section 3.1. Capital Contributions.
(a) General Partner. The initial Capital Contribution of the
General Partner to the Partnership is the undivided one percent (1%) of the
Included Weatherford Assets and the undivided one percent (1%) of the Included
Global Assets contributed to Limited by WECC and Global, respectively.
(b) By WECC. The initial Capital Contribution of WECC as a
Limited Partner, to the Partnership, shall be as follows (and is set forth
opposite WECC's name on Schedule 3.1 hereto): an undivided ninety-nine percent
(99%) of the Included Weatherford Assets.
(c) By Global. The initial Capital Contribution of Global, as
a Limited Partner, to the Partnership, shall be as follows (and is set forth
opposite Global's name on Schedule 3.1 hereto):
an undivided ninety-nine percent (99%) of the Included Global Assets.
(d) Partnership Expenses. The Partnership shall be responsible
for the payment when due of all Partnership Expenses. In the event the
Partnership does not have sufficient cash to pay or discharge when due any of
the Partnership Expenses, the General Partner shall be entitled to (but shall
not be obligated to) request all (but not less than all) of the Limited Partners
to make
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additional Capital Contributions or to lend money to the Partnership in an
amount sufficient to enable the Partnership to pay or discharge such Partnership
Expenses, any of which Capital Contributions or loans shall be made only if all
Limited Partners unanimously agree to make such Capital Contributions or loans,
and in such case shall be made only on a pro rata basis as among all Limited
Partners (based upon such Limited Partners' respective Percentage Interests) and
on such other terms as are unanimously agreed to in writing by all Partners.
Notwithstanding the foregoing, no Limited Partner shall have any obligation or
personal liability to contribute money or property or any other assets in excess
of its initial contribution specified in Section 3.1(b) with respect to WECC and
Section 3.1(c) with respect to Global, to, or in respect of debts, liabilities,
Partnership Expenses or other obligations of, the Partnership, or to make loans
to the Partnership, or to guarantee any indebtedness of the Partnership or to
otherwise provide credit support for the Partnership.
(e) Partner Capital Contribution and Return Schedule. All
Capital Contributions by any Partner to the Partnership, less any amounts
returned to such Partners constituting a return of such Capital Contributions
(all such Capital Contributions, less such returned amounts, "Unreturned
Capital"), shall be set forth on Schedule 3.1 hereto, which schedule shall be
periodically revised by the General Partner as necessary.
Section 3.2. Return of Capital Contributions. Except as otherwise
expressly provided in this LP Agreement, no Partner shall (i) be entitled to any
interest or other fixed return with respect to its Capital Contributions, (ii)
be obligated to make any Capital Contribution to the Partnership or (iii) have
any right to demand a return of its Capital Contributions.
Section 3.3. Partnership Interests. On the date hereof, the Partnership
shall issue partnership interests ("Partnership Interests") in the Partnership
in the following percentages: (i) one percent (1%) of such Partnership Interests
shall be issued to the General Partner, (ii) sixty-three and 36/100 percent
(63.36%) of such Partnership Interests shall be issued to WECC, and (iii) thirty
five and 64/100 percent (35.64%) of such Partnership Interests shall be issued
to Global. Partnership Interests will not be certificated, and the General
Partner shall keep a ledger recording the ownership of Partnership Interests by
the Partners. The ledger shall be adjusted by the General Partner to record any
changes in ownership of Partnership Interests effected pursuant to and in
accordance with the terms and conditions set forth in this LP Agreement.
Ownership of their respective Partnership Interests shall entitle the Partners
to the following Percentage Interests in the Partnership and, subject to the
terms and provisions of this LP Agreement, the Partners shall share in the
profits or losses of the Partnership in such Percentage Interests:
WECC 63.36%
Global 35.64%
General Partner 1.00%
------
100.00%
======
Unless otherwise agreed in writing by all Partners, no adjustment to the
Percentage Interest of any Partner shall be made except as a result of a
transfer of a Partner's Partnership Interest or a portion thereof pursuant to
Article IX or XI hereof.
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Section 3.4. Liability of General Partner. The General Partner shall
have such liability for the repayment, satisfaction and discharge of the debts,
liabilities and other obligations of the Partnership as is provided by the
DRULPA for the general partner of a limited partnership.
ARTICLE IV
ALLOCATIONS AND DISTRIBUTIONS
Section 4.1. General Application. The rules set forth in Section 4.1
through Section 4.7 of this LP Agreement shall apply for the purposes of
determining each Partner's general allocable share of the items of income, gain,
loss and expense of the Partnership comprising Net Profit or Net Loss of the
Partnership for each Partnership Fiscal Year, determining special allocations of
other items of income, gain, loss and expense, and adjusting the balance of each
Partner's Capital Account to reflect the aforementioned general and special
allocations. For each Partnership Fiscal Year, the special allocations in
Section 4.3 of this LP Agreement shall be made immediately prior to the general
allocations of Section 4.2 of this LP Agreement.
Section 4.2. General Allocations.
(a) General Allocations. The items of income, expense, gain
and loss of the Partnership comprising Net Profit or Net Loss for a Partnership
Fiscal Year shall be allocated among the Persons who were Partners during such
Partnership Fiscal Year in a manner that will, as nearly as possible, cause the
Capital Account balance of each Partner at the end of such Fiscal Year to equal
the excess (which may be negative) of:
(i) The hypothetical distribution (if any) that such
Partner would receive if, on the last day of the Fiscal Year, (x) all
Partnership assets, including cash, were sold for cash equal to their Gross
Asset Value, taking into account any adjustments thereto for such Fiscal Year,
(y) all Partnership liabilities were satisfied in cash according to their terms
limited, with respect to each Nonrecourse Liability, to Gross Asset Value of the
assets securing such liability) and (z) the net proceeds thereof (after
satisfaction of such liabilities) were distributed in full pursuant to Section
4.7 of this LP Agreement, over
(ii) The sum of (x) the amount, if any, which such Partner
is obligated to contribute to the capital of the Partnership, (y) such Partner's
share of the Partnership Minimum Gain determined pursuant to Regulations Section
1.704-2(g), and (z) such Partner's share of Partner Nonrecourse Debt Minimum
Gain determined pursuant to Regulations Section 1.704- 2(i)(5), all computed
immediately prior to the hypothetical sale described above in Section 4.2(a)(i)
of this LP Agreement.
(b) Determination of Items Comprising Allocations.
(i) In the event that the Partnership has Net Profit for a
Fiscal Year,
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(A) for any Partner as to whom the allocation
pursuant to Section 4.2(a) of this Agreement is negative, such allocation shall
be comprised of a proportionate share of each of the Partnership's items of
expense or loss entering into the computation of Net Profit for such Partnership
Fiscal Year; and
(B) the allocation pursuant to Section 4.2(a)
of this Agreement in respect of each Partner (other than a Partner referred to
in Section 4.2(b)(i)(A) of this Agreement) shall be comprised of a proportionate
share of each Partnership item of income, gain, expense and loss entering into
the computation of Net Profit for such Partnership Fiscal Year (other than the
portion of each Partnership item of expense and loss, if any, that is allocated
pursuant to Section 4.2(b)(i)(A) of this LP Agreement).
(ii) In the event that the Partnership has a Net Loss for
a Partnership Fiscal Year,
(A) for any Partner as to whom the allocation
pursuant to Section 4.2(a) of this LP Agreement is positive, such allocation
shall be comprised of a proportionate share of the Partnership's items of income
and gain entering into the computation of Net Loss for such Partnership Fiscal
Year; and
(B) the allocation pursuant to Section 4.2(a)
of this LP Agreement in respect of each Partner (other than a partner referred
to in Section 4.2(b)(ii)(A) of this LP Agreement) shall be comprised of a
proportionate share of each Partnership item of income, gain, expense and loss
entering into the computation of Net Loss and for such Partnership Fiscal Year
(other than the portion of each Partnership item of income and gain, if any,
that is allocated pursuant to Section 4.2(b)(ii)(A) of this LP Agreement).
(iii) For purposes of this Section 4.2, a gain recognized
by the Partnership upon the disposition of an item of Partnership property shall
be considered to be a single item of gain regardless of whether, for federal
income tax purposes, part of the gain is treated differently from the remainder.
(c) Loss Limitation. Notwithstanding anything to the contrary
in this Section 4.2, the amount of items of Partnership expense and loss
allocated pursuant to this Section 4.2 to any Partner shall not exceed the
maximum amount of such items that can be so allocated without causing such
Partner (other than a General Partner) to have an Adjusted Capital Account
Deficit at the end of any Partnership Fiscal Year. All such items in excess of
the limitation set forth in this Section 4.2(b) shall be allocated to the
General Partner.
Section 4.3. Special Allocations. The following special allocations
shall be made in the following order:
(a) In the event that there is a net decrease during a
Partnership Fiscal Year in either Partnership Minimum Gain or Partner
Nonrecourse Debt Minimum Gain, then notwithstanding any other provision of this
Article IV, each Partner shall receive such special allocations of items of
Partnership income and gain as are required in order to conform to
Regulations Section 1.704-2;
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(b) Subject to Section 4.3(a) of this LP Agreement, but
notwithstanding any other provision of this Article IV, items of income and gain
shall be specially allocated to the Partners in a manner that complies with the
"qualified income offset" requirement of Regulations Section
1.704-1(b)(2)(ii)(d)(3);
(c) In the event that a Partner has an deficit Capital Account
balance at the end of any Partnership Fiscal Year which is in excess of the sum
of (i) the amount such Partner is then obligated to restore pursuant to this LP
Agreement, and (ii) the amount such Partner is then deemed to be obligated to
restore pursuant to the penultimate sentences of Regulations Sections 1.704-
2(g)(1) and 1.704-2(i)(5), respectively, such Partner shall be specially
allocated items of Partnership income and gain in an amount of such excess as
quickly as possible, provided that any allocation under this Section 4.3(c)
shall be made only if and to the extent that a Partner would have a deficit
Capital Account balance in excess of such sum after all allocations provided for
in this Article IV have been tentatively made as if this Section 4.3(c) were not
in this Agreement;
(d) Any item of Partnership loss or expense that is
attributable to Partner Nonrecourse Debt shall be specially allocated to the
Partners in the manner in which they share the economic risk of loss (as defined
in Regulations Section 1.752-2) for such Partner Nonrecourse Debt. Each
Nonrecourse Deduction of the Partnership shall be specially allocated among the
Partners in proportion to their Percentage Interests.
The allocations pursuant to Section 4.3 (a), (b) and (c) shall
be comprised of a proportionate share of each of the Partnership's items of
income and gain.
Section 4.4. Allocation of Nonrecourse Liabilities. For purposes of
determining each Partner's share of Nonrecourse Liabilities, if any, of the
Partnership in accordance with Regulations Section 1.752-3(a)(3), the Partners'
interests in Partnership profits shall be determined in accordance with their
Percentage Interests.
Section 4.5. Transfer of Interest. In the event of a transfer of all or
part of a Partnership Interest (in accordance with the provisions of this LP
Agreement) at any time other than the end of a Partnership Fiscal Year, the
shares of items of Partnership Net Profit or Net Loss and specially allocated
items allocable to the interest transferred shall be allocated between the
transferor and the transferee in a manner determined by the General Partner in
its sole discretion that is not inconsistent with the applicable provisions of
the Code.
Section 4.6. Tax Allocations.
(a) Section 704(b) Allocations.
(i) Each item of income, gain, loss, deduction or credit
for federal income tax purposes which corresponds to an item of income, gain,
loss or expense that is either taken into account in computing Net Profit or Net
Loss or specially allocated pursuant to Section 4.3 (a "Book Item"), shall be
allocated among the Partners in the same proportion as the corresponding Book
Item is allocated among them pursuant to Section 4.2(a) or Section 4.3 of this
LP Agreement.
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(ii) (A) If the Partnership recognizes Depreciation
Recapture in respect of the sale of any Partnership asset,
(I) the portion of the gain on such sale which is
allocated to a Partner pursuant to Section 4.2 or Section 4.3 of this LP
Agreement shall be treated as consisting of a portion of the Partnership's
Depreciation Recapture on the sale and a portion of the balance of the
Partnership's gain on such sale under principles consistent with Regulations
Section 1.1245-1; and
(II) if, for federal income tax purposes, the
Partnership recognizes both "unrecaptured 1250 gain" (as defined in Section 1(h)
of the Code) and gain treated as ordinary income under Section 1250(a) of the
Code in respect of such sale, the amount treated as Depreciation Recapture under
Section 4.6(a)(ii)(A)(I) of this LP Agreement shall be comprised of a
proportionate share of both such types of gain.
(B) For purposes of this Section 4.6(a)(ii),
"Depreciation Recapture" shall mean the portion of any gain from the disposition
of an asset of the Partnership which, for federal income tax purposes: (i) is
treated as ordinary income under Section 1245 of the Code; (ii) is treated as
ordinary income under Section 1250 of the Code; or (iii) is "unrecaptured 1250
gain" as such term is defined in Section 1(h) of the Code.
(b) Section 704(c) Allocations. In the event any property of
the Partnership is credited to the Capital Account of a Partner at a value other
than its tax basis (whether as a result of a contribution of such property or a
revaluation of such property pursuant to subparagraph (b) of the definition of
"Gross Asset Value"), then allocations of taxable income, gain, loss and
deductions with respect to such property shall be made in a manner which will
comply with Section 704(c) of the Code and the Regulations thereunder. The
Partnership, in the sole discretion of tax matters partner, may make, or not
make, "curative" or "remedial" allocations (within the meaning of the Treasury
Regulations under Section 704(c) of the Code) including without limitation (i)
"curative" allocations which offset the effect of the "ceiling rule" for a prior
Partnership year (within the meaning of Treasury Regulation Section
1.704-3(c)(3)(ii)); and (ii) "curative" allocations from dispositions of
contributed property (within the meaning of Regulations Section 1.704-
3(c)(3)(iii)(B)). To the extent permitted by the Code and Regulations, the tax
matters partner, in the exercise of its discretion and with the consent of WECC,
may elect or not elect, with respect to amortization of all "section 197
intangibles" (as defined in the Code) contributed to the Partnership by WECC
(directly or indirectly through the General Partner) curative allocations if
such allocations are permissible, and if such curative allocations are not
permissible, then remedial allocations.
(c) Tax Purposes. The tax allocations made pursuant to this
Section 4.6 shall be solely for tax purposes and shall not affect any Partner's
Capital Account or share of non-tax allocations or distributions under this LP
Agreement.
Section 4.7. Non-Liquidation Event Distributions on Partnership
Interests.
(a) Distributions of Cash. On each Distribution Date the
General Partner shall cause the Partnership to distribute all Available Cash to
the Partners in accordance with their respective Percentage Interests on the
Distribution Date. The General Partner shall direct all such distributions
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to the Partners at the addresses specified on the signature pages of this
Agreement or such other address of which a Partner may notify the Partnership in
writing; provided, that, no distributions shall be made if the Partnership is
then insolvent or would thereby be made insolvent or rendered unable to carry on
its business purposes, or if the fair value of the Partnership's assets after
such distribution would be insufficient to meet its liabilities.
(b) Limitation. Notwithstanding the foregoing, except for the
Payment Obligation, the General Partner shall not be required at any time to
make any distribution of Available Cash to Partners if on the Distribution Date
such distribution would violate Section 17-607 of the Act or other applicable
law.
(c) Demand for Distribution. Except as otherwise provided in
this Section 4.7, no Partner shall be entitled to demand and receive a
distribution of Partnership property in return for its Capital Contributions to
the Partnership.
Section 4.8. Interest on Depreciation Benefit Shortfall.
Notwithstanding anything to the contrary in this LP Agreement, for so long as
Global is a Partner, WECC shall make an annual payment to Global equal to the
Depreciation Benefit Shortfall Amount (the "DBSA"), calculated as set forth
below. The payment for each Partnership Fiscal Year shall be paid to Global no
later than February 15 of the following year. The Partners and Partnership agree
to treat the DBSA as a guaranteed payment for the use of assets contributed by
Global to the Partnership under Section 707(c) of the Code, and to charge the
DBSA exclusively against the Capital Account of WECC.
The DBSA for any Partnership Fiscal Year shall mean the sum of:
(A) the product of (i) CFD (as defined below) as of
the end of the preceding Fiscal Year, and (ii) 2.1 percent (2.1%); plus
(B) the product of (i) the excess, if any, of CFD as
of the end of the current Partnership Fiscal Year over CFD as of the end of the
preceding Partnership Fiscal Year and (ii) 1.05 percent (1.05%).
(C) If any of Global's Partnership Interests is sold
or otherwise transferred or conveyed to a person who is not an Affiliate, the
DBSA shall be reduced by multiplying the DBSA as calculated above by a fraction
the numerator of which shall be the percentage owned by Global or its Affiliates
in the Partnership and the denominator of which shall be 36.0.
The following definitions shall apply for purposes of this Section 4.8:
"CFD" as of the end of a Partnership Fiscal Year
shall mean the excess, if any, of (A) over (B), where (A) is the dollar amount
of cumulative depreciation and amortization with respect to all assets
contributed by Global (directly or indirectly through the General Partner) upon
formation of the Partnership for all periods commencing with the Closing Date
and ending on the last day of such Partnership Fiscal Year that would have been
allowable to Global for federal income tax purposes with respect to the assets
it contributed to the Partnership if Global had not
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contributed such assets to the Partnership, and (B) is the dollar amount of
cumulative depreciation and amortization (or the equivalent amount of rental
deductions in the event that WECC or the Partnership is treated for federal
income tax purposes as the lessee of any of the assets it contributed to the
Partnership) with respect to all assets contributed by Global, WECC, and the
General Partner upon formation of the Partnership for all periods commencing
with the Closing Date and ending on the last day of such Partnership Fiscal Year
that was allocated to Global (directly or indirectly through the General
Partner) for federal income tax purposes pursuant to this Article IV (including
any remedial allocations of negative amounts to Global or curative allocations
of deduction items to Global (directly or indirectly through the General
Partner) or income items to WECC pursuant to Section 4.6(b)). Both clauses (A)
and (B) include depreciation and amortization on any assets acquired in a
nonrecognition transaction in exchange for any of the contributed assets to the
extent that such depreciation and amortization with respect to the acquired
asset is determined by reference to the adjusted tax basis of the contributed
asset that was exchanged therefor.
For purposes of clause (B) above of the definition of
DBSA, for the first Partnership Fiscal Year of the Partnership the quantity 1.05
percent (1.05%) in subclause (ii) shall instead be 0.9625 percent (0.9625%).
Section 4.9. Distribution of Lease Proceeds. The Partnership will make
a distribution in accordance with Section 6.1(d) of this LP Agreement.
ARTICLE V
OPERATION OF PARTNERSHIP
Section 5.1. Management of Partnership. Subject to the terms of this LP
Agreement, the business and affairs of the Partnership shall be managed and
conducted by the General Partner, which shall exercise full and exclusive
control over the affairs of the Partnership and shall have full authority to
take all actions necessary or appropriate to pursue the business and carry out
the purpose of the Partnership. The General Partner shall devote such time as it
considers necessary, in its commercially reasonable discretion, to conduct the
business of the Partnership. The Limited Partners shall have no authority to
manage or conduct the business of the Partnership, or to approve of any action
by the General Partner, except as hereinafter specifically provided.
Section 5.2. Restrictions on General Partner's Authority; Certain
Duties of General Partner. (a) Restrictions on General Partner's Authority.
Subject to any other restrictions on the following set forth in this LP
Agreement, a unanimous vote of all of the Partners and all of the members of the
Board of Directors of the General Partner, shall be necessary to approve, enter
into, effect or operate under:
(i) The taking of any Bankruptcy Action;
(ii) Any transfer, sale, assignment, conveyance or other
disposition, or any pledge, mortgage, hypothecation or other encumbrance, or any
lease, of any assets or properties of
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the Partnership or any subsidiary thereof, in one transaction or any combination
of transactions, Outside the Ordinary Course of Business;
(iii) Any acquisition of assets or properties by the
Partnership or any subsidiary thereof, or any capital expenditure by the
Partnership or any subsidiary thereof, in one transaction or any combination of
transactions, Outside the Ordinary Course of Business;
(iv) Any merger, consolidation or other combination of the
Partnership with or into any other business entity;
(v) Any change of the Partnership's purpose from that set
forth in Section 2.2 hereof, or any engagement by the Partnership in any
business activity not described in Section 2.2 hereof;
(vi) Any change of, or reorganization or restructure of,
the Partnership into any other legal form, except in accordance with Section
11.1 of this LP Agreement;
(vii) Any change in the Partnership's independent
auditors, or, except as required by GAAP, any material change in the
Partnership's accounting methodology, practices or policies;
(viii) Any Contractual Obligation or other transaction
between the Partnership or the General Partner, and any Affiliate of the
Partnership, any Partner or any Affiliate of any Partner, except for the
Preapproved Contracts;
(ix) Any dissolution, winding up or liquidation of the
Partnership or the General Partner, or any act or omission as a result of which
the Partnership or the General Partner would be dissolved, wound up or
liquidated, in any case in whole or in part, except as provided in Sections
10.2(d) and 10.3(i) hereof;
(x) (A) the Partnership's Annual Business Plan (including
without limitation the operating budget and capital expenditures thereunder) if
at the time such plan is presented for approval EBIT for the current year to
date plus projected EBIT through the end of the current year is less than
seventy percent (70%) of EBIT projected for the current year, or (B) an Annual
Business Plan of the Partnership (including without limitation the operating
budget and capital expenditures thereunder) approved in accordance with the
terms of this LP Agreement if, after such approval, EBIT for the Partnership
Fiscal Year immediately preceding the Partnership Fiscal Year covered by such
Annual Business Plan (as set forth in the Partnership's audited financial
statements for such preceding Partnership Fiscal Year) is less than seventy
percent (70%) of projected EBIT for such preceding Partnership Fiscal Year in
the Partnership's Annual Business Plan covering such preceding Partnership
Fiscal Year;
(xi) Any public announcement regarding Global, GE Capital
or any of their respective Affiliates, the formation of the Partnership or
Limited or any extraordinary event; except that, such a public announcement may
be made by any Partner to the extent such Partner reasonably believes such
announcement is required under applicable law or regulation; provided, however,
that,
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prior to making any such announcement, a Partner will consult on a reasonable
basis with all other Partners as to the need for and scope and substance of such
announcement;
(xii) Any distribution to the Partners of any property
other than cash, or any distribution to the Partners not prescribed by Section
4.7 of this LP Agreement;
(xiii) Any issuance of any Partnership Interests or any
other equity interests in the Partnership other than those issued to the General
Partner, WECC and Global on the date hereof, or any repurchase or redemption of
any Partnership Interests or other equity interests (including without
limitation those of the General Partner, WECC, and Global); or
(xiv) Any incurrence of Indebtedness by the Partnership
other than funded debt incurred to (A) meet budgeted working capital
requirements of the Partnership or (B) finance distributions to Partners
prescribed hereby.
(b) Void Action. Any action taken in violation of Section
5.2(a) shall be null and void.
(c) The General Partner shall cause the Partnership to (i)
maintain the Properties in a good and safe condition and repair, (ii) promptly
comply with all laws, orders and ordinances affecting the Properties, or the use
thereof, (iii) promptly repair, replace or rebuild any part of the Properties
that are destroyed by any casualty, or that become damaged, worn or dilapidated,
and (iv) complete and pay for any structure at any time in the process of
construction or repair on the Properties.
(d) The General Partner shall cause the Partnership to comply
with all laws and regulations applicable to the Partnership, or its Properties
or business. In furtherance but not in limitation of the foregoing, the General
Partner shall (i) cause the Partnership to comply with all Environmental Laws
applicable to the Partnership, or its Properties or business, (ii) cause the
Partnership to implement, or confirm implementation by Weatherford or GE Capital
of, the actions required by Environmental Laws to correct the conditions
identified in the TRC Reports that violate Environmental Laws, including those
items set forth on Schedules 3.1(l) and 3.2(l) to the Formation Agreement, with
a goal of concluding such actions within six (6) months from the date of this LP
Agreement, or with respect to conditions that cannot be corrected within six (6)
months, as soon as is reasonably practicable, consistent with the requirements
of Environmental Laws, (iii) cause the Partnership to ensure that (x) all
equipment washing takes place on concrete pads, which prevent the discharge of
washwater to the environment without requisite permits or governmental
approvals, (y) secondary containment is provided for all hazardous materials
storage areas, and (z) where appropriate, bottled or municipal water is provided
to employees to prevent the consumption of water from on-site process wells,
(iv) report in writing at least annually to the Limited Partners on the status
of the Partnership with respect to compliance with Environmental Laws and (v)
within 30 days after the Closing, cause the Partnership to retain an
environmental consulting firm to undertake limited sampling for RCRA metals and
volatile organic compounds at or in the vicinity of any leach field located on
property owned or leased, if allowed by applicable leases, by or for the
Partnership as of the Closing. In connection with such obligation, the General
Partner shall appoint and maintain a committee of its officers and/or employees
to provide semi-
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annual written reports to the General Partner (which reports shall also be
contemporaneously provided to each Limited Partner) as to such compliance. With
respect to costs incurred in connection with clause (ii) above, GE Capital shall
promptly pay or reimburse the Partnership for all reasonable out-of-pocket costs
associated with actions undertaken by the Partnership at the properties or
facilities contributed by Global to the Partnership, and Weatherford shall
promptly pay or reimburse the Partnership for all reasonable out-of-pocket costs
associated with actions undertaken by the Partnership at properties or
facilities contributed to the Partnership by the Transferring Weatherford
Entities; provided that the Partnership shall not commence any of the actions
listed on Schedule 3.1(l) or 3.2(l) involving additional sampling or remediation
unless it has received notice from the responsible Partner, Weatherford, with
respect to Schedule 3.1(l), or GE Capital, with respect to Schedule 3.2(l)
requesting the Partnership to implement the action or the responsible Partner
fails to commence the required action within 30 days after the Closing Date. All
other costs shall be those of the Partnership.
(e) The Partnership shall at all times operate under an Annual
Business Plan (which shall include an operating and capital expenditure budget,
and projected EBIT for each fiscal quarter of the Partnership for the applicable
Partnership Fiscal Year, and for such Partnership Fiscal Year) approved by the
Board of Directors in advance of the Partnership Fiscal Year to be covered by
such Annual Business Plan, subject to the right of all of the Partners to
approve thereof under Section 5.2(a) of this LP Agreement, and provided that the
Partnership's Annual Business Plan for the 1999 Partnership Fiscal Year has been
approved by all Partners and is attached as Exhibit B to this LP Agreement.
Section 5.3. Finance Committee. The Partnership shall establish a
separate Finance Committee ("Finance Committee") which shall be composed of four
members, two of whom shall at all times be designated by WECC, and two of whom
shall at all times be designated by Global. The purpose of the Finance Committee
will be to report and make recommendations to the General Partner as to such
matters affecting the Partnership as such Finance Committee deems appropriate,
including without limitation the recommendation of Partnership budgets. The
Finance Committee shall meet no less frequently than quarterly.
Section 5.4. Compensation of General Partner. The General Partner shall
be reimbursed all reasonable expenses incurred in managing the Partnership and
acting as tax matters partner thereof, and on request of any Limited Partner
shall provide such Limited Partner with documentary evidence reflecting such
expenses.
Section 5.5. Specific Obligations of General Partner. The General
Partner shall, on behalf of and in the name of the Partnership and in addition
to the general management obligations provided for in Section 5.1 of this LP
Agreement and the obligations of the General Partner provided for elsewhere in
this LP Agreement or by law, have the following specific obligations:
(a) The General Partner shall deposit all of the Partnership's
funds in segregated bank accounts or other segregated investment accounts;
(b) The General Partner shall file certificates and do such
other acts as may be required to qualify and maintain the Partnership as a
limited partnership under the DRULPA and to
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qualify the Partnership to transact business in all such jurisdictions as may be
required under applicable provisions of law, and to maintain such qualification,
and shall do such other acts as the General Partner shall deem necessary or
appropriate to comply with all other applicable provisions of law;
(c) The General Partner shall serve as the "tax matters
partner" (as defined in Section 6231 of the Code) of the Partnership and, as
such, shall have all of the rights and obligations given to a tax matters
partner under the Code and the Regulations. The General Partner shall keep each
Partner informed in writing of any administrative and judicial proceedings. Each
Partner, by its execution of this LP Agreement, consents to the General Partner
serving as the tax matters partner and agrees to execute, acknowledge or verify,
and deliver, such written instruments as may be necessary or appropriate to
evidence such consent;
(d) The General Partner shall take all such action necessary
in order to preserve the treatment of the Partnership as a partnership for
federal tax purposes; and
(e) The General Partner shall use its reasonable best efforts
and take all necessary actions to ensure that the Partnership will be Year 2000
Compliant on or before September 1, 1999. By way of example and not by
limitation, the efforts to be taken by the General Partner shall include (a) the
commission of adequate resources (internal and, if required, in the best
business judgment of the General Partner, external), (b) the hiring of outside
consultants, if necessary, (c) the preparation of contingency plans, and (d)
assessments of customer and supplier viability. In addition, the General Partner
shall provide written quarterly reports to all Limited Partners as to the
progress made in becoming Year 2000 Compliant.
Section 5.6. Protection of Third Parties. Any Person doing any business
with or otherwise dealing in any transaction whatsoever with the General Partner
within the scope of its power and authority under this LP Agreement shall be
entitled to rely fully upon the General Partner's power and authority to bind
the Partnership in that business or transaction.
Section 5.7. Outside Ventures of Partners. Each of WECC and Global and
their respective Affiliates may engage in or possess any interest, whether
direct or indirect, in any other business activity, venture or undertaking of
any type or description, independently or with others, including without
limitation activities, ventures or undertakings involving the acquisition,
development and operation of compression businesses or any interest therein
(whether or not the same may be competitive with the Partnership business or any
business in which the Partnership may have an interest), and neither the
Partnership nor any other Partner will, by virtue of this LP Agreement, have any
right, title or interest in or to such outside activities, ventures or
undertakings, or the income or other benefits derived therefrom. The conduct of
the business of the Partnership may involve business dealings with such
activities, ventures or undertakings. The General Partner shall devote such time
as it considers necessary, in its reasonable discretion, to conduct the business
of the Partnership in a prudent and diligent manner, and shall comply with all
provisions of this LP Agreement, the General Partner's Certificate of Formation
and the LLC Agreement. In addition, WECC agrees to cause its Affiliates to
discuss and seek global alliances with the Partnership for the rental or sale of
compressors or compression services; provided, however, any such services or
alliances are effected on mutually agreeable terms and on an arms'-length basis.
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Section 5.8. Liability; Protection; Indemnity.
(a) General Partner. The General Partner shall have no
liability to the Partnership or any Partner as a result of any error of
judgment, mistake or other action or inaction by the General Partner so long as
the General Partner acted (or failed to act) in good faith and in material
compliance with this LP Agreement and in a manner not involving gross negligence
or reckless or willful misconduct, in a manner it reasonably believed to be
within the scope of the authority conferred upon it by this LP Agreement, and
in, or not opposed to, the best interests of the Partnership. The fact that the
General Partner has obtained the advice of legal counsel selected in good faith
not involving negligence or reckless or willful misconduct that any action or
inaction by it is within the scope of the authority conferred upon the General
Partner by this LP Agreement and in, or not opposed to, the best interests of
the Partnership, shall be conclusive evidence that the General Partner
reasonably believed in good faith that such action or inaction was within the
scope of the authority conferred upon it by this LP Agreement and was in, or not
opposed to, the best interests of the Partnership. The General Partner shall
not, however, be required to procure such advice of legal counsel in order to be
entitled to the benefit of the exculpation or indemnification provided
hereunder. The Partnership shall indemnify and hold harmless the General Partner
against and from any personal loss, liability, or damage incurred by it as a
result of any action or inaction by it in connection with the operation of the
business of the Partnership (excluding actions or inactions for which the
General Partner is not protected under the provisions of this Section 5.8(a)),
except that the General Partner shall not in any way be excused from bearing as
a Partner the same portion of any such indemnification payment by the
Partnership as it would bear of any other payment by the Partnership. The
indemnification of the General Partner hereunder shall be limited to and
recoverable only out of the assets of the Partnership. The indemnification
provided for in this Section 5.8(a), and any obligation of the Partnership to
indemnify a Partner under this LP Agreement or any applicable statute,
regulation or court decision, shall be subordinate to the obligations of the
Partnership to make distributions to the Partners hereunder.
(b) Limited Partners. Except to the extent expressly assumed
in writing by a Limited Partner, no Limited Partner shall be liable for any
debts, obligations or liabilities of the Partnership or any other Partner,
whether arising in tort, contract, or otherwise, solely by reason of being a
Limited Partner, or acting (or omitting to act) in such capacities, or
participating (as a contractor or otherwise) in the conduct of the business of
the Partnership; provided, however, that nothing in this Section 5.8(b) shall be
construed to relieve any Limited Partner of any obligation it may have pursuant
to the Formation Agreement. Except as otherwise specifically provided in this LP
Agreement, no Limited Partner shall have any authority to bind or act for, or
assume any obligations or responsibility on behalf of, the Partnership or the
other Limited Partner. The Partnership shall (i) pay, indemnify and hold the
Limited Partners, as such, and their directors, officers, employees,
shareholders, shareholders of shareholders, and partners, harmless from and
against any and all recording and filing fees and any and all liabilities with
respect to, or resulting from any delay in paying, stamp, excise and other taxes
(other than income and franchise taxes payable with respect to the revenues or
income of such Limited Partners), if any, which may be payable or determined to
be payable in connection with the execution and delivery of, or consummation of
any of the transactions contemplated by, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, this LP
Agreement; and (ii) pay, indemnify, and hold the Limited Partners, as such, and
their directors, officers, employees,
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shareholders, shareholders of shareholders and partners, harmless from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including attorney's fees),
disbursements, fines or amounts paid in settlement actually incurred, of any
kind or nature whatsoever, including without limitation any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative, or investigative in nature, with respect to or arising from the
execution, delivery, enforcement, performance and administration of this LP
Agreement and any other related agreements (including without limitation the
Formation Agreement and the LLC Agreement) or the operation of the Partnership
(including, without limitation, liabilities or obligations arising under or
pursuant to Environmental Laws) (all the foregoing, collectively, the "Limited
Partners' Indemnified Liabilities"); provided that, the Partnership shall have
no obligation hereunder to such Limited Partners with respect to the Limited
Partners' Indemnified Liabilities arising from the willful misconduct or gross
negligence of such Limited Partners; and provided further that, such
indemnification shall in no way limit any indemnification or other obligation
that either Limited Partner may have to the other or to the Partnership or to
any Affiliate of the other or the Partnership under the Formation Agreement, all
of which shall be governed by the Formation Agreement. The agreements in this
Section 5.8 shall survive repayment of all amounts owed to the Partners, and
shall extend to the original such Partners and all transferees and subsequent
transferees thereof permitted hereunder.
(c) Partnership. Neither of the Limited Partners shall,
without the prior written consent of all other Partners, take any action on
behalf of or in the name of the Partnership, or enter into any commitment or
obligation binding upon the Partnership, except as expressly provided for in
this LP Agreement. Each Limited Partner shall pay, indemnify and hold harmless
the Partnership and the other Partners and each of their respective Affiliates,
directors, officers, employees, shareholders, shareholders of shareholders, and
partners, harmless from and against any and all claims, demands, losses,
damages, liabilities, suits and other proceedings, judgments and awards, and
costs and expenses (including but not limited to reasonable attorneys' fees)
arising directly or indirectly, in whole or in part, out of any breach of the
immediately preceding sentence by such Partner or its Affiliates, agents or
employees. Nothing in this Section 5.8(c) shall be construed to benefit any
Persons that are not parties to this LP Agreement, it being understood that no
Limited Partner has any personal liability for the liabilities and obligations
of the Partnership, and nothing in this Section 5.8(c) shall be construed to
create any such personal liability to third parties on the part of the Limited
Partners.
(d) Non-exclusive. The indemnification provided by this
Section 5.8 shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any agreement of the Partnership
or a Partner, both as to action in an official capacity and as to action in
another capacity while holding an office of a Person entitled to indemnification
hereunder, and shall continue as to a person who has ceased to hold such an
office and shall inure to the benefit of the heirs, executors and administrators
of such a person; provided, however, the indemnification provided in this
Section 5.8 shall be considered primary to any indemnification rights that an
officer may have against a Partner or its Affiliates and if a Partner or its
Affiliate is required to indemnify an officer for an action, omission or other
matter with respect to which the Partnership would otherwise be required to
indemnify such person hereunder, the Partnership will reimburse that Partner or
Affiliate for any amount so paid.
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Section 5.9. Contracts With Related Parties. Goods supplied and
services rendered, if any, to the Partnership by a Partner or an Affiliate
thereof shall not constitute a Capital Contribution to the capital of the
Partnership by such Partner and shall not be reimbursable by the Partnership
except as specifically provided in this Section 5.9, or as otherwise agreed by
all the Partners. Goods supplied and services rendered, if any, by the
Partnership to any Partner or its Affiliates shall not be deemed a return of
capital to such Partner. The Partnership will offer to either Partner (for the
Partner's own use or use in conjunction with other goods and/or services
provided by such Partner to third parties) its goods and/or services on an
arms'-length basis. It is contemplated that one or more Affiliates of WECC will
provide sales and related services for the Partnership from time to time. Such
services shall be on an arms'-length basis, on terms mutually agreeable between
the Partnership and WECC or such Affiliate of WECC, and on terms approved by all
other Partners. Preapproved Contracts need not be approved on a contract by
contract basis.
ARTICLE VI
CERTAIN COVENANTS OF THE PARTNERSHIP
Section 6.1. Certain Affirmative Covenants. The Partnership shall and
the General Partner shall cause the Partnership to:
(a) Not compensate any of its employees in an amount that is
in excess of that which the General Partner considers to be reasonable relative
to the compression service industry and the services to be provided. The
Partners acknowledge that the current compensation levels of the employees of
the Weatherford Compression Business and the Global Compression Business are in
compliance with the preceding sentence.
(b) Procure and maintain, or cause to be procured and
maintained, insurance which the General Partner considers to be customary and
reasonable covering the operations of the Partnership, including without
limitation (i) workers' compensation and employers' liability insurance, (ii)
comprehensive general liability insurance, (iii) comprehensive automobile
liability insurance, (iv) protection and indemnity insurance, (v) product
liability insurance, and (vi) all risk property insurance. All insurance
coverages shall be in such amounts and forms as may be approved from time to
time by the General Partner. All such coverages shall provide that the Limited
Partners and their Affiliates be named as additional insureds and further
provide that the insurers waive subrogation rights in favor of the Limited
Partners and their Affiliates. The additional insured and waiver provisions
shall apply only with respect to and to the extent of liabilities of the
Partnership. It is agreed that the Partnership may self-insure any or all
exposures; provided that, any such self insurance may not be undertaken without
the unanimous, express, prior written approval of all Limited Partners. Any or
all of the Partnership's insurance coverages may be included within the
insurance policies maintained by a Limited Partner or its Affiliates; provided
that, (i) such insurance is approved in writing by all Limited Partners, (ii)
the Partnership shall be responsible for the payment of its allocated premiums
and all retentions, deductibles and other payments relating to any claims made
and (iii) such insurance may be terminated or modified at any time by such
Limited Partner or Affiliates upon ten Business Days' prior written notice to
the Partnership and the Limited Partners.
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(c) Adopt, implement and maintain a code of ethics/integrity
policy in form and substance attached as Exhibit C hereto.
(d) As soon as practical after the Closing Date, but in no
event later than sixty (60) days thereafter, the Partnership will sell and lease
back certain assets acquired from Global under the Master Lease and will pay the
Contributed Global Note and make the Payment Obligation.
Section 6.2. Certain Negative Covenants. The Partnership shall not:
(a) Incur any Indebtedness that purports to provide for any
recourse against any Partner or any property or asset of any Partner, except as
may be provided under the Master Lease with respect to one or more Weatherford
Entities. Weatherford shall be subrogated to the rights of the Lessor against
the assets subject the Master Lease (but not against the Partnership) if there
is a default by the Partnership thereunder and Weatherford makes payments
thereunder.
Section 6.3. Employee Benefits and Employment Covenants. (a) Offers of
Employment. As soon as practicable following the Closing Date (but in no event
later than April 1, 1999), the Partnership shall offer employment to all active
employees of the Global Compression Business (including employees on vacation)
as of the expiration of the Employee Lease Agreement (other than those employees
of the Global Compression Business listed on Schedule 6.3 (the "Global
Employees")). In addition, the Partnership shall offer employment to those
employees of the Global Compression Business listed on Schedule 6.3 who are
identified on the date of such employment offer as being inactive because of
approved leave of absence, long-term or short-term disability or maternity leave
(the "Leave Employees"), upon their return to active employment, subject to the
following conditions: (i) if on medical leave, such individual is released by
his or her physician to return to active employment; and (ii) such individual
actually reports for active employment with the Partnership immediately upon
such medical release or expiration of approved leave; provided, however, no
individual shall be offered employment under this provision after six (6) months
from the Closing Date or after the expiration of any applicable federal or state
law period, if later. Each such employee who accepts such offer of employment
shall be referred to herein as a "Transferred Employee" upon commencement of
employment with the Partnership. Notwithstanding the above, the Partnership
shall not be obligated to continue the employment of any Transferred Employee
for any period of time following his initial hire date. Global and each of its
Affiliates shall retain liability and responsibility for any benefits in
accordance with the Global Benefits Plans and Global Benefit Programs and
Agreements with respect to Leave Employees until, and if, any such employee
shall be employed by the Partnership.
(b) Terms and Conditions of Employment. The Partnership shall
be liable for severance benefits outlined in Section 6.3(f) below for any Global
Employee or Leave Employee (if such Leave Employee returns to active Employment
within the time frame in Section 6.3(a)) not offered a Comparable Job (as
hereinafter defined); provided, however, that the Partnership shall also be
liable for any costs under the Worker's Adjustment and Retraining Notification
Act, and any similar state or local law. Any Global Employee or Leave Employee
not provided with a Comparable Job will immediately be eligible for severance
benefits outlined in Section 6.3(f) below. The Partnership will provide each
Transferred Employee with employee benefit plans of the
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Partnership as applicable to similarly situated employees of the Partnership
effective as of their date of hire by the Partnership; provided, however, that
with respect to any Global Employee or Leave Employee employed outside of the
United States, the Partnership shall provide such employees with substantially
similar benefits in the aggregate to those they receive immediately prior to the
Closing Date in the event the Partnership does not employ other individuals in
such foreign country. For purposes hereof, "Comparable Job" means employment of
a Transferred Employee in another position with the Partnership that is similar
in respect to title, position and responsibility, is located within 50 miles of
the job site of the employee's current position and is at a total compensation
that is not less than ninety percent (90%) of that of the Transferred Employee's
current position.
(c) Credited Service and Waiver of Pre-Existing Conditions.
The Partnership shall recognize each Transferred Employee's service with Global
or any of its Affiliates (to the extent Global or any of its Affiliates
recognized such service) prior to the expiration of the Employee Lease Agreement
as service with the Partnership or any of its Affiliates in connection with
vacation and any employee benefit plan, including severance, for purposes of any
waiting period, eligibility to participate, vesting, level of benefit and
benefit entitlement (but not benefit accruals) only in which such Transferred
Employees elect to participate and which is available by the Partnership or any
of its Affiliates following the expiration of the Employee Lease Agreement. Any
group medical plan provided by the Partnership or one of its Affiliates for
Transferred Employees from and after the expiration of the Employee Lease
Agreement shall not contain any pre-existing condition limitation or exclusion
applicable to their participation therein and shall give each Transferred
Employee credit toward applicable deductibles and annual out-of-pocket limits
for expenses incurred prior to the expiration of the Employee Lease Agreement
during the applicable plan year.
(d) Vacation. Transferred Employees shall be eligible for
vacation in accordance with the Partnership vacation policy following the
expiration of the Employee Lease Agreement; provided, however, the Partnership
shall recognize the accrued vacation carried over, if any, by each Transferred
Employee and the Partnership will compensate the Transferred Employee for the
difference between the maximum accrual of the Transferred Employee under the
applicable Global vacation plan and the maximum accrual allowed by the
Partnership plan less sick pay benefits of 56 hours for non exempt personnel.
This "Excess" amount will be paid on the first pay period the Transferred
Employee is on the Partnership payroll.
(e) Bonus, Sales Commission and Retention Plans. The
Partnership shall be responsible for and shall pay all (i) sales commissions to
Global Employees which are earned prior to the expiration of the Employee Lease
Agreement but are payable on or following the expiration of the Employee Lease
Agreement in accordance with the terms of the Global Compression Services, Inc.
Sales Incentive Plan, which commissions shall be accrued on Global's Closing
Date Balance Sheet/Financial Statements, (ii) 1998 bonuses due to Global
Employees under the Global Compression Services, Inc. Manager Bonus Plan, which
bonuses shall be accrued on Global's Closing Date Balance Sheet/Financial
Statements and (iii) retention bonuses for those Global Employees set forth on
Schedule 6.3 in accordance with the terms of the Global Compression Services,
Inc. Retention Plan (except that with respect to any such employee who is paid
by GE Capital, the Partnership shall reimburse GE Capital for the amount of such
retention bonus), which retention bonuses shall be accrued on Global's Closing
Date Balance Sheet/Financial Statements.
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The Partnership shall be responsible for the payment of the retention and
severance payments set forth on Schedule 6.3 attached hereto.
(f) Severance. For a period of twelve (12) months following
the Closing Date, the Partnership shall provide benefits upon termination of
employment to any Transferred Employee who is terminated from the Partnership
within such period in such amounts as prescribed under the Global Compression
Services, Inc. Lack of Work Policy and, if applicable, the "Special Assignment
Period of Paid Time with Benefits" as set forth on Schedule 6.3. In addition,
the Partnership shall pay, or reimburse Global or GE Capital for, any severance
costs with respect to any Global Employee or Leave Employee not offered a
Comparable Job in accordance with Section 6.3(b) hereof.
(g) Benefit Plan Participation. Effective 12:00 a.m. on the
expiration of the Employee Lease Agreement, or the day that a Transferred
Employee commences employment with the Partnership, if later, and signed all
benefit plan participation forms that may be appropriate, as applicable, the
active participation of any Transferred Employee in any Global Benefit Plan will
terminate and no further benefits shall accrue under any Global Benefit Plans
with respect to any Transferred Employee or any beneficiary of any Transferred
Employee. Global and its Affiliates shall retain all liability and be
responsible for all claims of Global Employees and Leave Employees incurred on
and prior to the expiration of the Employee Lease Agreement in accordance with
each Global Benefit Plan which is a "group health plan" as defined in Section
5000(b)(1) of the Code (subject to the reimbursement provisions of the Employee
Lease Agreement) and the Partnership or any of its Affiliates shall be
responsible for all claims of Transferred Employees incurred after the
expiration of the Employee Lease Agreement in accordance with each Partnership
benefit plan which is a "group health plan" as defined in Section 5000(b)(1) of
the Code (or such later date a Leave Employee returns to active employment with
the Partnership).
(h) The Partnership shall not assume any Global Benefit Plan
and Global Benefit Programs and Agreements except for the Global Compression
Services, Inc. 401(k) Profit Sharing Plan.
(i) Global and GE Capital shall assume all obligations,
responsibilities and liabilities including severance liability and continuation
coverage under Code Section 4980B and Part 6 of Title 1 of ERISA for all Global
Employees, including Leave Employees who refuse or decline a Comparable Job or
Leave Employees who are not offered employment under Section 6.3(a) after six
(6) months from the Closing Date or after the expiration of any applicable
federal or state law period, if later.
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ARTICLE VII
ACCOUNTING AND FISCAL AFFAIRS; INSPECTIONS
Section 7.1. Accounting. The General Partner shall keep or cause to be
kept full, complete, proper and accurate records and books of account for the
Partnership. Such records and books of account shall be (i) prepared and
presented in accordance with generally accepted accounting principles,
consistently applied ("GAAP"), (ii) maintained on an accrual basis, (iii)
adequate to provide each Partner with all financial information that may be
needed by such Partner or any of its Affiliates for purposes of satisfying the
financial or tax reporting obligations of such Partner or Affiliate, (iv) kept
at the principal office of the Partnership, and (v) open for the inspection,
examination and copying by any Partner or that Partner's authorized
representative as often as may reasonably be desired. The General Partner shall
establish GAAP accounting policies and a system of internal controls and
procedures designed to ensure that the Partnership and any of its subsidiaries
keep and maintain records and books that, in sufficient and reasonable detail,
accurately and fairly reflect all transactions of the Partnership and such
subsidiaries, which policies, controls and procedures are described on Schedule
7.1 attached hereto. The General Partner shall retain such records and books of
account for six (6) years after the termination of the Partnership.
Section 7.2. Audit. The Partnership shall engage as independent
auditors ("Auditors") for the Partnership the firm of Arthur Andersen LLP or
such other firm of nationally recognized, independent certified public
accountants as the Partners shall unanimously agree. The Auditors shall at the
end of each Partnership Fiscal Year (i) audit the records and accounts of the
Partnership, and (ii) render their opinion on the statement of financial
condition of the Partnership as of the end of each Partnership Fiscal Year and
related statements of income and changes in financial condition for each
Partnership Fiscal Year.
Section 7.3. Annual Reports; Monthly Reports.
(a) The General Partner shall furnish to each of the Limited
Partners annually, within one hundred twenty (120) days following the end of
each Partnership Fiscal Year, a complete copy of the Partnership's annual
financial statements audited by the Auditors in accordance with GAAP, containing
statements of profit and loss and the balance sheet for the Partnership. Such
statements shall set forth the financial condition and income and expenses for
the Partnership for the immediately preceding Partnership Fiscal Year, including
without limitation, statements of annual net operating income. In addition, the
General Partner shall furnish to each of the Limited Partners, on or before
twenty (20) days after the end of each fiscal quarter, a quarterly report in a
form reasonably acceptable to the Limited Partners, certified by the General
Partner, containing the Partnership's quarterly and year-to-date unaudited
financials, prepared in accordance with GAAP. The General Partner will furnish
to the Limited Partners on a monthly basis the same monthly financial
information with respect to the Partnership as is furnished to senior management
of Weatherford.
(b) The General Partner will furnish to each of the Limited
Partners, promptly but within ten (10) Business Days after request (or if more
than ten (10) Business Days is reasonably necessary, as soon thereafter as may
be reasonably possible), such further detailed
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information with respect to the Partnership's financial condition, results of
operations and affairs as may be reasonably requested by any Limited Partner and
that is directly related to the Properties, business or operations of the
Partnership.
Section 7.4. Tax Information and Elections. The Partnership shall
engage the firm of PricewaterhouseCoopers LLP or such other firm of nationally
recognized, independent certified public accountants as the Partners shall
unanimously agree to prepare and deliver to each Partner, within one hundred
twenty (120) days following the end of each Partnership Fiscal Year, with
respect to such Partnership Fiscal Year the Partnership's return on Form 1065
(or similar form) and a statement showing such information concerning all items
of income, gain, loss, deduction, and credit of the Partnership for federal
income tax purposes, and each Partner's allocable share thereof, as shall be
necessary to permit each Partner to prepare its federal income tax return. A
written estimate of such information to be set forth in such statement shall be
provided by such firm not later than December 1 of the prior Partnership Fiscal
Year, with an updated written estimate to be provided on each of the following
February 15 and March 15, and the final such statement to be provided within
such one hundred twenty (120) day period. The General Partner shall cause all
tax returns and reports required to be filed by the Partnership to be prepared
and timely filed with the appropriate authorities and shall furnish to the
Partners copies of such tax returns and reports promptly after the filing of the
same. The General Partner shall retain such tax returns and reports for the
three most recent Partnership Fiscal Years.
Section 7.5. Method of Accounting. In addition to the financial
statements of the Partnership, all other statements and financial information
provided under this LP Agreement shall be prepared in accordance with GAAP.
Section 7.6. Rights of Inspection; Audit. Each Limited Partner shall
have the right to conduct financial and operational audits of the Partnership
and/or any of its subsidiaries, at its own expense, and the Partnership, such
subsidiaries, the General Partner, the management of the General Partner and the
Auditors shall cooperate fully with the auditors and representatives of the
Limited Partners in connection therewith, including without limitation
responding to any comments and suggestions made thereby. Copies of all internal
audits conducted by a Limited Partner pursuant to this Section 7.6, and all
responses of the General Partner and its management thereto, shall be furnished
to the Limited Partner. If in the course of any audit (or other review) of the
Partnership (including without limitation an audit of any of its subsidiaries),
problems are noted and the response or action of the General Partner made with
regard thereto is deemed by a Limited Partner not to be adequate, the Partners
shall attempt to agree upon a satisfactory resolution. If the Partners cannot
agree, the dispute shall be submitted to the Partnership's Auditors, who shall
attempt to propose a satisfactory resolution.
Section 7.7. General Partner's Books and Records. The General Partner
shall keep or cause to be kept full, complete, proper and accurate records and
books of account for itself.
Section 7.8. Bank Accounts. Funds of the Partnership shall be deposited
in an account or accounts of the Partnership of a type, in a form and in a bank
or banks approved by the General Partner. Withdrawals from Partnership bank
accounts shall be made by officers of the General Partner approved by the Board
of Directors of the General Partner.
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Section 7.9. Withdrawals of Capital and Additional Contributions.
Except as otherwise expressly provided herein, no portion of the capital of the
Partnership may be withdrawn at any time without the approval of all of the
Partners.
ARTICLE VIII
TAX MATTERS
Section 8.1. Partnership for Tax Purposes. The Partners agree that the
Partnership shall be treated as a partnership for tax purposes under the Code,
state and local income tax laws or other laws, and, except as required by law,
further agree not to take any action or to make any election, in a tax return or
otherwise, inconsistent therewith.
Section 8.2. Tax Elections. Subject to Section 4.6(b) of this LP
Agreement, the General Partner, by its Members holding a majority of the
Membership Interests, is authorized to make any and all elections for federal,
state and local tax purposes. In connection with any transfer of a Partnership
Interest pursuant to this LP Agreement, the General Partner shall cause the
Partnership, at the written request of the transferor or transferee, on behalf
of the Partnership and at the time and in the manner provided in Regulations
Section 1.754-1(b), to make an election to adjust the basis of the Partnership's
property in the manner provided in Section 743(b) of the Code, and such
transferee shall pay all costs incurred by the Partnership in connection
therewith, including, without limitation, reasonable attorneys' and accountants'
fees, provided, however, that the General Partner shall not be obligated to
cause the Partnership to make an election pursuant to this Section 8.2 if the
General Partner, in its reasonable discretion, determines that such election may
have a material adverse effect on any other Partner.
Section 8.3. Notice of Tax Audit. Prompt notice shall be given to all
Partners upon receipt of advice that the Internal Revenue Service or any other
taxing authority intends to examine Partnership tax returns for any period.
ARTICLE IX
SALE, TRANSFER OR MORTGAGE
Section 9.1. Transfer Restrictions and Procedures. Each of the Partners
agrees that it will not Transfer all or any part of its Partnership Interest,
except as provided in Article X, Article XI or Section 9.2 and except that any
Partner may Transfer all or any part of its Partnership Interest to any
Affiliate thereof (so long as such Partner directly and beneficially owns at
least 50% (on a fully-diluted basis) of the issued and outstanding equity
securities or other equity interests of such Affiliate), provided that (i)
notice of such Transfer is given by the Partner making such Transfer to all
other Partners, (ii) any such Affiliate to whom any Partnership Interest is to
be transferred pursuant to such Transfer enters into an agreement with all other
Partners, reasonably satisfactory in form and substance as to such other
Partners, pursuant to which such Affiliate agrees to be bound by all the terms
and provisions of this LP Agreement and (iii) any such Affiliate to whom any
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Partnership Interest is so transferred pursuant to such Transfer shall be deemed
to be subject to the same provisions of this LP Agreement as the Partner making
the Transfer. Any purported Transfer in violation of this Section 9.1 shall be
null and void.
Section 9.2. Sale by WECC. Beginning three years from the Closing Date,
so long as the Partnership or a successor entity has not effected an IPO of its
securities pursuant to Section 11.1 of LP Agreement, WECC may sell all (but not
less than all) of its Partnership Interests (including that percentage of the
General Partner's Partnership Interests attributable to WECC's position as a
Member of the General Partner) to a third party, provided that (i) the price
paid for such Partnership Interests is not less than the Net Book Value thereof
on the date of sale, (ii) such price shall be payable only in cash (or, if any
non-cash consideration is to be received, such consideration shall be valued by
a nationally recognized investment banking firm selected by Global), (iii)
Global has the option to sell all (but not less than all) its Partnership
Interests (including that percentage of the General Partner's Partnership
Interests attributable to Global's position as a Member of the General Partner)
on the same terms and conditions as WECC (which shall be reflected in a written
offer by the third party to Global) and (iv) if Global elects not to sell its
Partnership Interests or if such third-party sale is not consummated, Global's
put rights, and WECC's and Weatherford's obligations under Section 11.2 hereof
shall remain in full force and effect (if any such third party sale in which
Global elects to participate is consummated, Global's put rights, and WECC's and
Weatherford's obligations, under Section 11.2 hereof shall continue in full
force and effect until the actual time of such consummation).
ARTICLE X
DEFAULT AND DISSOLUTION
Section 10.1. Events of Default and Withdrawal.
(a) LP Event of Default. The occurrence of any of the
following events shall constitute an "LP Event of Default" hereunder on the part
of the Partner with respect to whom such event occurs (the "Defaulting Partner")
if, within 30 days following notice of such default from any other Partner,
which notice shall be provided to all Partners (each Partner with respect to
whom such event does not occur, a "Nondefaulting Partner"), or ten days if the
default is due solely to the nonpayment of monies, such Defaulting Partner fails
to pay such monies, or in the case of non-monetary defaults, fails to commence
substantial efforts to cure such default or thereafter fails within a reasonable
time to prosecute to completion with diligence and continuity the curing of such
default:
(i)the attempted violation by a Partner of any of its
obligations under Article IX of this LP Agreement; or
(ii) material default in the performance of or failure to
comply with any other agreements, obligations or undertakings of a Partner
contained in this LP Agreement, other than the agreement not to resign from the
Partnership set forth in Section 2.6.1 of this LP Agreement.
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(b) Event of Withdrawal. The occurrence of any of the
following events shall constitute an "LP Event of Withdrawal" hereunder on the
part of the Partner with respect to whom such event occurs (the "Withdrawing
Partner") immediately upon such occurrence without any requirement of notice
from any other Partner (each such other Partner, a "Nonwithdrawing Partner") or
passage of time except as specifically set forth below:
(i) institution by a Partner of proceedings of any nature
under any laws of the United States or of any state, whether now existing or
subsequently enacted or amended, for the relief of debtors wherein such Partner
is seeking relief as debtor;
(ii) a general assignment by a Partner for the benefit of
its creditors;
(iii) the institution by a Partner of a case or other
proceeding under any section or chapter of the federal Bankruptcy Code, as now
existing or hereafter amended or becoming effective;
(iv) the institution against a Partner of a case or other
proceeding with respect to it under any section or chapter of the federal
Bankruptcy Code, as now existing or hereafter amended or becoming effective,
which proceeding is not dismissed, stayed or discharged within a period of 60
days after the filing thereof or if stayed, which stay is thereafter lifted
without a contemporaneous discharge or dismissal of such proceeding;
(v) a proposed plan of arrangement or other action by a
Partner's creditors taken as a result of a general meeting of the creditors of
such Partner;
(vi) the appointment of a receiver, custodian, trustee or
like officer, to take possession of assets having a value in excess of
$25,000,000 of a Partner if the pendency of said receivership would reasonably
tend to have a materially adverse effect upon the performance by said Partner of
its obligations under this LP Agreement, which receivership remains undischarged
or unstayed for a period of 60 days from the date of its imposition;
(vii) admission by a Partner in writing of its inability
to pay its debts as they mature;
(viii) attachment, execution or other judicial seizure of
all or any substantial part of a Partner's assets or of a Partner's Partnership
Interest, or any part thereof, such attachment, execution or seizure being with
respect to an amount not less than $25,000,000 and remaining undismissed,
unstayed or undischarged for a period of 60 days after the levy thereof, if the
occurrence of such attachment, execution or other judicial seizure would
reasonably tend to have a materially adverse effect upon the performance by said
Partner of its obligations under this LP Agreement; provided, however, that said
attachment, execution or seizure shall not constitute an LP Event of Withdrawal
hereunder if said Partner posts a bond sufficient to fully satisfy the amount of
such claim or judgment within 15 days after the levy thereof and the Partner's
assets are thereby released from the lien of such attachment;
(ix) the resignation or withdrawal of the Partner from the
Partnership; or
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(x) the dissolution of any Partner that is an entity (if
such dissolution is followed by the liquidation or winding up of such Partner).
Section 10.2. Election of Nondefaulting or Nonwithdrawing Partner.
(a) Purchase in LP Event of Withdrawal. Upon the occurrence of
any LP Event of Withdrawal by any Limited Partner, the Limited Partner that is a
Nonwithdrawing Partner shall have the right (but not the obligation) to purchase
all (but not less than all) of the Partnership Interests of the Withdrawing
Partner and that percentage of the General Partner's Partnership Interests
attributable to the Withdrawing Partner's position as a Member of the General
Partner, for cash at a price determined pursuant to the appraisal procedure set
forth in Article XIII of this LP Agreement by payment of 20% of such purchase
price at the closing of such purchase, the balance of the purchase price to be
payable in equal monthly installments over a period of five years, the unpaid
balance to bear interest at a rate of interest equal to the then prime rate at
Chase Bank, Texas, N.A., plus one-half percent, with the right of prepayment of
any amount at any time without premium or penalty. In furtherance of such right,
such Nonwithdrawing Partner may notify the Withdrawing Partner at any time
following an LP Event of Withdrawal of its election to institute the appraisal
procedure set forth in Article XIII of this LP Agreement. Upon receipt of notice
of determination of the net fair market value of such Withdrawing Partner's
Partnership Interests and that percentage of the General Partner's Partnership
Interests attributable to such Withdrawing Partner's position as a Member of the
General Partner, such Nonwithdrawing Partner may notify such Withdrawing Partner
of its election to purchase such Partnership Interests.
(b) Affiliated Purchaser. The Nonwithdrawing Partner may
assign to any Affiliate (the "Partner Affiliated Purchaser") its rights to
purchase the Partnership Interests of the Withdrawing Partner (and that
percentage of the General Partner's Partnership Interests attributable to its
position as a Member of the General Partner) pursuant to Section 10.2(a) of this
LP Agreement. If the Partner Affiliated Purchaser exercises such right and
purchases such Partnership Interests, the Partner Affiliated Purchaser shall
automatically be admitted to the Partnership as a Partner with the Percentage
Interests applicable to the Partnership Interests so purchased.
(c) Closing. The closing of any purchase pursuant to this
Section 10.2 shall take place at the principal office of the Partnership, unless
otherwise unanimously agreed by all the Partners, on a date specified by the
Nonwithdrawing Partner or Partner Affiliated Purchaser (as applicable) that is
not less than ten days following receipt of notice of determination of the net
fair market value of the Partnership Interests to be purchased pursuant to
Article XIII of this LP Agreement. Upon the closing of such purchase, the
Nonwithdrawing Partner or Partner Affiliated Purchaser (as applicable) may elect
to offset against the purchase price the amount of any loss, damage or injury,
the amount of which has been established by a final nonappealable judgment,
caused to it (or, in the case of an Partner Affiliated Purchaser, caused to the
Nondefaulting Partner or Nonwithdrawing Partner) by the LP Event of Withdrawal.
(d) Election to Dissolve for LP Event of Default. If an LP
Event of Default occurs and is continuing, the Nondefaulting Partner may elect
to dissolve and terminate the Partnership pursuant to Section 10.3(i) of this LP
Agreement by written notice to the Defaulting Partner.
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Section 10.3. Causes of Dissolution.
The Partnership shall be dissolved only in the event that:
(i) an LP Event of Default has occurred and is continuing
and the Nondefaulting Partner elects to dissolve the Partnership as provided in
Section 10.2(d) of this LP Agreement;
(ii) an LP Event of Withdrawal has occurred, or any other
event occurs that terminates the continued Partnership of a Partner in the
Partnership under Section 17-801(4) of the DRULPA , unless the business of the
Partnership is continued by the consent of all the remaining Partners (including
any Partner Affiliated Purchaser) within 90 days following the occurrence of
such LP Event of Withdrawal;
(iii) the Partners unanimously agree to terminate the
Partnership;
(iv) the Partnership ceases to maintain any interest
(which term shall include but not be limited to a security interest) in the
Business;
(v) at least one of the Partners elect to dissolve or
terminate the Partnership pursuant to any provision of this LP Agreement
permitting such election to be made;
(vi) the Partnership is dissolved pursuant to an express
provision of this LP Agreement; or
(vii) a decree of judicial dissolution is entered under
Section 17-802 of DRULPA.
Section 10.4. Procedure in Dissolution and Liquidation.
(a) Winding Up. Upon any dissolution of the Partnership
pursuant to Section 10.3 of this LP Agreement, unless the business of the
Partnership is continued in accordance with Section 10.3(ii) of this LP
Agreement, the Partnership shall immediately commence to wind up its affairs and
the Partners shall proceed with reasonable promptness to liquidate the business
of the Partnership.
(b) Management Rights During Winding Up. During the period of
the winding up of the affairs of the Partnership, the rights and obligations of
the Partners set forth in this LP Agreement with respect to the management of
the Partnership shall continue. For purposes of winding up, the Partners shall
continue to act as such and shall make all decisions relating to the conduct of
any business or operations during the winding up period and to the sale or other
disposition of Partnership assets; provided that, if the termination of the
Partnership results from an LP Event of Default or LP Event of Withdrawal, the
Defaulting Partner or Withdrawing Partner (as applicable) shall have no further
right to participate in the management or affairs of the Partnership or to
attend meetings of the Partners or vote on decisions, but shall nonetheless be
bound by all decisions made by the Nondefaulting Partner(s) or Nonwithdrawing
Partner(s) (as applicable) relating to matters with respect to the operations of
the Partnership or the winding up of the Partnership. Each Partner hereby waives
any claims it may have against the Nondefaulting
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<PAGE> 35
Partner(s) or Nonwithdrawing Partner(s) (as applicable) that may arise out of
the management by the Nondefaulting Partner(s) or Nonwithdrawing Partner(s) of
the Partnership, so long as such Nondefaulting Partner(s) or Nonwithdrawing
Partner(s) acts in good faith.
(c) Distributions in Liquidation. The assets of the
Partnership shall be applied or distributed in liquidation in the following
order of priority:
(i) first, to the payment of the expenses of liquidation;
(ii) second, in payment of debts and obligations of the
Partnership owed to third parties or to Partners; and
(iii) third, any remaining assets shall be distributed to
the Partners in accordance with Section 4.7 of this LP Agreement, provided that
there shall be withheld from the amount otherwise distributable to a Defaulting
Partner or Withdrawing Partner, the amount of any loss, damage or injury to the
Nondefaulting Partner or Nonwithdrawing Partner, the amount of which has been
established by a final, nonappealable judgment, caused to the Nondefaulting
Partner or the Nonwithdrawing Partner by the LP Event of Default or the LP Event
of Withdrawal, and such amount shall be distributed to the Nondefaulting Partner
or the Nonwithdrawing Partner in addition to the amounts otherwise distributable
to such Nondefaulting Partner or such Nonwithdrawing Partner.
(d) Noncash Assets. Every reasonable effort shall be made to
dispose of the assets of the Partnership so that all distributions may be made
to the Partners in cash. Notwithstanding the foregoing, the Partners agree that,
in the event of liquidation, the Partner that or whose Affiliates contributed
particular patents, patent applications, trademarks and trade names to the
Partnership (or whose predecessor in interest made such contributions), if any,
shall be given the right of first refusal to reacquire such patents, patent
applications, trademarks or trade names as it so desires by payment to the
Partnership of an amount equal to the then current net asset value on the books
of the Partnership of such patents, patent applications, trademarks or trade
names. If the Partnership makes distributions in kind to the Partners in
connection with the liquidation of the Partnership, for purposes of determining
the Capital Account balances of the Partners, the Partnership shall be deemed to
have sold the assets to be distributed in kind to a third party for cash at the
fair market value thereof as determined (i) by an investment banking firm
(including any successor) listed on Schedule 10.4(d) hereto selected by the
Nondefaulting Partner or the Nonwithdrawing Partner, as the case may be, if the
termination and liquidation of the Partnership results from an LP Event of
Default or an LP Event of Withdrawal, and (ii) in all other cases, by unanimous
agreement of all Partners (or if such Partners cannot so agree, as determined by
a nationally recognized investment bank or appraiser unanimously selected by all
Partners). Any license or other agreement permitting the Partnership to use the
name "Weatherford" shall terminate automatically upon dissolution of the
Partnership.
Section 10.5. Disposition of Documents and Records. All documents and
records of the Partnership, including without limitation all financial records,
vouchers, canceled checks and bank statements, shall be delivered to WECC upon
termination of the Partnership. Unless otherwise approved by Global, WECC shall
retain such documents and records for a period of not less than
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<PAGE> 36
seven (7) years and shall make such documents and records available during
normal business hours to Global for inspection and copying at Global's cost and
expense. In the event either Partner ("Nonsurviving Partner") for any reason
ceases as provided herein to be a Partner at any time prior to termination of
the Partnership, and the Partnership is continued without the Nonsurviving
Partner, the other Partner ("Surviving Partner") agrees that said documents and
records of the Partnership up to the date of the termination of the Nonsurviving
Partner's Partnership Interest shall be maintained by the Surviving Partner, its
successors and assigns, for a period of not less than seven (7) years
thereafter; provided, however, that if there is an audit or threat of audit,
such documents and records shall be retained until the audit is completed and
any tax liability finally determined. Such documents and records shall be
available for inspection, examination and copying by the Nonsurviving Partner
upon reasonable notice during said seven-year period.
Section 10.6. Termination. The Partners shall comply with all
requirements of the Act or other applicable law pertaining to the winding-up of
the Partnership. On completion of the distribution of Partnership assets as
provided in this LP Agreement, the Partnership shall be terminated, and the
Partners shall file a certificate of cancellation with the Secretary of State of
Delaware and shall take such other actions as may be necessary to terminate the
Partnership.
ARTICLE XI
PUBLIC OFFERING; PUT; CALL
Section 11.1. Registration Right. Global, WECC and the Partnership have
executed and delivered and shall have the rights and obligations set forth in
the Registration Rights Agreement. If the IPO Notice contemplates a public
offering and sale of Partnership Interests or other equity interests by Global,
Global and each other Limited Partner will have the right to include their
Partnership Interests or such other entity interests on a pro rata basis
pursuant to and in accordance with the terms and conditions set forth in the
Registration Rights Agreement. WECC shall have the right for 90 days following
the date of the IPO Notice to exercise its call pursuant to Section 11.3. During
such 90-day period, the Partnership will draft a registration statement on an
appropriate form and file it with the Securities and Exchange Commission (the
"Commission"). Such registration statement shall be filed no earlier than 60
days following the date of the IPO Notice and is not to be declared effective
until a date following the earlier of (i) the last day of the 90 day period
following the date of the IPO Notice during which WECC may exercise its call
pursuant to Section 11.3 and (ii) the date of WECC's notice to Global that WECC
will not exercise such call. If WECC exercises such call within such 90 day
period, such registration statement will be withdrawn.
Section 11.2. Put.
(a) Two-year Put. At any time from and after twenty-four (24)
months following the Closing Date, so long as the Partnership or a successor
entity has not effected an initial public offering ("IPO") of its securities
pursuant to Section 11.1 of this LP Agreement, Global shall have the right to
require WECC to purchase all (but not less than all) its Partnership Interests
and that percentage of the General Partner's Partnership Interests attributable
to Global's position as a Member of the General Partner at a cash price equal to
the product of (i) Global's Percentage
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<PAGE> 37
Interests plus the General Partner's Percentage Interests attributable to
Global's position as a Member of the General Partner multiplied by (ii) the
Market Value of the Partnership (as determined pursuant to Article XIII of this
LP Agreement) as of the date of Global's written notice of put to WECC.
(b) Put Closing. The closing of the purchase by WECC of
Global's Partnership Interests and that percentage of the General Partner's
Partnership Interests attributable to Global's position as a Member of the
General Partner shall occur on the later of (i) the 90th day following the
determination of the Market Value of the Partnership (as determined pursuant to
Article XIII of this LP Agreement), or such other date as may be mutually agreed
upon by WECC and Global, and (ii) the fifth Business Day following the receipt
of all material governmental approvals (if any) required for such purchase and
sale, including the expiration of any applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "Requisite
Approvals").
(c) Weatherford Put Obligation. Weatherford shall be jointly
and severally liable with WECC for the obligations of WECC under this Section
11.2.
(d) Nonexclusive remedy on default. If Global exercises its
put option pursuant to this Section 11.2, and WECC and Weatherford default in
their obligation to purchase Global's Partnership Interests and that percentage
of the General Partner's Partnership Interests attributable to Global's position
as a Member of the General Partner, Global shall have the right to independently
seek a purchaser for the Partnership or its assets, and may select any
investment banking firm (including any successor thereto) listed on Schedule
10.4(d) hereto to conduct an auction of the Partnership or its assets. The fees
of such firm and all of Global's expenses in connection with such action
(including without limitation its attorneys' fees) shall be paid by WECC or
Weatherford, or if WECC or Weatherford default in such payment obligation, by
the Partnership (and Weatherford, WECC and the General Partner shall fully
cooperate with Global and GE Capital in connection with such action, including
without limitation taking all actions and executing all agreements and
instruments as may be reasonably requested by Global or GE Capital to effect
such action). Any such auction shall be conducted in a commercially reasonable
manner acceptable to Global and GE Capital. The remedy provided for in this
Section 11.2(d) shall not be exclusive of any other remedy that Global may have,
whether at law or in equity, for any such defaults by WECC or Weatherford.
Section 11.3. Call.
11.3.1. Initial Price. At any time after the date hereof, WECC
shall have the right to purchase all (but not less than all) of Global's
Partnership Interests and that percentage of the General Partner's Partnership
Interests attributable to Global's position as a Member of the General Partner
at a cash price equal to the greater of (i) the product of (A) Global's
Percentage Interests plus the General Partner's Percentage Interests
attributable to Global's position as a Member of the General Partner multiplied
by (B) the Market Value of the Partnership (as determined pursuant to Article
XIII of this LP Agreement) as of the date of WECC's written notice of call to
Global and (ii) $219,950,000 (less any cash or other distributions from the
Partnership to Global or its Affiliates in respect of Global's Partnership
Interest or Global's interest in the General Partner, including the
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<PAGE> 38
payment pursuant to the Payment Obligation) increased by the increase in the
Partnership's retained earnings during the first Partnership Fiscal Year
multiplied by the sum of Global Percentage Interests and the General Partner's
Partnership Percentage Interests attributable to Global's position as a Member
of the General Partner, an annual rate of five percent (5%) during the second
Partnership Fiscal Year and thereafter at a compound annual rate of six and 1/2
percent (6.5%). The closing of the purchase by WECC of Global's Partnership
Interests and that percentage of the General Partner's Partnership Interests
attributable to Global's position as a Member of the General Partner shall occur
on the later of (i) the tenth Business Day following the determination of the
Market Value of the Partnership (as determined pursuant to Article XIII of this
LP Agreement), or such other date as may be mutually agreed upon by Global and
WECC, and (ii) the fifth Business Day following receipt of all Requisite
Approvals (if any).
11.3.2. Adjusted Price. If WECC purchases Global's Partnership
Interests and that percentage of the General Partner's Partnership Interests
attributable to Global's position as a Member of the General Partner pursuant to
Section 11.3.1 within 12 months following the Closing Date and if a Significant
Transaction occurs within 12 months following the date of closing such purchase,
WECC will pay to Global (as additional consideration for Global's Partnership
Interests and that percentage of the General Partner's Partnership Interests
attributable to Global's position as a Member of the General Partner) an amount
in cash equal to the excess, if any, of the value of the consideration actually
received by WECC in the Significant Transaction multiplied by Global's
Percentage Interests plus the General Partner's Percentage Interests
attributable to Global's position as a Member of the General Partner at the time
of sale to WECC over the purchase price initially paid by WECC for Global's
Partnership Interests and that percentage of the General Partner's Partnership
Interests attributable to Global's position as a Member of the General Partner
(the "Adjustment Amount"). If WECC purchases Global's Partnership Interests and
that percentage of the General Partner's Partnership Interests attributable to
Global's position as a Member of the General Partner pursuant to Section 11.3.1
after 12 months following the Closing Date and before the expiration of 24
months following the Closing Date, and if a Significant Transaction occurs
within six months following the date of closing such purchase, WECC will pay to
Global the Adjustment Amount, if any, with respect to such Significant
Transaction. Any non-cash consideration received by WECC in connection with a
Significant Transaction shall be valued by a nationally recognized investment
banking firm selected by Global. For purposes of this Section 11.3.2, a
"Significant Transaction" shall mean the sale of more than 50% of the assets of
the Partnership or a merger, consolidation, share exchange, combination or other
fundamental business transaction with an entity not affiliated with WECC or an
initial public offering by the Partnership. A Significant Transaction shall not
include any pro rata distribution by or on behalf of Weatherford of all (but not
less than all) the Partnership Interests or interests in a successor to the
Partnership owned by WECC (including the General Partner's Partnership Interests
or interests in a successor to the General Partner attributable to WECC's
position as a Member of the General Partner) to Weatherford's shareholders (a
"Spin-Off") except to the extent WECC receives consideration from the entity
subject to the Spin-Off that is in excess of the amount paid to Global for its
interest, in which case the Adjustment Amount shall equal that amount of
consideration that was received by WECC in excess of the amount paid to Global
for its interest or any Transfer permitted under Section 9.1 hereof. In
addition, a Significant Transaction shall not include any merger, consolidation,
share exchange or change in control of Weatherford.
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<PAGE> 39
ARTICLE XII
ARBITRATION
Section 12.1. Dispute Resolution; Arbitration. Any Claim arising out of
or related to this LP Agreement shall be governed by the dispute resolution,
arbitration, attorneys' fees and choice of forum provisions set forth in Section
9.2 of the Formation Agreement.
ARTICLE XIII
DETERMINATION OF THE MARKET VALUE OF THE PARTNERSHIP
Section 13.1. Determination of Market Value of the Partnership.
(a) Negotiation Period. Whenever any provision of this LP
Agreement provides for the valuation of a Partnership Interest to be purchased
or sold, the value of such Partnership Interest shall be determined as follows.
The Partners shall first attempt to agree upon the "Market Value of the
Partnership" (as defined in Section 13.1(c)) for a period of 60 days following
the event giving rise to the determination of the Market Value of the
Partnership.
(b) Appraisal Process. In the event WECC and Global are unable
to reach an agreement as to the Market Value of the Partnership within the
60-day period referred to in Section 13.1(a), then within five Business Days
after the expiration of such 60-day period (such fifth Business Day being
referred to herein as the "13.1 Appraisal Process Commencement Date"), WECC and
Global each shall select a nationally recognized investment banking firm who
shall (i) prepare a report which (A) sets forth such investment banking firm's
determination of the Market Value of the Partnership (which shall be a single
amount as opposed to a range) and (B) includes work papers which indicate the
basis for and calculation of the Market Value of the Partnership (a "13.1
Appraisal Report") and (ii) deliver to WECC or Global, as the case may be, an
oral and written opinion addressed to such party as to the Market Value of the
Partnership. The fees and expenses of each investment banking firm shall be paid
by the party selecting such investment banking firm. Each of WECC and Global
shall instruct its respective investment banking firm to (i) not consult with
the other investment banking firm with respect to its view as to the Market
Value of the Partnership prior to the time that both investment banking firms
have delivered their respective opinions to WECC or Global, as applicable, (ii)
determine the Market Value of the Partnership in accordance with Section
13.1(c), (iii) deliver their respective 13.1 Appraisal Reports, together with
their oral and written opinions as to the Market Value of the Partnership (the
"13.1 Initial Opinion Values"), within 30 days after the 13.1 Appraisal Process
Commencement Date, and (iv) deliver a copy of its written opinion and its 13.1
Appraisal Report to the Partnership, the other party and the other party's
investment banking firm at the time it delivers its oral and written opinion to
WECC or Global, as applicable. The opinions and reports of the two investment
banking firms shall be delivered at the same time.
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<PAGE> 40
If the two 13.1 Initial Opinion Values differ and the lesser
13.1 Initial Opinion Value equals or exceeds 90% of the greater 13.1 Initial
Opinion Value, the Market Value of the Partnership shall be deemed to be an
amount equal to (i) the sum of the two 13.1 Initial Opinion Values divided by
(ii) two.
If the 13.1 Initial Opinion Values differ and the lesser 13.1
Initial Opinion Value is less than 90% of the greater 13.1 Initial Opinion
Value, then:
(i) within two Business Days after both investment banking
firms have delivered their respective opinions to WECC or Global, as applicable,
each investment banking firm shall, at a single meeting at which WECC, Global,
the Partnership and the other investment banking firm are present, make a
presentation with respect to its 13.1 Initial Opinion Value. At such
presentation, WECC, Global, the Partnership and the other investment banking
firm shall be entitled to ask questions as to the basis for and the calculation
of such investment banking firm's Initial Opinion Value; and
(ii) WECC and Global shall, within five Business Days
after the date WECC and Global receive the 13.1 Initial Opinion Values (such
fifth Business Day being referred to herein as the "13.1 Subsequent Appraisal
Process Commencement Date"), jointly select a third nationally recognized
investment banking firm to (A) prepare a 13.1 Appraisal Report and (B) deliver
an oral and written opinion addressed to WECC and Global as to the Market Value
of the Partnership. The fees and expenses of such third investment banking firm
shall be paid by the Partnership. During such five-Business Day period, WECC and
Global shall negotiate in good faith to independently reach an agreement as to
the Market Value of the Partnership. If WECC and Global reach such an agreement,
then the Market Value of the Partnership shall be deemed to be the amount so
agreed upon by WECC and Global. If WECC and Global are unable to reach such an
agreement, then WECC and Global shall instruct such third investment banking
firm to (A) determine the Market Value of the Partnership in accordance with
Section 13.1(c) and (B) deliver its 13.1 Appraisal Report, together with its
oral and written opinion (the "13.1 Third Opinion Value"), within 30 days after
the 13.1 Subsequent Appraisal Process Commencement Date. Such third investment
banking firm shall receive the 13.1 Appraisal Reports and meet with the other
two investment banking firms prior to delivering its 13.1 Appraisal Report. The
Market Value of the Partnership in such circumstances shall be deemed to be an
amount equal to (A) the sum of the two closest of the 13.1 Third Opinion Value
and the 13.1 Initial Opinion Values, divided by (B) two.
(c) Definition of Market Value of the Partnership. For
purposes of this LP Agreement, the Market Value of the Partnership (the "Market
Value of the Partnership") means the fair market value of 100% of common equity
of the Partnership as of the relevant date as determined by the applicable
investment banking firm. In determining the Market Value of the Partnership,
consideration should be given as to a range of analytical methodologies,
potentially including, but not limited to, the following: comparable trading
analysis, comparable transaction analysis and discounted cash flow analysis. In
the determination of the Market Value of the Partnership, the Partnership shall
be valued as a going concern on a stand-alone basis without regard to synergies
that might be achieved by a particular purchaser and without any liquidity
discount. In determining the Market Value of the Partnership, no consideration
should be given to the values that are initially assigned to assets of the
Partnership for purchase accounting or tax
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<PAGE> 41
accounting purposes. The value of a Partnership Interest of a Partner shall be
equal to such Partner's Percentage Interest multiplied by the Market Value of
the Partnership determined pursuant to Article XIII.
ARTICLE XIV
GENERAL PROVISIONS
Section 14.1. Complete Agreement; Amendment. The Transaction Documents
constitute the entire agreement among the parties thereto with respect to the
subject matter thereof and supersede all other agreements, representations,
warranties, statements, promises and understandings, whether oral or written,
with respect to the subject matter thereof. This LP Agreement may not be
amended, altered or modified except by a writing signed by duly authorized
officers of all the Partners.
Section 14.2. Notices.
14.2.1. Addresses. All notices under this LP Agreement shall
be in writing and shall be delivered by personal service; certified or
registered mail, postage prepaid, return receipt requested;
nationally-recognized overnight courier, courier charges prepaid; or facsimile
transmission (followed by telephone confirmation of receipt), to the Partners at
the addresses herein set forth and to the Partnership at its principal place of
business.
The addresses for notices are as follows:
Weatherford Global Compression Holding, L.L.C.
1231 Greenway Drive, Suite 580
Irving, Texas 75038
Attention: General Counsel
Telecopy: (972) 714-0102
Weatherford Enterra Compression Company, L.P.
c/o Weatherford International, Inc.
5 Post Oak Park, Suite 1760
Houston, Texas 77027
Attention: General Counsel
Telecopy: (713) 297-8488
Global Compression Services, Inc.
c/o General Electric Capital Corporation
260 Long Ridge Road
Stamford, CT 06927
Attention: General Counsel
Telecopy: (203) 357-8365
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<PAGE> 42
with a copy to:
Charles E. Harrell, Esq.
Weil, Gotshal & Manges LLP
700 Louisiana, Suite 1600
Houston, Texas 77002
Telephone: (713) 546-5000
Telecopy: (713) 224-9511
14.2.2. Effective Date of Notices, etc. All notices, demands
and requests shall be effective upon actual receipt or, in the case of delivery
by facsimile transmission, the completion of such transmission during the normal
business hours of the recipient. Rejection or other refusal to accept or the
inability to deliver because of changed address of which no notice was given as
provided in Section 14.2.3 shall be deemed to be receipt of the notice, demand
or request sent.
14.2.3. Changes. By giving to the other Partners and the
Partnership at least 10 Business Days' written notice thereof, the Partners and
their respective permitted successors and permitted assigns shall have the right
from time to time and at any time during the term of this LP Agreement to change
their respective addresses for notices and each shall have the right to specify
as its address for notices any other address within the United States of
America.
Section 14.3. Validity. In the event that any provisions of this LP
Agreement shall be held to be invalid or unenforceable, the same shall not
affect in any respect whatsoever the validity or enforceability of the remainder
of this LP Agreement.
Section 14.4. Survival of Rights. Except as expressly provided herein
to the contrary, this LP Agreement shall be binding upon and inure to the
benefit of the Partners and their permitted successors and permitted assigns.
Section 14.5. Governing Law. This LP Agreement and the rights and
liabilities of the Partners shall be governed by and construed in accordance
with the internal laws of the State of Delaware, without regard to conflicts of
laws provisions thereof.
Section 14.6. Waiver. No consent or waiver, express or implied, by a
Partner to or of any breach or default by any other Partner in the performance
by such other Partner of its obligations hereunder shall be deemed or construed
to be a consent or waiver to or of any other breach or default in the
performance by such other or any other Partner of the same or any other
obligations of such other or any other Partner hereunder. Failure on the part of
a Partner to complain of any act or failure to act of any other Partner or to
declare any other Partner in default, irrespective of how long such failure
continues, shall not constitute a waiver by such Partner of its rights
hereunder. The giving of consent by a Partner in any one instance shall not
limit or waive the necessity to obtain such Partner's consent in any future
instance.
Section 14.7. Remedies in Equity. The rights and remedies of the
Partners hereunder shall not be mutually exclusive, and the exercise of one or
more rights or remedies shall not preclude the exercise of any other rights or
remedies. Each of the Partners confirms that damages at law will be
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<PAGE> 43
an inadequate remedy for a breach or threatened breach of this LP Agreement and
agrees that, except as expressly provided to the contrary in this LP Agreement,
in the event of a breach or threatened breach of any provision hereof, the
respective rights and obligations hereunder shall be enforceable by specific
performance, injunction or other equitable remedy, but nothing herein contained
is intended to, nor shall it, limit or affect any rights at law or by statute or
otherwise of any Partner aggrieved as against any other for a breach or
threatened breach of any provision hereof, it being the intention by this
Section 14.7 to make clear the agreement of the Partners that the respective
rights and obligations of the Partners hereunder, except as expressly provided
to the contrary herein, shall be enforceable in equity as well as at law or
otherwise.
Section 14.8. No Member Liability. No Member shall have any personal
obligation for any liabilities of the General Partner (including those that may
be caused by any act or failure to act of the General Partner), whether such
liabilities arise in contract, tort or otherwise, except to the extent that any
such liabilities are expressly assumed in writing by such Member; provided,
however, that nothing in this Section 14.8 shall be construed to relieve either
Member of any obligation it may have pursuant to the Transaction Documents
(other than in its capacity as a Member).
Section 14.9. Terminology. All personal pronouns used in this LP
Agreement, whether used in the masculine, feminine, or neuter gender, shall
include all other genders; and the singular shall include the plural and vice
versa. Titles of Articles and Sections are for convenience only, and neither
limit nor amplify the provisions of this LP Agreement itself.
Section 14.10. Counterparts. This LP Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which shall constitute one and the same agreement.
Section 14.11. Further Assurances. Each Partner agrees to do all acts
and things and to make, execute and deliver such written instruments, as shall
from time to time be reasonably required to carry out the terms and provisions
of this LP Agreement.
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IN WITNESS WHEREOF, the Partners have executed this LP
Agreement as of the day and year first above set forth.
Weatherford Global Compression Holding, L.L.C.,
as sole General Partner
By: /s/ ROBERT STILES
----------------------------------------------
Robert Stiles
President
Weatherford Enterra Compression Company, L.P., as
a Limited Partner
by Enterra Compression Company, its sole
General Partner
By: /s/ CURTIS W. HUFF
----------------------------------------------
Curtis W. Huff
Senior Vice President
Global Compression Services, Inc., as a Limited
Partner
By: /s/ PAUL J. FRIESEN
-----------------------------------------
Name: Paul J. Friesen
---------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
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<PAGE> 45
Weatherford hereby agrees to be jointly and severally liable with WECC
to fulfill WECC's obligations under Section 11.2 hereof.
Weatherford International, Inc.
By: /s/ CURTIS W. HUFF
--------------------------------------
Curtis W. Huff
Senior Vice President
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<PAGE> 46
Schedule 3.1
Capital Contributions and Returns
<TABLE>
<CAPTION>
Percentage
Partner Initial Capital Contribution* Interests
------- ----------------------------- ---------
Gross Contribution (Liabilities) Net Contribution/Capital Account
------------------ ------------- --------------------------------
<S> <C> <C> <C> <C>
Limited, as the Sole
General Partner.......... 1.0%
WECC, as
Limited Partner.......... 63.36%
Global, as a Limited
Partner.................. 35.64%
------
100.0%
-----
<CAPTION>
Subsequent Return of
Capital Capital Unreturned
Partner Contributions Contributions Capital
------- ------------- ------------- -------
<S> <C> <C> <C>
Limited, as the Sole
General Partner..........
WECC, as
Limited Partner..........
Global, as a Limited
Partner..................
</TABLE>
* The Partners acknowledge that the fair market value of the Included
Weatherford Assets transferred by WECC expressed as a percentage of the fair
market value of the Partnership's assets is equal to the percentage of
Partnership Interests issued to WECC.
The Partners acknowledge that the fair market value of the Included Global
Assets transferred by Global expressed as a percentage of the fair market value
of the Partnership's assets is equal to the percentage of Partnership Interests
issued to Global.
The Partners acknowledge that the fair market value of the Included
Weatherford Assets and the Included Global Assets transferred by Limited
expressed as a percentage of the Partnership's fair market value is equal to the
percentage of Partnership Interests issued to Limited.
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<PAGE> 47
The Company has not filed any schedules or exhibits with this Exhibit No. 10.2.
Listed below is a brief description of the omitted schedules and exhibits. The
Company agrees to furnish supplementally a copy of any of such omitted schedules
and exhibits to the Commission upon request.
ANNEX I-Glossary (attached to Exhibit 10.1)
Exhibits
Exhibit A [Reserved]
Exhibit B 1999 Partnership Annual Business Plan
Exhibit C Ethics/Integrity Policy
Schedules
Schedule 3.1 Capital Contributions and Returns
Schedule 5.2(a)(iv) Same Line of Business
Schedule 7.1 Accounting Policies, Controls and Procedures
Schedule 10.4(d) Investment Banking Firms
<PAGE> 1
EXHIBIT 10.3
LLC AGREEMENT
<PAGE> 2
Limited Liability Company Agreement of
WEATHERFORD GLOBAL COMPRESSION HOLDING, L.L.C.,
By and Between
Weatherford Enterra Compression Company, L.P.,
a Delaware limited partnership, as a Member,
and
Global Compression Services, Inc.
a Delaware corporation, as a Member
Dated as of February 2, 1999
THE MEMBERSHIP INTERESTS OF THE LIMITED LIABILITY COMPANY UNDER THIS LIMITED
LIABILITY COMPANY AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER ANY APPLICABLE STATE SECURITIES LAWS. THESE INTERESTS
MAY NOT BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF AT ANY TIME WITHOUT
(i) EFFECTIVE REGISTRATION UNDER SUCH ACT AND LAWS OR EXEMPTIONS THEREFROM AND
(ii) IN COMPLIANCE WITH THIS LIMITED LIABILITY COMPANY AGREEMENT.
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS..........................................................................................1
Section 1.1. Definitions............................................................................1
ARTICLE II
FORMATION; PURPOSES; DURATION........................................................................1
Section 2.1. Formation and Name.....................................................................1
Section 2.2. Purpose of Limited.....................................................................2
Section 2.3. Scope of Members' Authority; No Member Liability.......................................2
Section 2.4. Place of Business......................................................................2
Section 2.5. Term: Resignation......................................................................2
ARTICLE III
CAPITAL ACCOUNTS, DISTRIBUTIONS AND ALLOCATIONS......................................................3
Section 3.1. Membership Interests and Percentage Interests..........................................3
Section 3.2. No Interest on Capital.................................................................3
Section 3.3. Initial Capital Accounts...............................................................3
Section 3.4. Distributions to Members...............................................................4
Section 3.5. Allocations............................................................................4
Section 3.6. Withdrawals of Capital and Additional Contributions....................................7
ARTICLE IV
MANAGEMENT...........................................................................................7
Section 4.1. Management by Board of Directors.......................................................7
Section 4.2. Officers...............................................................................9
Section 4.3. Contracts With Related Parties........................................................10
Section 4.4. Actions Requiring Unanimous Consent of Members........................................11
Section 4.5. Time Devoted to Company...............................................................11
Section 4.6. Outside Ventures of Partners..........................................................11
Section 4.7. Scope of Authority; Indemnification...................................................11
Section 4.8. Insurance.............................................................................13
ARTICLE V
ACCOUNTING..........................................................................................13
Section 5.1. Books and Records.....................................................................13
Section 5.2. Location, Rights of Inspection, Audit and Accounting Policies.........................14
Section 5.3. Limited Fiscal Year...................................................................14
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Section 5.4. Statements of Financial Condition.....................................................14
Section 5.5. Audit.................................................................................14
Section 5.6. Bank Accounts.........................................................................15
ARTICLE VI
INCOME TAX RETURNS, TAX ACCOUNTING, TAX ELECTIONS...................................................15
Section 6.1. Partnership for Tax Purposes..........................................................15
Section 6.2. Preparation of Tax Returns............................................................15
Section 6.3. Section 754 Election..................................................................15
Section 6.4. Tax Decisions Not Specified...........................................................15
Section 6.5. Notice of Tax Audit...................................................................15
Section 6.6. "Tax Matters Partner."................................................................15
ARTICLE VII
SALE, TRANSFER OR MORTGAGE..........................................................................16
Section 7.1. Transfer Restrictions and Procedures..................................................16
Section 7.2. ......................................................................................16
ARTICLE VIII
DEFAULT AND DISSOLUTION.............................................................................16
Section 8.1. Events of Default and Withdrawal......................................................16
Section 8.2. Election of Nonwithdrawing Member.....................................................18
Section 8.3. Causes of Dissolution.................................................................19
Section 8.4. Procedure in Dissolution and Liquidation..............................................19
Section 8.5. Disposition of Documents and Records..................................................21
Section 8.6. Termination...........................................................................21
ARTICLE IX
PUBLIC OFFERING; PUT; CALL..........................................................................21
Section 9.1. Cooperation...........................................................................21
ARTICLE X
ARBITRATION.........................................................................................22
Section 10.1. Dispute Resolution; Arbitration......................................................22
ARTICLE XI
DETERMINATION OF THE MARKET VALUE OF LIMITED........................................................22
Section 11.1. Determination of Market Value of Limited.............................................22
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ARTICLE XII
GENERAL PROVISIONS..................................................................................24
Section 12.1. Complete Agreement; Amendment........................................................24
Section 12.2. Notices..............................................................................24
Section 12.3. Validity.............................................................................25
Section 12.4. Survival of Rights...................................................................25
Section 12.5. Governing Law........................................................................25
Section 12.6. Waiver...............................................................................25
Section 12.7. Remedies in Equity...................................................................25
Section 12.8. Terminology..........................................................................26
Section 12.9. Counterparts.........................................................................26
Section 12.10. Further Assurances..................................................................26
ANNEX
Annex I Glossary of Terms
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Limited Liability Company Agreement
This Limited Liability Company Agreement of Weatherford Global
Compression Holding, L.L.C., a Delaware limited liability company, dated as of
February 2, 1999, is entered into by and between Weatherford Enterra Compression
Company, L.P., a Delaware limited partnership, as a Member, and Global
Compression Services, Inc., a Delaware corporation, as a Member.
R E C I T A L S
WHEREAS, WECC, Global, Weatherford, and GE Capital are parties
to the Formation Agreement regarding the formation of the Partnership, the
formation of the General Partner and the acquisition by the Partnership, by
means of contribution, of certain gas compression assets of WECC and Global in
exchange for Partnership Interests;
WHEREAS, the Partnership and the General Partner have been
formed by filing the Certificate of Limited Partnership and the Certificate of
Formation, respectively, with the Secretary of State of the State of Delaware;
and
WHEREAS, it is a condition precedent to the consummation of
the transactions contemplated by the Formation Agreement that WECC and Global,
as the sole Members of Limited, enter into this LLC Agreement;
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. All capitalized or other defined terms used
but not defined in this LLC Agreement are used in this LLC Agreement with the
meanings assigned thereto in Annex I to this LLC Agreement.
ARTICLE II
FORMATION; PURPOSES; DURATION
Section 2.1. Formation and Name.
2.1.1. Formation. Effective as of the filing of the
Certificate of Formation under and pursuant to the Delaware Limited Liability
Company Act (as amended from time to time, the "DLLCA"), WECC and Global
(jointly the "Members" and individually a "Member") have formed Limited as a
Delaware limited liability company for the purposes set forth in this LLC
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Agreement. Limited shall be governed by the DLLCA, except as expressly provided
herein to the contrary.
2.1.2. Name. The name of Limited shall be Weatherford Global
Compression Holding, L.L.C.
2.1.3. Governmental Filings. The Members shall promptly
execute and acknowledge all certificates and other instruments conforming with
this LLC Agreement that are necessary or appropriate to comply with applicable
laws of the State of Delaware and/or the jurisdictions in which Limited conducts
business.
2.1.4. Registered Office and Registered Agent. The registered
office of Limited in the State of Delaware shall be the initial registered
office designated in the Certificate of Formation or such other office (which
need not be a place of business of Limited) as the Members may unanimously
designate from time to time in the manner provided by law. The registered agent
of Limited in the State of Delaware shall be the initial registered agent
designated in the Certificate of Formation or such other Person (as defined in
the DLLCA) or Persons as the Members may unanimously designate from time to time
in the manner provided by law.
Section 2.2. Purpose of Limited. The purpose of Limited is to engage in
the Business and in any activities incidental thereto.
Section 2.3. Scope of Members' Authority; No Member Liability. Except
as otherwise expressly provided in this LLC Agreement, neither Member shall have
any authority to bind or act for, or assume any obligations or responsibility on
behalf of, the other Member or Limited. The Members intend that Limited not be a
partnership, limited partnership or joint venture; and that no Member be a
partner or joint venturer of any other Member (other than pursuant to the
Partnership) for any purposes other than federal, state, local and foreign Tax
purposes, and this LLC Agreement shall not be construed to suggest otherwise. No
Member shall have any personal obligation for any liabilities of Limited,
whether such liabilities arise in contract, tort or otherwise, except to the
extent that any such liabilities are expressly assumed in writing by such
Member; provided, however, that nothing in this Section 2.3 shall be construed
to relieve either Member of any obligation it may have pursuant to the
Transaction Documents in any capacity other than as a Member.
Section 2.4. Place of Business. The principal place of business of
Limited shall be located in Dallas, Texas, or in such other location as may be
determined unanimously by the Members. Limited may also conduct business at such
other places both within and without the State of Texas (including without
limitation outside of the United States) as determined by the Board of
Directors.
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Section 2.5. Term: Resignation.
2.5.1. Term. The term of Limited shall be perpetual unless
sooner liquidated or dissolved in accordance with this LLC Agreement.
2.5.2. Resignation. Neither Member shall have the right, and
each Member hereby agrees not, to resign from Limited; provided, however, a
Member shall have the power to resign from Limited at any time in violation of
this LLC Agreement. If a Member exercises such power in violation of this LLC
Agreement, such Member shall be liable to Limited and the other Member for all
monetary damages suffered by them as a result of such resignation. In no event
shall Limited or any Member have the right, through specific performance or
otherwise, to prevent a Member from resigning in violation of this LLC
Agreement.
2.5.3. Other Restrictions on Members. Neither Member shall
have the right to dissolve, terminate or liquidate, or to petition a court for
the dissolution, termination or liquidation of, Limited, except as provided in
this LLC Agreement; provided, however, that nothing in this Section 2.5.3 shall
impair a Member's power to resign from Limited pursuant to Section 2.5.2.
Neither Member at any time shall have the right to petition or to take any
action to subject Limited's assets or any part thereof to the authority of any
court or other governmental body in connection with any bankruptcy, insolvency,
receivership or similar proceeding.
ARTICLE III
CAPITAL ACCOUNTS, DISTRIBUTIONS AND ALLOCATIONS
Section 3.1. Membership Interests and Percentage Interests.
3.1.1. Membership Interests; Percentage Interests. The
interest in Limited held by a Member (including, without limitation, the
Member's "limited liability company interest," as defined in the DLLCA) and the
Member's right to participate in the management of Limited are referred to in
this LLC Agreement as such Member's "Membership Interest." Ownership of their
respective Membership Interests shall entitle the Members to the following
percentage interests in Limited (individually a "Percentage Interest" and
jointly "Percentage Interests") and, subject to the terms and provisions of this
LLC Agreement, the Members shall share in the Net Profits or Net Losses of
Limited in such Percentage Interests:
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WECC 64%
Global 36%
---
100%
===
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3.1.2. Adjustments. Unless otherwise unanimously agreed by the
Members, no adjustment to the Percentage Interest of either Member shall be made
except as a result of a transfer of a Member's Percentage Interest or a portion
thereof pursuant to Articles VII, VIII or IX hereof.
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Section 3.2. No Interest on Capital. Interest earned on Company funds
shall inure solely to the benefit of Limited, and no interest shall be paid upon
any contributions to the capital of Limited nor upon any undistributed or
reinvested income or profits of Limited.
Section 3.3. Initial Capital Accounts. The Initial Capital Account
balance of each Member shall be equal to, in the case of WECC, the Net Book
Value on the Closing Date of an undivided one percent (1%) of the Included
Weatherford Assets and, in the case of Global, the Net Book Value of an
undivided one percent (1%) of the Included Global Assets.
Section 3.4. Distributions to Members.
3.4.1. General. It is the mutual intent of the Members that
cash not otherwise needed for Company business be distributed quarterly to the
Members in proportion to their Percentage Interests. Subject to the foregoing,
the Board of Directors shall have complete discretion with respect to the
timing, form and amount of all distributions to the Members and neither Member
shall have any right to distributions except to the extent duly authorized by
the Board of Directors; provided that any distributions to the Members shall be
made pro rata in proportion to their respective Percentage Interests; and
provided further that no distributions shall be made if Limited is then
insolvent or would thereby be made insolvent or rendered unable to carry on its
business purposes, or if the fair value of Limited's assets after such
distribution would be insufficient to meet its liabilities.
3.4.2. Reduction of Capital Accounts. Any distribution to a
Member shall reduce the amount of such Member's Capital Account but no
adjustment in the Percentage Interest of any Member shall be made on account of
any such distribution.
Section 3.5. Allocations. The rules set forth below in this Section 3.5
shall apply for purposes of determining each Member's allocable share of the
items of income, gain, loss and expense of Limited comprising Net Profit or Net
Loss of Limited for each Limited Fiscal Year, determining special allocations of
other items of income, gain, loss and expense, and adjusting the balance of each
Member's Capital Account to reflect the aforementioned general and special
allocations. For each Limited Fiscal Year, the special allocations in Section
3.5.2 of this LLC Agreement shall be made immediately prior to the general
allocations of Section 3.5.1 of this LLC Agreement.
3.5.1. Allocations of Net Profit and Net Loss.
(a) Unless otherwise provided herein, Net Profit and
Net Loss shall be allocated between the Members in a manner that will, as nearly
as possible, cause the Capital Account balance of each Member at the end of the
Limited Fiscal Year to equal the excess (which may be negative) of:
(i) the hypothetical distribution (if any) that such
Member would receive if, on the last day of the Limited Fiscal Year, (x) all
Limited assets, including cash, were sold for cash equal to their Gross Asset
Values, taking into account any adjustments thereto
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for such Limited Fiscal Year, (y) all Limited liabilities were satisfied in cash
according to their terms (limited with respect to each Nonrecourse Liability to
the Gross Asset Value of the assets securing such liability) and (z) the net
proceeds thereof (after satisfaction of such liabilities) were distributed in
full pursuant to Section 3.4.1 of this LLC Agreement, over
(ii) the sum of (x) the amount, if any, which such
Member is obligated to contribute to the capital of Limited, (y) such Member's
share of the Limited Minimum Gain determined pursuant to Regulation Section
1.704-2(g), and (z) such Member's share of Member Nonrecourse Debt Minimum Gain
determined pursuant to Regulation Section 1.704-2(i)(5), all computed
immediately prior to the hypothetical sale described above in Section
3.5.1(a)(i) of this LLC Agreement.
(b) Determination of Items Comprising Allocation.
(i) If Limited has Net Profit for a Limited Fiscal
Year:
(A) for any Member as to whom the allocation
pursuant to Section 3.5.1(a) of this LLC Agreement is negative, such allocation
shall be comprised of a proportionate share of each Limited item of expense or
loss entering the computation of Net Profit for such Limited Fiscal Year, and
(B) the allocation pursuant to Section
3.5.1(a) of this LLC Agreement in respect of each Member (other than a Member
referred in Section 3.5.1(b)(i)(A) of this LLC Agreement) shall be comprised of
a proportionate share of each Limited item of income, gain, expense and loss
entering into the computation of Net Profit for such Limited Fiscal Year (other
than the portion of each Limited item of expense and loss, if any, that is
allocated pursuant to Section 3.5.1(b)(i)(A) of this LLC Agreement).
(ii) If Limited has a Net Loss for a Limited Fiscal
Year:
(A) for any Member as to whom the allocation
pursuant to Section 3.5.1(a) of this LLC Agreement is positive, such allocation
shall be comprised of a proportionate share of Limited items of income and gain
entering into the computation of Net Loss for such Limited Fiscal Year; and
(B) the allocation pursuant to Section
3.5.1(a) of this LLC Agreement in respect of each Member (other than a Member
referred to in Section 3.5.1(b)(ii)(A) of this LLC Agreement) shall be comprised
of a proportionate share of each Limited item of income, gain, expense and loss
entering into the computation of Net Loss for such Limited Fiscal Year (other
than the portion of each Limited item of income and gain, if any, that is
allocated pursuant to Section 3.5.1(b)(ii)(A) of this LLC Agreement).
(iii) For purposes of this Section 3.5.1, a gain
recognized by Limited upon the disposition of an item of Limited property shall
be considered a single item of gain
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regardless of whether, for federal income tax purposes, part of the gain is
treated differently from the remainder.
(c) Loss Limitation. Notwithstanding anything to the
contrary in this Section 3.5.1, the amount of items of Limited expense and loss
allocated pursuant to this Section 3.5.1 to any Member shall not exceed the
maximum amount of such item that can be so allocated without causing any Member
to have an Adjusted Capital Account Deficit at the end of any Limited Fiscal
Year.
3.5.2. Special Allocations. The following special allocations
shall be made in the following order:
(a) In the event that there is a net decrease during
a Limited Fiscal Year in either Limited Minimum Gain or Member Nonrecourse Debt
Minimum Gain, then notwithstanding any other provision of this Article III, each
Member shall receive such special allocations of items of Limited income and
gain as are required in order to conform to Regulation Section 1.704-2;
(b) Subject to Section 3.5.2(a), but notwithstanding
any other provision of this Section 3.5, items of income and gain shall be
specially allocated to the Members in a manner that complies with the "qualified
income offset" requirement of Regulation Section 1.704-1(b)(2)(ii)(d)(3);
(c) In the event that a Member has a deficit Capital
Account balance at the end of any Limited Fiscal Year which is in excess of the
sum of (i) the amount such Member is then obligated to restore pursuant to this
LLC Agreement, and (ii) the amount such Member is then deemed to be obligated to
restore pursuant to the penultimate sentences of Regulation Sections
1.704-2(g)(1) and 1.704-2(i)(5), respectively, such Member shall be specially
allocated items of Limited income and gain in an amount of such excess as
quickly as possible, provided that any allocation under this Section 3.5.2(c)
shall be made only if and to the extent that a Member would have a deficit
Capital Account balance in excess of such sum after all allocations provided for
in this Section 3.5 have been tentatively made as if this Section 3.5.2(c) were
not in this LLC Agreement;
(d) Any item of Limited loss or expense that is
attributable to Member Nonrecourse Debt shall be specially allocated to the
Members in the manner in which they share the economic risk of loss (as defined
in Regulation Section 1.752-2) for such Member Nonrecourse Debt. Each
Nonrecourse Deduction of Limited shall be specially allocated among the Members
in proportion to their Percentage Interests.
The allocations pursuant to Section 3.5.2 (a), (b) and (c) shall be comprised of
a proportionate share of each of Limited's items of income and gain.
3.5.3. Allocation of Nonrecourse Liabilities. For purposes of
determining each Member's share of Nonrecourse Liabilities, if any, of Limited
in accordance with Regulation
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Section 1.752-3(a)(3), the Members' interests in Limited profits shall be
determined in accordance with their Percentage Interests.
3.5.4. Transfer of Interest. In the event of a transfer of all
or part of a Membership Interest (in accordance with the provisions of this LLC
Agreement) at any time other than the end of a Limited Fiscal Year, the shares
of items of Limited Net Profit or Net Loss and specially allocated items
allocable to the interest transferred shall be allocated between the transferor
and the transferee in a manner determined by the tax matters partner in its sole
discretion that is not inconsistent with the applicable provisions of the Code.
3.5.5. Section 704(b) Allocations. Each item of income, gain,
loss, deduction or credit for federal income tax purposes which corresponds to
an item of income, gain, loss or expense that is either taken into account in
computing Net Profit or Net Loss or specially allocated pursuant to Section
3.5.2 (a "Book Item") shall be allocated among the Members in the same
proportion as the corresponding Book Item is allocated among them pursuant to
Section 3.5.1 or 3.5.2 hereof.
3.5.6. Section 704(c) Allocations. In the event any property
of Limited is credited to the Capital Account of a Member at a value other than
its tax basis (whether as a result of a contribution of such property or a
revaluation of such property pursuant to subparagraph (b) of the definition of
"Gross Asset Value"), then allocations of taxable income, gain, loss and
deductions with respect to such property shall be made in a manner which will
comply with Section 704(c) of the Code and the Regulations thereunder. Limited,
in the sole discretion of the tax matters partner, may make, or not make,
"curative" or "remedial" allocations (within the meaning of the Treasury
Regulations under Section 704(c) of the Code) including without limitation (i)
"curative" allocations which offset the effect of the "ceiling rule" for a prior
Limited Fiscal Year (within the meaning of Treasury Regulation Section 1.704-
3(c)(3)(ii)); and (ii) "curative" allocations from dispositions of contributed
property (within the meaning of Regulations Section 1.704-3(c)(3)(iii)(B)). To
the extent permitted by the Code and Regulations, the tax matters partner, in
the exercise of its discretion, may elect or not elect, with respect to
amortization of all "section 197 intangibles" (as defined in the Code)
contributed to Limited by WECC, curative allocations if such allocations are
permissible, and if such curative allocations are not permissible, then remedial
allocations.
Section 3.6. Withdrawals of Capital and Additional Contributions.
3.6.1. Except as otherwise provided herein, no portion of the
capital of Limited may be withdrawn at any time without the approval of both of
the Members. Upon termination of Limited, the Members' capital shall be
distributed pursuant to Section 8.4 of this LLC Agreement.
3.6.2. No member shall be obligated to make any additional
capital contributions or loans to Limited or to guarantee any indebtedness of
Limited or otherwise provide credit support for Limited.
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ARTICLE IV
MANAGEMENT
Section 4.1. Management by Board of Directors.
(a) The management and control of the business and
affairs of Limited shall be vested in the Board of Directors, who shall exercise
such management and control only in accordance with the provisions of this LLC
Agreement, including without limitation the procedures established in this
Section 4.1 and in Section 4.4. Except as set forth in Section 4.4 and other
provisions of this LLC Agreement that expressly require the unanimous consent of
the Board of Directors, (i) all decisions to be made by the Board of Directors
in connection with the management and control of Limited shall be made in
accordance with the procedures established in this Section 4.1, and (ii) all
such decisions with respect to the management and control of Limited that are
duly authorized by the Board of Directors in such manner shall be binding on
Limited and each of the Members. The entire Board of Directors shall consist of
five members, three of whom shall be selected by WECC and two of whom shall be
selected by Global. Any vacancy in the Board resulting from the death,
resignation or other removal of a director shall be filled by the Member who
selected such director. The members of the Board of Directors shall be
"managers" as defined in Section 18-101(9) of the DLLCA. Notwithstanding any
provision contained in this LLC Agreement, the Members recognize and acknowledge
that the Members, officers and employees of Limited are not "managers" as so
defined.
(b) Except as otherwise provided in paragraph (d) of
this Section 4.1, the Board shall act at meetings thereof duly convened and held
as provided in this LLC Agreement. A majority of the members of the entire Board
shall constitute a quorum for the transaction of business or any specified item
of business. Except as otherwise set forth in Section 4.4 or any other
provisions of this LLC Agreement expressly requiring the unanimous consent of
the Board of Directors, the vote of a majority of the members of the entire
Board shall be the act of the Board. To facilitate the orderly conduct of
meetings of the Board, one of the members thereof shall be selected by such
members as Chairman thereof, and such Chairman or, in his absence, the
President, shall preside at such meetings, and the Secretary shall attend such
meetings for the purpose of recording the proceedings of such meetings, as
provided in Sections 4.2.2, 4.2.3 and 4.2.6.
(c) The members of the Board may participate in a
meeting thereof by means of conference telephone or similar communications
equipment allowing all persons participating in the meeting to hear each other
at the same time. Participation by such means shall constitute presence in
person at a meeting.
(d) Any action required or permitted by this LLC
Agreement to be taken at a meeting of the Board may be taken without a meeting
if all members of the entire Board consent in writing to the adoption of a
resolution authorizing the action. Such resolution and the written consents
thereto shall be filed with the minutes of the proceedings of the Board of
Directors.
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(e) The Board may hold meetings, both regular and
special, either within or without the State of Delaware.
(f) Regular meetings of the Board may be held without
notice at such time and at such place as shall from time to time be determined
by unanimous consent of the Members, but no less frequently than once each
calendar quarter.
(g) Special meetings of the Board may be called by
either Member on ten days' written notice to the other Member, either personally
or by mail or by facsimile transmission.
Section 4.2. Officers.
4.2.1. General.
(a) Limited shall have officers for purposes of the
day-to-day administration of Limited. The officers of Limited shall be a
President (who shall be the chief executive officer), a Vice President-Finance
(who shall be the chief financial officer), a Secretary, a Controller and a
Treasurer. The President may also choose additional Vice Presidents, and one or
more Assistant Secretaries and Assistant Treasurers. Any number of offices may
be held by the same person. The President shall at all times be an individual
selected by WECC. The initial Vice President-Finance shall be an individual
selected by Global.
(b) The President may appoint such other officers and
agents as he shall deem necessary, each of whom shall hold office for such term
and shall exercise such powers and perform such duties as shall be determined
from time to time by the President.
(c) The compensation of all officers of Limited shall
be fixed by unanimous agreement of the entire Board, which compensation shall be
an expense of Limited.
(d) The officers of Limited shall hold office until
their successors are chosen and qualify. Any officer may be removed at any time
by the President and any vacancy occurring in any office of Limited (except the
office of President) shall be filled by the President.
4.2.2. Chairman. The Chairman shall preside at all meetings of
the Board and shall also do and perform such other duties as from time to time
may be assigned to him by the Board.
4.2.3. President. The President shall be the chief executive
officer of Limited, shall preside at all meetings of the Board if the position
of Chairman shall be vacant or at any such meetings from which the Chairman is
absent, shall have general and active management of the business of Limited,
subject to the oversight of the Board, and shall see that all orders and
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resolutions of the Board are carried into effect. The President's office shall
be held by a person designated by WECC.
4.2.4. Vice President-Finance. The Vice President-Finance
shall be the chief financial officer of Limited and shall have general and
active management of the financial affairs of Limited, subject to the oversight
of the President and the Board. The Vice President-Finance's office shall first
be held by a person designated by Global. If the first Vice President-Finance
dies, resigns, is terminated or otherwise ceases to hold office, the President
shall appoint any subsequent Vice President-Finance and may terminate any Vice
President-Finance he has appointed; provided that, the President may not
terminate the first Vice President of Finance prior to the second anniversary of
this LLC Agreement other than for cause.
4.2.5. Vice Presidents. The other Vice Presidents, if any,
shall perform such other duties and have such other powers as the President may
from time to time prescribe, other than the duties and powers of the chief
executive officer and the chief financial officer.
4.2.6. Secretary and Assistant Secretaries.
(a) The Secretary shall attend all meetings of the
Board and record all the proceedings of such meetings in a book to be kept for
that purpose. He shall give, or cause to be given, notice of all special
meetings of the Board, and shall perform such other duties as may be prescribed
by the President.
(b) The Assistant Secretary, or if there be more than
one, the Assistant Secretaries, in the order determined by the President (or if
there be no such determination, then in the order of their selection) shall, in
the absence of the Secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the President may from time to
time prescribe.
4.2.7. Treasurer and Assistant Treasurers.
(a) The Treasurer shall have the custody of Company
funds and securities and shall deposit all moneys and other valuable effects in
the name and to the credit of Limited in such depositories as may be designated
by the Board. The Treasurer shall disburse funds of Limited as ordered by or on
behalf of the President or the Board, taking proper vouchers for such
disbursements, and shall render to the President and the Board, at their regular
meetings, or when the Board so requires, an account of all his transactions as
Treasurer and of the financial condition of Limited. If required by the Board,
the Treasurer shall give Limited a bond, in such sum and with such surety or
sureties as shall be satisfactory to the Board, for the faithful performance of
the duties of his office and for the restoration to Limited, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to Limited.
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(b) The Assistant Treasurer, or if there shall be
more than one, the Assistant Treasurers in the order determined by the President
(or if there be no such determination, then in the order of their selection)
shall, in the absence of the Treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as the President may
from time to time prescribe.
4.2.8. Controller. The Controller shall have the custody and
control of Limited's books and records, and shall be the chief accounting
officer of Limited. The Controller shall ensure that Limited shall maintain all
of its books and records in compliance with law, and shall prepare and record
all transactions and statements in accordance with generally accepted accounting
principles.
Section 4.3. Contracts With Related Parties. Goods supplied and
services rendered, if any, to Limited by a Member or an Affiliate thereof shall
not constitute a Capital Contribution to the capital of Limited by such Member
and shall not be reimbursable by Limited except as specifically provided in this
Section 4.3, or as otherwise agreed by all the Members. Goods supplied and
services rendered, if any, by Limited to any Member or its Affiliates shall not
be deemed a return of capital to such Member. Limited will offer to either
Member (for the Member's own use or use in conjunction with other goods and/or
services provided by such Member to third parties) its goods and/or services on
an arms'-length basis. It is contemplated that one or more Affiliates of WECC
will provide sales and related services for the Partnership from time to time.
Such services shall be on an arms'-length basis, on terms mutually agreeable
between the Partnership and WECC or such Affiliate of WECC, and on terms
approved by all other Partners. Preapproved Contracts need not be approved on a
contract by contract basis.
Section 4.4. Actions Requiring Unanimous Consent of Members.
(a) Restrictions on Board's Authority. Subject to any other
restrictions on the following set forth in this LLC Agreement, a unanimous vote
of all of the Members and all of the members of the Board shall be necessary to
approve and effect any action at Limited level that requires unanimous approval
of the Partners at the Partnership level.
(b) Void Action. Any action taken in violation of Section
4.4(a) shall be null and void.
Section 4.5. Time Devoted to Company. The Members shall devote such
time to Limited as is reasonably necessary to carry out the provisions of this
LLC Agreement. The officers of Limited may be full-time employees of Limited,
but shall devote such time to Limited as is reasonably necessary to carry out
the provisions of this LLC Agreement.
Section 4.6. Outside Ventures of Partners. Each of the Members and
their respective Affiliates may engage in or possess any interest, whether
direct or indirect, in any other business activity, venture or undertaking of
any type or description, independently or with others, including without
limitation activities, ventures or undertakings involving the acquisition,
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development and operation of compression businesses or any interest therein
(whether or not the same may be competitive with Limited's business or any
business in which Limited may have an interest), and neither Limited nor any
other Member will, by virtue of this LLC Agreement, have any right, title or
interest in or to such outside activities, ventures or undertakings, or the
income or other benefits derived therefrom. The conduct of the business of
Limited may involve business dealings with such activities, ventures or
undertakings. WECC agrees to cause its Affiliates to discuss and seek global
alliances with the Partnership for the rental or sale of compressors or
compression services; provided, however, any such services or alliances are
effected on mutually agreeable terms and on an arm's-length basis.
Section 4.7. Scope of Authority; Indemnification.
4.7.1. Members. Neither of the Members shall, without the
advance written consent of the other Member, take any action on behalf of or in
the name of Limited, or enter into any commitment or obligation binding upon
Limited, except as expressly provided for in this LLC Agreement. Each Member
shall indemnify and hold harmless Limited as well as the other Member and its
Affiliates, directors and officers from and against any and all claims, demands,
losses, damages, liabilities, lawsuits and other proceedings, judgments and
awards, and costs and expenses (including without limitation reasonable
attorneys' fees) arising directly or indirectly, in whole or in part, out of any
breach of the covenant in the immediately preceding sentence by such Member.
Nothing in this Section 4.7.1 shall be construed to benefit any persons or
entities that are not parties to this LLC Agreement, it being understood that no
Member has any personal liability for the liabilities and obligations of
Limited, and nothing in this Section 4.7.1 shall be construed to create any such
personal liability to third parties on the part of the Members.
4.7.2. Officer Indemnities.
(a) Limited shall indemnify each officer of Limited (each an
"Indemnified Person"), made or threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative by reason of the fact that he is or was an
officer of Limited, or is or was serving at the request of Limited as a
director, officer, manager, employee or agent of another entity, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of Limited,
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the Indemnified Person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of Limited,
and, with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
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(b) Any indemnification under paragraph (a) (unless ordered by
a court) shall be made by Limited only as authorized in the specific case upon a
determination by all the Members that indemnification of the Indemnified Person
is proper in the circumstances because he has met the applicable standard of
conduct set forth in paragraph (a).
(c) Expenses incurred by any such Indemnified Person in
defending a civil or criminal action, suit or proceeding may be paid by Limited
in advance of the final disposition of such action, suit or proceeding as
authorized by all the Members in the specific case upon receipt of an
undertaking by or on behalf of such Indemnified Person to repay such amount
unless it shall ultimately be determined that he is entitled to be indemnified
by Limited as authorized herein.
(d) The indemnification provided by this Section 4.7.2 shall
not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any agreement of Limited, both as to
action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be an
officer of Limited, or a director, officer, manager, employee or agent of
another entity as to which he was serving at the request of Limited, and shall
inure to the benefit of the heirs, executors and administrators of such a
person; provided, however, the indemnification provided in this Section 4.7.2
shall be considered primary to any indemnification rights that an Indemnified
Person may have against a Member or its Affiliates and if a Member or its
Affiliate is required to indemnify an Indemnified Person for an action, omission
or other matter arising out of or by reason of the Indemnified Person having
been an officer of Limited, or serving at the request of Limited as a director,
officer, manager, employee or agent of another entity, Limited will reimburse
that Member or Affiliate for any amount so paid.
(e) Limited shall have the power to purchase and maintain
insurance on behalf of any person who is or was an officer of Limited, or is or
was serving at the request of Limited as a director, officer, manager, employee
or agent of another entity, against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such. If
such insurance is maintained by a Member or its Affiliates on behalf of Limited,
Limited shall reimburse the Member or its Affiliates for the allocated portion
of the premiums paid in respect of such person and shall be responsible for all
deductibles, retentions and other payments as a result of any claim made.
(f) For purposes of this Section 4.7.2, references to "other
entity" shall include employee benefit plans; references to "fines" shall
include any excise Taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of Limited" shall
include any service as an officer of Limited which imposes duties on, or
involves services by, such officer with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of Limited" as referred to in this
Section 4.7.2.
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Section 4.8. Insurance. Limited shall procure and maintain, or cause to
be procured and maintained, adequate insurance covering the operations of
Limited, including without limitation (i) workers' compensation and employers
liability insurance, (ii) comprehensive general liability insurance, (iii)
comprehensive automobile liability insurance, (iv) protection and indemnity
insurance, (v) product liability insurance, and (vi) all risk property
insurance. Such required coverages shall be in such amounts and forms as may be
approved from time to time by the Board of Directors. The coverages shall
provide that the Members and their Affiliates be named as additional insureds
and further provide that the insurers waive subrogation rights in favor of the
Members and their Affiliates. The additional insured and waiver provisions shall
apply only with respect to and to the extent of liabilities of Limited. Limited
may self-insure any or all exposures; however, any such self insurance may not
be undertaken without the unanimous written approval of the Members. The
coverages required above may be included within the insurance policies
maintained by a Member or its Affiliates; provided, that (i) such insurance is
approved by the Board of Directors, (ii) Limited shall be responsible for the
payment of its allocated premiums and all retentions, deductibles and other
payments relating to any claims made and (iii) such insurance may be terminated
or modified at any time by the Member or Affiliates upon ten days prior written
notice to Limited.
ARTICLE V
ACCOUNTING
Section 5.1. Books and Records.
5.1.1. General. At all times during the term hereof, the
Controller, at Limited's expense, shall cause accurate books and records of
account to be maintained in which shall be entered all matters relating to
Limited, including all income, expenditures, assets, and liabilities thereof.
All such Company books and records shall be prepared and presented according to
generally accepted accounting principles with appropriate adjustments for tax
accounting requirements.
5.1.2. Accrual Basis. Such books and records of account shall
be maintained on the accrual basis and shall be adequate to provide each Member
with all financial information that may be needed by such Member or any of its
Affiliates for purposes of satisfying the financial and tax reporting
obligations of such Member or Affiliate.
Section 5.2. Location, Rights of Inspection, Audit and Accounting
Policies.
5.2.1. Audits by Members. Each Member shall have the right to
conduct financial and operational audits of Limited, solely at such Member's
expense, and the management of Limited shall cooperate fully with the Members'
auditors, including responding to any comments and suggestions made in
connection therewith. Copies of all internal audits conducted by a Member
pursuant to this Section 5.2.1, and all management responses thereto, shall be
furnished to the Controller and the other Member. Limited's books and records of
account shall be kept and maintained at all times at the place or places
approved by the Board of
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Directors. Each Member and its authorized representative shall have the right to
inspect, examine and copy the books, records, files, securities and other
documents of Limited at all reasonable times.
5.2.2. Accounting Policies and Internal Controls. Limited
shall establish accounting policies and a system of internal controls and
procedures designed to ensure that Limited, and each of its Affiliates, keep and
maintain books and records that, in reasonable detail, accurately and fairly
reflect all transactions of such entity, including without limitation any
dispositions of its assets which policies, controls and procedures are described
in Schedule 5.2.2 attached hereto. If in the course of any audit (or other
review) of Limited (including an audit of any of its Affiliates), problems or
other issues or concerns are noted and the response or action of Limited's
management made with regard thereto is deemed by a Member not to be adequate,
the Members shall attempt to agree upon a satisfactory resolution. If the
Members cannot so agree, the dispute shall be submitted to Limited's independent
auditors for final resolution, and the Members and Company agree to be bound by
such decision.
Section 5.3. Limited Fiscal Year. The Limited Fiscal Year of Limited
shall end on December 31 of each year.
Section 5.4. Statements of Financial Condition. The Controller shall
prepare and certify a statement of the financial condition of Limited as of the
last day of each calendar month of each Limited Fiscal Year, and statements of
income and changes in financial condition for each calendar month of each
Limited Fiscal Year. Copies shall be furnished to each of the Members within 20
days after the end of each calendar month to the extent feasible. An annual
statement of the financial condition of Limited and related statements of income
and changes in financial condition (unaudited) shall be furnished to the Members
within 30 days after the close of the Limited Fiscal Year, to the extent
feasible.
Section 5.5. Audit. Limited shall engage as independent auditors for
Limited the firm of Arthur Andersen LLP or such other firm of nationally
recognized, independent certified public accountants as the Members shall
unanimously agree. The independent auditors shall at the end of each Limited
Fiscal Year (i) audit the records and accounts of Limited, and (ii) render their
opinion on the statement of financial condition of Limited as of the end of each
Limited Fiscal Year and related statements of income and changes in financial
condition for each Limited Fiscal Year, as prepared by the accountants for
Limited.
Section 5.6. Bank Accounts. Funds of Limited shall be deposited in an
account or accounts of a type, in form and name and in a bank or banks
unanimously approved by all the Members. Withdrawals from Company bank accounts
shall be made only by Company officers approved by the Board of Directors.
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ARTICLE VI
INCOME TAX RETURNS, TAX ACCOUNTING, TAX ELECTIONS
Section 6.1. Partnership for Tax Purposes. The Members agree that
Limited shall be treated as a partnership for tax purposes under the Code, state
and local income tax laws or other laws, and further agree not to take any
action or to make any election, in a Tax Return or otherwise, inconsistent
therewith.
Section 6.2. Preparation of Tax Returns. Federal, state, local and
foreign income Tax Returns of Limited shall be prepared by the Controller and
reviewed by Limited's independent auditors. Copies of all Tax Returns of Limited
shall be furnished for review and approval by each of the Members at least 30
days prior to the statutory date for filing, including extensions thereof, if
any.
Section 6.3. Section 754 Election. In the event of a transfer of all or
part of the Membership Interest of a Member or former Member, at the request of
the transferee, the Members will cause Limited to elect, pursuant to Section 754
of the Code, or the corresponding provision of subsequent law, to adjust the
basis of property as provided by Sections 734 and 743 of the Code; provided,
however, that no Member shall be obligated to cause Limited to make such an
election if the Member, in its reasonable discretion, determines that such
election may have a material adverse effect on it..
Section 6.4. Tax Decisions Not Specified. Except as provided in Section
6.6, tax decisions and elections for Limited not provided for herein must be
approved by the unanimous consent of the Members.
Section 6.5. Notice of Tax Audit. Prompt notice shall be given to the
Members upon receipt of advice that the Internal Revenue Service or any other
taxing authority intends to examine Company Tax Returns for any period.
Section 6.6. "Tax Matters Partner." WECC is designated as the "tax
matters partner" of Limited, as that term is used in Section 6231(a) of the
Code, and, as such, shall have all of the rights and obligations given to a tax
matters partner under the Code and Regulations. WECC shall keep each Member
informed in writing of any administrative or judicial proceeding.
ARTICLE VII
SALE, TRANSFER OR MORTGAGE
Section 7.1. Transfer Restrictions and Procedures. Each of the Members
agrees that it will not Transfer all or any part of its Membership Interest,
except as provided in Article VIII, Article IX or Section 7.2, and except that
any Member may Transfer all or any part of its Membership Interest to any
Affiliate thereof (so long as such Member directly and beneficially owns at
least 50% (on a fully diluted basis) of the issued and outstanding equity
securities or
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other equity interests of such Affiliate); provided that (i) notice of such
Transfer is given by the Member making such Transfer to all other Members, (ii)
any such Affiliate to whom any Membership Interest is to be transferred pursuant
to such Transfer enters into an agreement with all other Members, reasonably
satisfactory in form and substance as to such other Members, pursuant to which
such Affiliate agrees to be bound by all the terms and provisions of this LLC
Agreement and (iii) any such Affiliate to whom any Membership Interest is so
transferred pursuant to such Transfer shall be deemed to be subject to the same
provisions of this LLC Agreement as the Member making the transfer. Any
purported Transfer in violation of this Section 7.1 shall be null and void.
Section 7.2. Sale by WECC. Beginning three years from the Closing Date,
so long as the Partnership or a successor entity has not effected an IPO of its
securities pursuant to Section 11.1 of LP Agreement, WECC may sell all (but not
less than all) of its Membership Interests (but only if sold in connection with
its Partnership Interests) to a third party, provided that (i) the price paid
for such Membership Interests is not less than the Net Book Value thereof on the
date of sale, (ii) such price shall be payable only in cash (or, if any non-cash
consideration is to be received, such consideration shall be valued by a
nationally recognized investment banking firm selected by Global), (iii) Global
has the option to sell all (but not less than all) its Membership Interests
(including its Partnership Interests) on the same terms and conditions as WECC
(which shall be reflected in a written offer by the third party to Global) and
(iv) if Global elects not to sell its Membership Interests or if such
third-party sale is not consummated, Global's put rights, and WECC's and
Weatherford's obligations under Section 11.2 hereof shall remain in full force
and effect (if any such third party sale in which Global elects to participate
is consummated, Global's put rights, and WECC's and Weatherford's obligations,
under Section 11.2 hereof shall continue in full force and effect until the
actual time of such consummation).
ARTICLE VIII
DEFAULT AND DISSOLUTION
Section 8.1. Events of Default and Withdrawal.
(a) LLC Event of Default. The occurrence of any of the
following events shall constitute an "LLC Event of Default" hereunder on the
part of the Member with respect to whom such event occurs (the "Defaulting
Member") if, within 30 days following notice of such default from the other
Member (the "Nondefaulting Member") or ten days if the default is due solely to
the nonpayment of monies, such Defaulting Member fails to pay such monies, or in
the case of non-monetary defaults, fails to commence substantial efforts to cure
such default or thereafter fails within a reasonable time to prosecute to
completion with diligence and continuity the curing of such default:
(i) the violation by a Member of any of its
obligations under Article VII of this LLC Agreement; or
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(ii) material default in the performance of or
failure to comply with any other agreements, obligations or undertakings of a
Member contained in this LLC Agreement, other than the agreement not to resign
from the Membership set forth in Section 2.5.2 of this LLC Agreement.
(b) LLC Event of Withdrawal. The occurrence of any of the
following events shall constitute an "LLC Event of Withdrawal" hereunder on the
part of the Member with respect to whom such event occurs (the "Withdrawing
Member") immediately upon such occurrence without any requirement of notice from
the other Member (the "Nonwithdrawing Member") or passage of time except as
specifically set forth below:
(i) institution by a Member of proceedings of any
nature under any laws of the United States or of any state, whether now existing
or subsequently enacted or amended, for the relief of debtors wherein such
Member is seeking relief as debtor;
(ii) a general assignment by a Member for the benefit
of its creditors;
(iii) the institution by a Member of a case or other
proceeding under any section or chapter of the federal Bankruptcy Code, as now
existing or hereafter amended or becoming effective;
(iv) the institution against a Member of a case or
other proceeding under any section or chapter of the federal Bankruptcy Code, as
now existing or hereafter amended or becoming effective, which proceeding is not
dismissed, stayed or discharged within a period of 60 days after the filing
thereof or if stayed, which stay is thereafter lifted without a contemporaneous
discharge or dismissal of such proceeding;
(v) a proposed plan of arrangement or other action by
a Member's creditors taken as a result of a general meeting of the creditors of
such Member;
(vi) the appointment of a receiver, custodian,
trustee or like officer, to take possession of assets having a value in excess
of $25,000,000 of a Member if the pendency of said receivership would reasonably
tend to have a materially adverse effect upon the performance by said Member of
its obligations under this LLC Agreement, which receivership remains
undischarged or unstayed for a period of 60 days from the date of its
imposition;
(vii) admission by a Member in writing of its
inability to pay its debts as they mature;
(viii) attachment, execution or other judicial
seizure of all or any substantial part of a Member's assets or of a Member's
Membership Interest, or any part thereof, such attachment, execution or seizure
being with respect to an amount not less than $25,000,000 and remaining
undismissed, unstayed or undischarged for a period of 60 days after the levy
thereof, if the occurrence of such attachment, execution or other judicial
seizure would reasonably tend to have a materially adverse effect upon the
performance by said Member of its obligations
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under this LLC Agreement; provided, however, that said attachment, execution or
seizure shall not constitute an LLC Event of Withdrawal hereunder if said Member
posts a bond sufficient to fully satisfy the amount of such claim or judgment
within 15 days after the levy thereof and the Member's assets are thereby
released from the lien of such attachment;
(ix) the resignation or withdrawal of the Member from
Limited; or
(x) the dissolution of any Member that is an entity
(if such dissolution is followed by the liquidation or winding up of such
Member).
Section 8.2. Election of Nonwithdrawing Member.
(a) Purchase in LLC Event of Withdrawal. Upon the occurrence
of any LLC Event of Withdrawal by any Member, the Nonwithdrawing Member shall
have the right (but not the obligation) to purchase all (but not less than all)
of the Membership Interests and the Partnership Interests of the Defaulting
Member for cash at a price determined pursuant to the appraisal procedure set
forth in Article XI of this LLC Agreement and Article XIII of the LP Agreement
by payment of 20% of such purchase price at the closing of such purchase, the
balance of the purchase price to be payable in equal monthly installments over a
period of five years, the unpaid balance to bear interest at a rate of interest
equal to the then prime rate at Chase Bank, Texas, N.A., plus one-half percent,
with the right of prepayment of any amount at any time without premium or
penalty. In furtherance of such right, such Nonwithdrawing Member may notify the
Withdrawing Member at any time following an LLC Event of Withdrawal of its
election to institute the appraisal procedure set forth in Article XI of this
LLC Agreement and Article XIII of the LP Agreement. Upon receipt of notice of
determination of the net fair market value of such Withdrawing Member's
Membership Interests and Partnership Interests, such Nonwithdrawing Member may
notify such Withdrawing Member of its election to purchase such Membership
Interests and Partnership Interests.
(b) Member Affiliated Purchaser. The Nonwithdrawing Member may
assign to any Affiliate (the "Member Affiliated Purchaser") its rights to
purchase the Membership Interests and Partnership Interests of the Withdrawing
Member pursuant to Section 8.2(a) of this LLC Agreement. If the Member
Affiliated Purchaser exercises such right and purchases such Membership
Interests and Partnership Interests, the Member Affiliated Purchaser shall
automatically be admitted to Limited as a Member and to the Partnership as a
Limited Partner with the Percentage Interests applicable to the Membership
Interests and Partnership Interests so purchased.
(c) Closing. The closing of any purchase pursuant to this
Section 8.2 shall take place at the principal office of Limited, unless
otherwise unanimously agreed by all the Members, on a date specified by the
Nonwithdrawing Member or Member Affiliated Purchaser (as applicable) that is not
less than ten days following receipt of notice of determination of the net fair
market value of the Membership Interests and Partnership Interests to be
purchased pursuant to Article XI of this LLC Agreement and Article XIII of the
LP Agreement. Upon the closing of such purchase, the Nonwithdrawing Member or
Member Affiliated Purchaser (as
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applicable) may elect to offset against the purchase price the amount of any
loss, damage or injury, the amount of which has been established by a final,
nonappealable judgment, caused to it (or, in the case of an Member Affiliated
Purchaser, caused to the Nonwithdrawing Member) by the LLC Event of Withdrawal.
(d) Election to Dissolve for LLC Event of Default. If an LLC
Event of Default occurs, the Nondefaulting Member may elect to dissolve and
terminate Limited pursuant to Section 8.3(i) of this LLC Agreement by written
notice to the Defaulting Member.
Section 8.3. Causes of Dissolution.
Limited shall be dissolved only in the event that:
(i) an LLC Event of Default has occurred and the
Nondefaulting Member elects to dissolve Limited as provided in Section 8.2(d) of
this LLC Agreement;
(ii) an LLC Event of Withdrawal has occurred, or any
other event occurs that terminates the continued membership of a Member in
Limited under Section 18-801(4) of the DLLCA, unless the business of Limited is
continued by the consent of all the remaining Members (including any Member
Affiliated Purchaser) within 90 days following the occurrence of such LLC Event
of Withdrawal;
(iii) the Members unanimously agree to terminate
Limited;
(iv) Limited ceases to maintain any interest (which
term shall include but not be limited to a security interest) in the Business;
(v) at least one of the Members elect to dissolve or
terminate Limited pursuant to any provision of this LLC Agreement permitting
such election to be made;
(vi) Limited is dissolved pursuant to an express
provision of this LLC Agreement; or
(vii) a decree of judicial dissolution is entered
under Section 18-802 of the DLLCA.
Section 8.4. Procedure in Dissolution and Liquidation.
(a) Winding Up. Upon any dissolution of Limited pursuant to
Section 8.3 of this LLC Agreement, unless the business of Limited is continued
in accordance with Section 8.3(ii), Limited shall immediately commence to wind
up its affairs and the Members shall proceed with reasonable promptness to
liquidate the business of Limited.
(b) Management Rights During Winding Up. During the period of
the winding up of the affairs of Limited, the rights and obligations of the
Members set forth in this LLC
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Agreement with respect to the management of Limited shall continue. For purposes
of winding up, the Members shall continue to act as such and shall make all
decisions relating to the conduct of any business or operations during the
winding up period and to the sale or other disposition of Company assets;
provided that, if the termination of Limited results from an LLC Event of
Default or LLC Event of Withdrawal, the Defaulting Member or Withdrawing Member
(as applicable) shall have no further right to participate in the management or
affairs of Limited or to attend meetings of the Members or vote on decisions,
but shall nonetheless be bound by all decisions made by the Nondefaulting Member
or Nonwithdrawing Member (as applicable) relating to matters with respect to the
operations of Limited or the winding up of Limited. Each Member hereby waives
any claims it may have against the Nondefaulting Member or Nonwithdrawing Member
(as applicable) that may arise out of the management by the Nondefaulting Member
or Nonwithdrawing Member of Limited, so long as such Nondefaulting Member or
Nonwithdrawing Member acts in good faith.
(c) Distributions in Liquidation. The assets of Limited shall
be applied or distributed in liquidation in the following order of priority:
(i) first, to the payment of the expenses of
liquidation;
(ii) second, in payment of debts and obligations of
Limited owed to third parties or to Members; and
(iii) third, any remaining assets shall be
distributed to the Members in accordance with Section 3.4.1 of this LLC
Agreement; provided that there shall be withheld from the amount otherwise
distributable to a Defaulting Member or Withdrawing Member, the amount of any
loss, damage or injury to the Nondefaulting or the Nonwithdrawing Member, the
amount of which has been established by a final, nonappealable judgment, caused
to the Nondefaulting Member or the Nonwithdrawing Member by the LLC Event of
Default or the LLC Event of Withdrawal, and such amount shall be distributed to
the Nondefaulting Member or the Nonwithdrawing Member in addition to the amounts
otherwise distributable to such Nondefaulting Member or such Nonwithdrawing
Member.
(d) Noncash Assets. Every reasonable effort shall be made to
dispose of the assets of Limited so that all distributions may be made to the
Members in cash. Notwithstanding the foregoing, the Members agree that, in the
event of liquidation, the Member that or whose Affiliates contributed particular
patents, patent applications, trademarks and trade names to Limited (or whose
predecessor in interest made such contributions), if any, shall be given the
right of first refusal to reacquire such patents, patent applications,
trademarks or trade names as it so desires by payment to Limited of an amount
equal to the then current net asset value on the books of Limited of such
patents, patent applications, trademarks or trade names. If Limited makes
distributions in kind to the Members in connection with the liquidation of
Limited, for purposes of determining the Capital Account balances of the
Members, Limited shall be deemed to have sold the assets to be distributed in
kind to a third party for cash at their fair market value thereof as determined
(i) by an investment banking firm (including any successor) listed on Schedule
10.4(d) to the LP Agreement selected by the Nondefaulting Member or the
Nonwithdrawing
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Member, as the case may be, if the termination and liquidation of Limited
results from an LLC Event of Default or an LLC Event of Withdrawal, and (ii) in
all other cases, by unanimous agreement of all Members (or if such Members
cannot so agree, as determined by a nationally recognized investment bank or
appraiser unanimously selected by all Members). Any license or other agreement
permitting Limited to use the name "Weatherford" shall terminate automatically
upon dissolution of Limited.
Section 8.5. Disposition of Documents and Records. All documents and
records of Limited, including without limitation all financial records,
vouchers, canceled checks and bank statements, shall be delivered to WECC upon
termination of the Membership. Unless otherwise approved by Global, WECC shall
retain such documents and records for a period of not less than seven (7) years
and shall make such documents and records available during normal business hours
to Global for inspection and copying at Global's cost and expense. In the event
either Member ("Nonsurviving Member") for any reason ceases as provided herein
to be a Member at any time prior to termination of Limited, and Limited is
continued without the Nonsurviving Member, the other Member ("Surviving Member")
agrees that said documents and records of Limited up to the date of the
termination of the Nonsurviving Member's Membership Interest shall be maintained
by the Surviving Member, its successors and assigns, for a period of not less
than seven (7) years thereafter; provided, however, that if there is an audit or
threat of audit, such documents and records shall be retained until the audit is
completed and any tax liability finally determined. Such documents and records
shall be available for inspection, examination and copying by the Nonsurviving
Member upon reasonable notice during said seven-year period.
Section 8.6. Termination. The Members shall comply with all
requirements of the DLLCA or other applicable law pertaining to the winding-up
of Limited. On completion of the distribution of Company assets as provided in
this LLC Agreement, Limited shall be terminated, and the Members shall file a
certificate of cancellation with the Secretary of State of Delaware and shall
take such other actions as may be necessary to terminate Limited.
ARTICLE IX
PUBLIC OFFERING; PUT; CALL
Section 9.1. Cooperation. In the event Global exercises its demand
registration rights pursuant to Section 11.1 of the LP Agreement, Limited shall
cooperate (including without limitation the execution and delivery of documents
and instruments and the taking of all other actions reasonably necessary ) to
effect the transactions described in such Section 11.1. In the event Global
exercises its put rights under Section 11.2 of the LP Agreement, Limited shall
cooperate with Global and GE Capital (including without limitation the execution
and delivery of documents and instruments and the taking of all other actions
reasonably necessary) to effect the transactions described in such Section 11.2,
including without limitation the purchase by WECC or Weatherford of that
percentage of Limited's Partnership Interests attributable to Global's position
as a Member. In the event WECC exercises its call rights under Section 11.3 of
the LP
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Agreement, Limited shall cooperate with WECC (including without limitation the
execution and delivery of documents and instruments and the taking of all other
actions reasonably necessary) to effect the transactions described in such
Section 11.3, including without limitation the purchase by WECC of that
percentage of Limited's Partnership Interests attributable to Global's position
as a Member.
ARTICLE X
ARBITRATION
Section 10.1. Dispute Resolution; Arbitration. Any Claim arising out of
or related to this LLC Agreement shall be governed by the dispute resolution,
arbitration, attorneys' fees and choice of forum provisions set forth in Section
9.2 of the Formation Agreement.
ARTICLE XI
DETERMINATION OF THE MARKET VALUE OF LIMITED
Section 11.1. Determination of Market Value of Limited
(a) Negotiation Period. Whenever any provision of this LLC
Agreement provides for the valuation of a Membership Interest to be purchased or
sold, the value of such Membership Interest shall be determined as follows. The
Members shall first attempt to agree upon the "Market Value of Limited" (as
defined in Section 11.1(c)) for a period of 60 days following the event giving
rise to the determination of Market Value.
(b) Appraisal Process. In the event WECC and Global are unable
to reach an agreement as to the Market Value of Limited within the 60-day period
referred to in Section 11.1(a), then within five Business Days after the
expiration of such 60-day period (such fifth Business Day being referred to
herein as the "11.1 Appraisal Process Commencement Date"), WECC and Global each
shall select a nationally recognized investment banking firm who shall (i)
prepare a report which (A) sets forth such investment banking firm's
determination of the Market Value of Limited (which shall be a single amount as
opposed to a range) and (B) includes work papers which indicate the basis for
and calculation of the Market Value of Limited (a "11.1 Appraisal Report") and
(ii) deliver to WECC or Global, as the case may be, an oral and written opinion
addressed to such party as to the Market Value of Limited. The fees and expenses
of each investment banking firm shall be paid by the party selecting such
investment banking firm. Each of WECC and Global shall instruct its respective
investment banking firm to (i) not consult with the other investment banking
firm with respect to its view as to the Market Value of Limited prior to the
time that both investment banking firms have delivered their respective opinions
to WECC or Global, as applicable, (ii) determine the Market Value of Limited in
accordance with Section 11.1(c), (iii) deliver their respective 11.1 Appraisal
Reports, together with their oral and written opinions as to the Market Value of
Limited (the "11.1 Initial Opinion Values"), within 30 days after the 11.1
Appraisal Process Commencement Date, and
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<PAGE> 29
(iv) deliver a copy of its written opinion and its 11.1 Appraisal Report to
Limited, the other party and the other party's investment banking firm at the
time it delivers its oral and written opinion to WECC or Global, as applicable.
The opinions and reports of the two investment banking firms shall be delivered
at the same time.
If the two 11.1 Initial Opinion Values differ and the lesser
11.1 Initial Opinion Value equals or exceeds 90% of the greater 11.1 Initial
Opinion Value, the Market Value of Limited shall be deemed to be an amount equal
to (i) the sum of the two 11.1 Initial Opinion Values divided by (ii) two.
If the 11.1 Initial Opinion Values differ and the lesser 11.1
Initial Opinion Value is less than 90% of the greater 11.1 Initial Opinion
Value, then:
(i) within two Business Days after both investment banking
firms have delivered their respective opinions to WECC or Global, as applicable,
each investment banking firm shall, at a single meeting at which WECC, Global,
Limited and the other investment banking firm are present, make a presentation
with respect to its 11.1 Initial Opinion Value. At such presentation, WECC,
Global, Limited and the other investment banking firm shall be entitled to ask
questions as to the basis for and the calculation of such investment banking
firm's Initial Opinion Value; and
(ii) WECC and Global shall, within five Business Days after
the date WECC and Global receive the 11.1 Initial Opinion Values (such fifth
Business Day being referred to herein as the "11.1 Subsequent Appraisal Process
Commencement Date"), jointly select a third nationally recognized investment
banking firm to (A) prepare a 11.1 Appraisal Report and (B) deliver an oral and
written opinion addressed to WECC and Global as to the Market Value of Limited.
The fees and expenses of such third investment banking firm shall be paid by
Limited. During such five-Business Day period, WECC and Global shall negotiate
in good faith to independently reach an agreement as to the Market Value of
Limited. If WECC and Global reach such an agreement, then the Market Value of
Limited shall be deemed to be the amount so agreed upon by WECC and Global. If
WECC and Global are unable to reach such an agreement, then WECC and Global
shall instruct such third investment banking firm to (A) determine the Market
Value of Limited in accordance with Section 11.1(c) and (B) deliver its 11.1
Appraisal Report, together with its oral and written opinion (the "11.1 Third
Opinion Value"), within 30 days after the 11.1 Subsequent Appraisal Process
Commencement Date. Such third investment banking firm shall receive the 11.1
Appraisal Reports and meet with the other two investment banking firms prior to
delivering its 11.1 Appraisal Report. The Market Value of Limited in such
circumstances shall be deemed to be an amount equal to (A) the sum of the two
closest of the 11.1 Third Opinion Value and the 11.1 Initial Opinion Values,
divided by (B) two.
(c) Definition of Market Value of Limited. For purposes of
this LLC Agreement, the Market Value of Limited (the "Market Value of Limited")
means the fair market value of 100% of common equity of Limited as of the
relevant date as determined by the applicable investment banking firm. In
determining the Market Value of Limited, consideration
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<PAGE> 30
should be given as to a range of analytical methodologies, potentially
including, but not limited to, the following: comparable trading analysis,
comparable transaction analysis and discounted cash flow analysis. In the
determination of the Market Value of Limited, Limited shall be valued as a going
concern on a stand-alone basis without regard to synergies that might be
achieved by a particular purchaser and without any liquidity discount. In
determining the Market Value of Limited, no consideration should be given to the
values that are initially assigned to assets of Limited for purchase accounting
or Tax accounting purposes. The value of a Membership Interest of a Member shall
be equal to such Member's Percentage Interest multiplied by the Market Value of
Limited determined pursuant to Article XI.
ARTICLE XII
GENERAL PROVISIONS
Section 12.1. Complete Agreement; Amendment. The Transaction Documents
constitute the entire agreement among the parties thereto with respect to the
subject matter hereof and thereof and supersede all other agreements,
representations, warranties, statements, promises and understandings, whether
oral or written, with respect to the subject matter thereof. This LLC Agreement
may not be amended, altered or modified except by a writing signed by duly
authorized officers of all the Members.
Section 12.2. Notices.
12.2.1. Addresses. All notices under this LLC Agreement shall
be in writing and shall be delivered by personal service; certified or
registered mail, postage prepaid, return receipt requested;
nationally-recognized overnight courier, courier charges prepaid; or facsimile
transmission (followed by telephone confirmation of receipt), to the Members at
the addresses herein set forth and to Limited at its principal place of
business.
The addresses for notices are as follows:
Weatherford Enterra Compression Company, L.P.
5 Post Oak Park, Suite 1760
Houston, Texas 77027
Attention: General Counsel
Telecopy: (713) 297-8488
Global Compression Services, Inc.
c/o General Electric Capital Corporation
260 Long Ridge Road
Stamford, Connecticut 06927
Attention: General Counsel
Telecopy: (203) 357-8365
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With a copy to:
Charles E. Harrell, Esq.
Weil, Gotshal & Manges LLP
700 Louisiana, Suite 1600
Houston, Texas 77002
Telephone: (713) 546-5000
Telecopy: (713) 224-9511
12.2.2. Effective Date of Notices, etc. All notices, demands
and requests shall be effective upon actual receipt or, in the case of delivery
by facsimile transmission, the completion of such transmission during the normal
business hours of the recipient. Rejection or other refusal to accept or the
inability to deliver because of changed address of which no notice was given as
provided in Section 12.2.3 shall be deemed to be receipt of the notice, demand
or request sent.
12.2.3. Changes. By giving to the other Member and Limited at
least ten Business Days' written notice thereof, the Members and their
respective permitted successors and permitted assigns shall have the right from
time to time and at any time during the term of this LLC Agreement to change
their respective addresses for notices and each shall have the right to specify
as its address for notices any other address within the United States of
America.
Section 12.3. Validity. In the event that any provisions of this LLC
Agreement shall be held to be invalid or unenforceable, the same shall not
affect in any respect whatsoever the validity or enforceability of the remainder
of this LLC Agreement.
Section 12.4. Survival of Rights. Except as expressly provided herein
to the contrary, this LLC Agreement shall be binding upon and inure to the
benefit of the Members and their permitted successors and permitted assigns.
Section 12.5. Governing Law. This LLC Agreement and the rights and
liabilities of the Members shall be governed by and construed in accordance with
the internal laws of the State of Delaware, without regard to conflicts of laws
provisions thereof.
Section 12.6. Waiver. No consent or waiver, express or implied, by a
Member to or of any breach or default by any other Member in the performance by
such other Member of its obligations hereunder shall be deemed or construed to
be a consent or waiver to or of any other breach or default in the performance
by such other Member of the same or any other obligations of such other Member
hereunder. Failure on the part of a Member to complain of any act or failure to
act of any other Member or to declare any other Member in default, irrespective
of how long such failure continues, shall not constitute a waiver by such Member
of its rights hereunder. The giving of consent by a Member in any one instance
shall not limit or waive the necessity to obtain such Member's consent in any
future instance.
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Section 12.7. Remedies in Equity. The rights and remedies of the
Members hereunder shall not be mutually exclusive, and the exercise of one or
more rights or remedies shall not preclude the exercise of any other rights or
remedies. Each of the Members confirms that damages at law will be an inadequate
remedy for a breach or threatened breach of this LLC Agreement and agrees that,
except as expressly provided to the contrary in this LLC Agreement, in the event
of a breach or threatened breach of any provision hereof, the respective rights
and obligations hereunder shall be enforceable by specific performance,
injunction or other equitable remedy, but nothing herein contained is intended
to, nor shall it, limit or affect any rights at law or by statute or otherwise
of any Member aggrieved as against any other for a breach or threatened breach
of any provision hereof, it being the intention by this Section 12.7 to make
clear the agreement of the Members that the respective rights and obligations of
the Members hereunder, except as expressly provided to the contrary herein,
shall be enforceable in equity as well as at law or otherwise.
Section 12.8. Terminology. All personal pronouns used in this LLC
Agreement, whether used in the masculine, feminine, or neuter gender, shall
include all other genders; and the singular shall include the plural and vice
versa. Titles of Articles and Sections are for convenience only, and neither
limit nor amplify the provisions of this LLC Agreement itself.
Section 12.9. Counterparts. This LLC Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which shall constitute one and the same agreement.
Section 12.10. Further Assurances. Each Member agrees to do all acts
and things and to make, execute and deliver such written instruments, as shall
from time to time be reasonably required to carry out the terms and provisions
of this LLC Agreement.
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<PAGE> 33
IN WITNESS WHEREOF, the Members have executed this LLC
Agreement as of the day and year first above set forth.
Weatherford Enterra Compression Company, L.P.
By: Enterra Compression Company,
its sole General Partner
By: /s/ CURTIS W. HUFF
------------------------------------------------------
Curtis W. Huff
Senior Vice President
Global Compression Services, Inc.
By: /s/ PAUL J. FRIESEN
------------------------------------------------------
Name: Paul J. Friesen
----------------------------------------------------
Title: President and Chief Executive Officer
---------------------------------------------------
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A copy of Annex I to this Exhibit 10.3 can be found as Annex I to Exhibit 10.1
<PAGE> 1
EXHIBIT 10.4
REGISTRATION RIGHTS AGREEMENT
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
AMONG
WEATHERFORD ENTERRA COMPRESSION COMPANY, L.P.,
A DELAWARE LIMITED PARTNERSHIP,
GLOBAL COMPRESSION SERVICES, INC.,
A DELAWARE CORPORATION,
AND
WEATHERFORD GLOBAL COMPRESSION SERVICES, L.P.,
A DELAWARE LIMITED PARTNERSHIP
DATED AS OF FEBRUARY 2, 1999
<PAGE> 3
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<TABLE>
<CAPTION>
ARTICLE II
REGISTRATION RIGHTS
<S> <C> <C>
2.1 REGISTRATION RIGHTS.....................................................5
(a) IPO Notice.....................................................5
(b) Demand Rights..................................................7
(c) Certain Limitations............................................7
(d) Piggyback Rights...............................................8
2.2 REGISTRATION STATEMENT FORM.............................................9
2.3 EXPENSES................................................................9
2.4 EFFECTIVE REGISTRATION..................................................9
2.5 UNDERWRITERS...........................................................10
2.6 APPORTIONMENT IN REGISTRATIONS REQUESTED...............................10
ARTICLE III
REGISTRATION PROCEDURES
3.1 PROCEDURES.............................................................10
3.2 UNDERWRITING AGREEMENT.................................................14
3.3 SELLER'S INFORMATION...................................................15
3.4 PREPARATION; REASONABLE INVESTIGATION..................................15
3.5 NOMINEES FOR BENEFICIAL OWNERS.........................................15
ARTICLE IV
INDEMNIFICATION
4.1 INDEMNIFICATION BY THE REGISTRANT......................................15
4.2 INDEMNIFICATION BY THE SELLERS OF REGISTRABLE SECURITIES...............16
4.3 CONTRIBUTION...........................................................17
4.4 NOTICES OF CLAIMS, ETC.................................................18
ARTICLE V
MISCELLANEOUS
5.1 SALES COMPLIANCE.......................................................19
5.2 COMPLETE AGREEMENT; AMENDMENT..........................................19
5.3 NOTICES................................................................20
(a) Addresses.....................................................20
(b) Effective Date of Notices, etc................................20
(c) Changes.......................................................20
</TABLE>
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<TABLE>
<S> <C> <C>
5.4 ASSIGNMENT; OTHER BENEFITS.............................................21
5.5 AMENDMENTS AND WAIVERS.................................................21
5.6 HEADINGS...............................................................21
5.7 SEVERABILITY OF PROVISIONS.............................................21
5.8 COUNTERPARTS...........................................................21
5.9 GOVERNING LAW..........................................................21
5.10 ADDITIONAL AGREEMENTS..................................................21
</TABLE>
ANNEX A Newco Adoption Agreement
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<PAGE> 5
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of
February 2, 1999, between Weatherford Enterra Compression Company, L.P., a
Delaware limited partnership ("WECC"), Global Compression Services, Inc., a
Delaware corporation ("Global") (collectively, the "Limited Partners") and
Weatherford Global Compression Services, L.P., a Delaware limited partnership
(the "Partnership").
W I T N E S S E T H:
WHEREAS, Weatherford International, Inc., WECC, Global, and GE Capital
(as defined in the Formation Agreement) are parties to that certain Formation
Agreement dated February 2, 1999 (the "Formation Agreement") providing for the
contribution to the Partnership of certain gas compression assets of WECC and
the Transferring Weatherford Entities (as defined in the Formation Agreement)
and Global in exchange for Partnership Interests (as defined in the Formation
Agreement);
WHEREAS, the Limited Partners are parties to that certain Limited
Partnership Agreement dated February 2, 1999 (the "LP Agreement") governing the
Partnership;
WHEREAS, WECC and Global are parties to that certain Limited Liability
Company Agreement dated February 2, 1999 (the "LLC Agreement"), providing for
the formation and governance of Weatherford Global Compression Holding, L.L.C.,
a Delaware limited liability company and the General Partner of the Partnership
(the "General Partner"); and
WHEREAS, it is a condition precedent to the consummation of the
transactions contemplated by the Formation Agreement that the Partnership and
the Limited Partners enter into this Agreement;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements hereinafter set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby covenant and agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used in this Agreement shall include the singular as
well as the plural, include the masculine as well as the feminine and neutral
and have the meanings given to them in this ARTICLE I, unless defined elsewhere
in this Agreement.
"Affiliate" means, with respect to any Person, (i) each Person that,
directly or indirectly, owns or controls, whether beneficially or as a trustee,
guardian or other fiduciary, 50% or more of the Stock having ordinary voting
power in the election of directors of such Person, (ii) each Person that
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<PAGE> 6
controls, is controlled by or is under common control with such Person or any
Affiliate of such Person or (iii) each of such Person's officers, directors,
joint venturers and partners. For purposes solely of the foregoing definition,
(a) "Stock" shall mean all shares, options, warrants, general or limited
partnership interests, participations or other equivalents (regardless of how
designated) of or in a corporation, partnership or equivalent entity, whether
voting or nonvoting, including, without limitation, common stock, preferred
stock, or any other "equity security" (as such term is defined in Rule 3a11-1 of
the General Rules and Regulations promulgated by the Commission under the
Exchange Act, regardless of whether the Registrant shall at any time be subject
to the requirements of the Exchange Act) and (b) "control" of a Person shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" shall have the meaning assigned to such term in the
introductory paragraph hereof.
"Affiliated Group", with respect to any Person, means such Person and
each Affiliate and Associate of such Person and each other Person with whom such
Person is acting "as a partnership, limited partnership, syndicate, or other
group for the purpose of acquiring, holding, or disposing of" Securities (within
the meaning of Section 13(d)(3) of the Exchange Act, regardless of whether the
Company shall at any time be subject to the requirements of the Exchange Act).
"Associate" has the meaning given such term in Rule 12b-2 under the
Exchange Act.
"Board of Directors" means (i) in the case of a Person that is a
corporation, the board of directors of such Person and (ii) in the case of any
other Person, the board of directors, board of managers, management committee or
similar governing body of such Person (or in the case of a limited partnership,
of such Person's general partner, or in the case of a limited liability company,
of such Person's manager if such manager(s) is not an individual), or any
authorized committee thereof responsible for the management of the business and
affairs of such Person.
"Business Day" means any day except Saturdays, Sundays and days on
which the offices of the Commission are not open for business.
"Code" shall have the meaning assigned to such term in Section 2.1(a)
hereof.
"Commission" means the Securities and Exchange Commission of the United
States of America or any other federal agency at the time administering the
Securities Act.
"Common Stock" means (x) all shares now or hereafter authorized and
designated as the Common Stock of Newco, including (without limitation) the
Common Stock held by each of WECC and Global, and (y) any securities issued or
issuable with respect to any such securities by way of a distribution or split
or in connection with a combination or subdivision of shares, reclassification,
recapitalization, merger, consolidation, or reorganization or otherwise upon any
required adjustments,
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<PAGE> 7
and securities of any other class with which such securities may hereafter have
been exchanged or reclassified.
"Delay Notice" shall have the meaning assigned to such term in Section
2.1(c) hereof.
"Demand Notice" shall have the meaning assigned to such term in Section
2.1(b) hereof.
"Disadvantageous Condition" shall have the meaning assigned to such
term in Section 2.1(c) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the regulations promulgated from time to time thereunder.
"Formation Agreement" shall have the meaning assigned to such term in
the recitals to this Agreement.
"Global" shall have the meaning assigned to such term in the
introductory paragraph of this Agreement.
"Governmental Entity" means the United States of America, any state,
province, territory, county, city, municipality and any subdivision thereof, any
court, administrative or regulatory agency, commission, department or body or
other governmental authority or instrumentality, the Commission, or any entity
or person exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Indemnified Party" shall have the meaning assigned to such term in
Section 4.4 hereof.
"Indemnifying Party" shall have the meaning assigned to such term in
Section 4.4 hereof.
"IPO" means a firm commitment underwritten initial public offering of
Registrable Securities of the Registrant registered under the Securities Act
that is consummated.
"IPO Notice" shall have the meaning assigned to such term in Section
2.1(a) hereof.
"LLC Agreement" shall have the meaning assigned to such term in the
recitals to this Agreement.
"LP Agreement" shall have the meaning assigned to such term in the
recitals to this Agreement.
"Newco" shall mean any new entity specified in the IPO Notice, which
entity's securities are to be registered under the Securities Act.
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<PAGE> 8
"Organizational Restructure" shall mean any reorganization,
restructure, reclassification, merger, consolidation, combination, conversion or
other fundamental organizational transaction, whether to be effected in one
transaction or a series of related transactions, involving the Partnership
and/or any of its subsidiaries and specified by Global in the IPO Notice to be
effected in connection with a public offering of the Registrant's equity
securities under the Securities Act, including without limitation (i) any
restructuring of the organizational structure of the Partnership and/or any of
its subsidiaries, (ii) any reorganization, merger, consolidation, combination or
conversion of the Partnership and/or any of its subsidiaries with and/or into
Newco, (iii) any transaction or transactions establishing an organizational
structure whereby the Partnership and/or its subsidiaries are owned, directly or
indirectly, by a newly-formed holding company and (iv) any transaction whereby
Newco purchases Global's interest in the Partnership with proceeds generated
from other steps in the Organizational Restructure.
"Party" means the Partnership, any Limited Partner party hereto or
Newco (in the event Newco becomes a signatory hereto pursuant to Section 2.1(a)
hereof).
"Permitted Transferee" shall mean with respect to any Registrable
Securities, (i) with respect to Partnership Interests, transferees thereof
permitted pursuant to the terms and conditions of the LP Agreement, and (ii)
with respect to any other Registrable Securities, any subsidiary of the Partner
owning such Registrable Securities to which subsidiary such Registrable
Securities are transferred, so long as a majority of the issued and outstanding
equity securities of such subsidiary are directly owned by such Partner.
"Person" shall mean an individual, partnership, corporation, business
trust, limited liability company, limited liability partnership, joint stock
company, trust, unincorporated association, joint venture, Governmental
Authority or other entity of whatever nature.
"Piggyback Registration" shall have the meaning assigned to such term
in Section 2.1(d) hereof.
"Registrable Securities" shall mean, with respect to each Partner (as
defined in the LP Agreement), all Partnership Interests and equity securities of
Newco owned or acquired by the Partners in connection with an Organizational
Restructure and any equity securities issued or issuable in respect of such
Partnership Interests or equity securities by way of a distribution or split or
in connection with a combination or subdivision thereof, reclassification,
recapitalization, merger, consolidation or other reorganization of the
Partnership or Newco. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities when (i) a registration
statement with respect to the offering and sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (ii) they shall have
been distributed to the public pursuant to Rule 144 (or any successor provision)
under the Securities Act, (iii) they shall have been otherwise transferred and
subsequent disposition of them shall not require registration or qualification
of them under the Securities Act or
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<PAGE> 9
any similar law then in force, (iv) they shall have been otherwise transferred
to any Person other than a Permitted Transferee, or (v) they shall have ceased
to be outstanding.
"Registrant" shall mean the Partnership or, if specified in the IPO
Notice, Newco.
"Registration Expenses" means all out-of-pocket expenses incident to
the Registrant's performance of or compliance with ARTICLE II or ARTICLE III,
including, without limitation, all registration, filing and National Association
of Securities Dealers, Inc. fees, all fees and expenses of complying with
securities or blue sky laws (including reasonable fees and disbursements of
underwriters' counsel in connection with any blue sky memoranda), all word
processing, duplicating and printing expenses, all listing fees, internal
expenses of the Partnership, fees and disbursements of counsel for the
Partnership, the fees and expenses of any special experts retained by the
Partnership in connection with the registration, any special audits or "cold
comfort" letters required by or incident to such performance and compliance and
the out-of-pocket expenses of underwriters typically paid by issuers of
securities, but excluding Selling Expenses, if any.
"Requesting Holders" shall have the meaning assigned to such term in
Section 2.1(b) hereof.
"Rule 144" means Rule 144 under the Securities Act, or any successor
provision.
"Securities Act" means the Securities Act of 1933, as amended, and the
regulations promulgated from time to time thereunder.
"Selling Expenses" shall mean any underwriting discounts or
commissions, any selling commissions and stock transfer taxes attributable to
sales of Registrable Securities and the fees and expenses of counsel for any
holder thereof.
"Shelf Registration" shall have the meaning assigned to such term in
Section 2.1(d) hereof.
"WECC" shall have the meaning assigned to such term in the introductory
paragraph of this agreement and include any successor thereto.
ARTICLE II
REGISTRATION RIGHTS
2.1 REGISTRATION RIGHTS.
(a) IPO Notice. At any time from and after February 2, 2001,
Global shall have the right, by providing written notice to the Partnership (an
"IPO Notice"), (i) to require that the Partnership effect an Organizational
Restructure, subject to the provisions below, and (ii) that the Registrant, as
expeditiously as possible, register under the Securities Act the Registrant's
equity securities and/or that amount of Registrable Securities owned or to be
owned by Global as a result
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of the Organizational Restructure and specified in the IPO Notice, in any case
for the public offering and sale of such securities. If Global exercises such
right:
(i) the Partnership, the General Partner (as defined
in the LP Agreement) and all other Limited Partners will cooperate with
Global to promptly effect such registration, offering and sale,
including without limitation (A) subject to the provisions below,
implementing and consummating any such Organizational Restructure, (B)
causing Newco to become a signatory to this Agreement and be bound by
the all terms hereof applicable to the Partnership, and (C) executing
all documents, instruments and taking all other actions reasonably
necessary in connection with such registration, offering and sale, and
any such Organizational Restructure; and
(ii) if the IPO Notice contemplates a public offering
and sale of Registrable Securities by Global, each other Limited
Partner shall have the right to include its Registrable Securities in
such offering on a pro rata basis.
Global's rights pursuant to this Section 2.1(a) shall be subject to the
provisions of Section 11.1 of the LP Agreement. Notwithstanding the foregoing,
WECC and Global shall not be obligated to effect an Organizational Restructure
if as a result of the Organizational Restructure or the subsequent sale of
shares of Common Stock by Global or Newco under the Code, WECC or any of its
Affiliates that are a party to the Organizational Restructure would recognize
any gain; provided, however, an Organizational Restructure may be effected if
(i) Global provides WECC with a private letter ruling of the Internal Revenue
Service in a form reasonably acceptable to WECC and based upon representations
reasonably acceptable to WECC, stating that, as a result of the Organizational
Restructure or IPO WECC will not recognize any gain, or (ii) GE Capital agrees
to fully indemnify WECC and its Affiliates that are a party to the
Organizational Restructure from and against any and all Taxes, expenses,
including reasonable attorneys' fees, penalties and interests, costs, losses,
damages and other liabilities that may arise, be paid or be payable as a result
of the Organizational Restructure and IPO, provided, however, that in the event
that GE Capital agrees to indemnify WECC pursuant to this provision, WECC shall
make such factual representations as reasonably requested by Global, which
representations shall be comparable to representations WECC would reasonably
have been expected to make in connection with a ruling request by Global. WECC
agrees that it will cooperate in such form of Organizational Restructure and IPO
as Global reasonably shall request to insure that WECC will not recognize any
gain, specifically including, without limitation, the following: (i) not
transferring liabilities to Newco that would result in gain recognition under
Section 357(c) of the Code, and (ii) agreeing to reasonable restrictions on the
sale of its Common Stock of Newco to the extent such sale, in addition to the
sales contemplated in the Organizational Restructure and IPO, would result in
the recognition of gain by WECC. WECC and Global acknowledge that each of them
will be required to make representations as part of any ruling request and agree
to make such factual representations as may be reasonably requested in
connection with such ruling request. For purposes of this Section, the term IPO
includes the sale of any shares held by Global or Newco for its own account in
the IPO.
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(b) Demand Rights. At any time from and after 180 days
following the consummation of an IPO, upon the written request to the Registrant
(a "Demand Notice") of the holder or holders of Registrable Securities holding
at least 15% of the Registrable Securities then outstanding (the "Requesting
Holders"), specifying the intended method of disposition of such Registrable
Securities, the Registrant shall effect the registration under the Securities
Act of the portion of such holders' Registrable Securities specified in the
Demand Notice for disposition in accordance with the intended method of
disposition as specified in the Demand Notice. The Registrant shall promptly
give written notice of any requested registration to the other holders of
Registrable Securities and shall use its reasonable best efforts to effect, as
expeditiously as possible, the registration under the Securities Act of:
(i) the Registrable Securities that the Registrant has been so
requested to register by such Requesting Holder; and
(ii) such Registrable Securities owned by other holders that
such holders request in writing to the Registrant, within 15 days after
receipt of written notice from the Registrant, to be registered,
all to the extent requisite to permit the disposition of the Registrable
Securities to be registered; provided that Registrable Securities registered
pursuant to subsections (i) and (ii) of this Section 2.1(b) shall be registered
on a pro rata basis according to such holders' ownership percentages of
Registrable Securities. Any sale of Registrable Securities by the Registrant or
any holders of Registrable Securities (other than Global) subsequent to an IPO
shall only be effected pursuant to a firm commitment underwritten distribution,
provided that such restriction shall terminate with respect to a particular
holder of Registrable Securities at the time such holder shall own less than 15%
of the Common Stock.
(c) Certain Limitations. The Registrant shall not be obligated
to effect more than (i) one (1) registration pursuant to Section 2.1(a) or (ii)
four (4) registrations pursuant to Section 2.1(b), two of which four shall be
allocated to WECC and two of which four shall be allocated to Global. In
addition, with respect to any registration statement to be filed pursuant to
Section 2.1(b), if the Board of Directors of the Registrant determines, in the
good faith exercise of its reasonable business judgment, that the filing of a
registration statement would (i) materially interfere with any bona fide
financing, acquisition or other material business plans of the Registrant, (ii)
require disclosure of material non-public information the premature disclosure
of which could materially adversely affect the Registrant or (iii) require any
financial statements that, for reasons beyond the Registrant's control, are
unavailable (a "Disadvantageous Condition"), the Registrant shall,
notwithstanding any other provision of this ARTICLE II, be entitled, upon the
giving of a written notice of such Disadvantageous Condition (a "Delay Notice")
to each holder of Registrable Securities included or requested to be included in
such registration statement, to cause the filing (but not the preparation) of
such registration statement to be delayed for a reasonable period of time until,
in the good faith exercise of the reasonable business judgment of the Board of
Directors, such
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Disadvantageous Condition no longer exists (written notice of which the
Registrant shall promptly deliver to each holder of Registrable Securities with
respect to which any such registration statement has been filed, or was
requested to have been filed). Upon the reasonable request of any holder of
Registrable Securities included or requested to be included in such registration
statement, the Registrant will disclose to such holder the nature of such
Disadvantageous Condition in reasonable detail, but only to the extent such
information has been publicly disclosed or would otherwise not constitute
material, non-public information that the Registrant has an interest in keeping
confidential. Upon receipt of any written notice from the Registrant to the
holders of Registrable Securities included in an effective registration
statement of the happening of any event which makes any statement made in such
registration statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in such registration statement,
prospectus or documents so that, in the case of the registration statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of a prospectus, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, such
holders of Registrable Securities selling securities pursuant to an effective
registration statement will forthwith discontinue use of the prospectus
contained in such registration statement until such holder's receipt of the
supplemented or amended prospectus contemplated by Section 3.1(g) hereof and, if
so directed by the Registrant, each such holder of Registrable Securities will
deliver to the Registrant all copies, other than permanent file copies then in
such holder's possession, of the most recent prospectus then covering such
Registrable Securities at the time of receipt of such notice. Notwithstanding
the foregoing provisions of this subparagraph (c), the Registrant shall not be
entitled to delay any registration of Registrable Securities requested pursuant
to Section 2.1(b) for a period of more than 90 consecutive days from the giving
of its Delay Notice to the holders of such Registrable Securities with respect
to a Disadvantageous Condition, as above provided.
(d) Piggyback Rights. If at any time following the
consummation of an IPO, the Registrant shall propose the registration under the
Securities Act of shares of Common Stock for sale through underwriters
(including the registration for a delayed offering (a "Shelf Registration")) for
its own account (excluding any employee benefit or compensation programs), the
Registrant shall give written notice of such proposed registration (a "Piggyback
Registration") to WECC and Global and will include in any such registration
Registrable Securities of any of the Parties that, within 15 days after the
giving of such notice, shall request (in a written notice to the Registrant)
such inclusion, and the Registrant shall use its reasonable efforts to cause the
managing underwriters of the proposed offering to permit such Registrable
Securities to be included in the registration statement for such offering and to
be included in such offering on substantially the same terms and conditions as
those of the Registrant; provided that if in the opinion of the managing
underwriter for such offering the inclusion of such Registrable Securities
therein would adversely affect the number of securities the Registrant could
sell or the price the Registrant could receive for such securities or would in
any other manner adversely affect such offering, the number of Registrable
Securities to be so included shall be reduced on a pro rata basis (based on the
number of Registrable Securities requested to be
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included) so that such holders of Registrable Securities shall be entitled to
include only such number of Registrable Securities, if any, as such managing
underwriter has advised may be included in such registration without adversely
affecting the offering or the price or the number of securities to be sold in
such registration by the Registrant. In the event Registrable Securities are
included in a Shelf Registration and the holders of such Registrable Securities
subsequently elect not to sell such Registrable Securities thereunder, the
Registrant will de-register such Registrable Securities (including filing a
post-effective amendment to the Registration Statement for such Shelf
Registration) and such election shall not affect the rights of such holders
hereunder. Each holder of securities included in a Piggyback Registration shall
sell its Registrable Securities through the underwriters for the securities
otherwise sold thereunder pursuant to an underwriting agreement acceptable to
such underwriters and on substantially the same terms and conditions as the
Registrant. Each holder of Registrable Securities included in such registration
shall otherwise be entitled to all the benefits of this Agreement. A holder who
has given notice to the Registrant hereunder requesting inclusion of any
Registrable Securities in a Piggyback Registration shall have the right to
withdraw all or part of its Registrable Securities from the Piggyback
Registration at any time prior to the effective date of the registration
statement for such Piggyback Registration. The Registrant shall have the right
to delay or cancel any offering to which this Section 2.1(d) relates or to
withdraw any registration statement to which this Section 2.1(d) relates at any
time prior to the effective date thereof.
2.2 REGISTRATION STATEMENT FORM. Registrations under this ARTICLE II,
shall be on such appropriate registration form of the Commission as agreed to by
Global and the Registrant. The Registrant agrees to include in any such
registration statement all information that holders of Registrable Securities
being registered thereby shall reasonably request.
2.3 EXPENSES. The Registrant shall pay all Registration Expenses in
connection with registrations hereunder whether or not any registration
statement becomes effective and whether or not any securities are sold pursuant
to any registration statement (including without limitation all salaries and
expenses of its officers performing any legal and accounting functions).
2.4 EFFECTIVE REGISTRATION. A registration pursuant to Section 2.1(a)
or 2.1(b) hereof shall not be deemed to have been effected unless and until (i)
the registration statement has become effective pursuant to the Securities Act
and (ii) after it has become effective, the offering of Registrable Securities
pursuant to such registration statement is not materially interfered with by any
stop order, injunction or other order or requirement of the Commission or other
governmental agency or court and (iii) all Registrable Securities offered in
such registration are sold at the price (or within the range) set forth on the
cover page of the prospectus included in the registration statement, in the form
thereof declared effective by the Commission, as amended by any post-effective
amendments thereto, filed with respect to such offering. In the event that any
such registration pursuant to Section 2.1(a) or 2.1(b) is not so deemed to have
been effected, the registration right relied upon with respect thereto shall be
deemed not to have been exercised and shall be reinstated for all purposes and
may again be exercised in accordance with such Section 2.1(a) or 2.1(b), as the
case may be; provided, however, that if Global's first request for a
registration pursuant to Section 2.1(a) is withdrawn by
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Global for any reason (in which case the Registrant will withdraw the related
registration statement), Global may at any time thereafter make a second request
for a registration under Section 2.1(a), however, such second request shall
extinguish Global's rights to make any additional requests for a registration
pursuant to Section 2.1(a) (but not Section 2.1(b)) and shall be deemed (so long
as the conditions set forth in clauses (i), (ii) and (iii) of the first sentence
of this Section 2.4 have been met), for purposes of Section 2.1(c), to
constitute Global's right to request a registration pursuant to Section 2.1(a).
2.5 UNDERWRITERS. The managing underwriter or underwriters of any
underwritten public offering effected pursuant to Sections 2.1(a) or 2.1(b)
hereof shall be determined by Global and shall be reasonably acceptable to WECC
and the Registrant.
2.6 APPORTIONMENT IN REGISTRATIONS REQUESTED. With respect to any
registration requested pursuant to Section 2.1(a) or (b), if the managing
underwriter shall advise the Registrant in writing (with a copy to each holder
including or requesting the inclusion of its Registrable Securities in such
registration statement) that, in its opinion, the number of securities requested
to be included in such registration exceeds the number that can be sold in such
offering within a price range acceptable to Global or would in any other manner
adversely affect such offering, the number of Registrable Securities requested
to be so included shall be reduced so that each seller shall be entitled to
include such number of Registrable Securities, as the case may be, determined by
multiplying the number of Registrable Securities that such managing underwriter
has advised may be included in such registration without so adversely affecting
the offering or the price range thereof by a fraction, the numerator of which is
the number of Registrable Securities held by such seller of Registrable
Securities and the denominator of which is the total number of Registrable
Securities held by all Persons who have requested to sell Registrable Securities
in the offering.
ARTICLE III
REGISTRATION PROCEDURES
3.1 PROCEDURES. If and whenever the Registrant is required to effect
the registration of any Registrable Securities under the Securities Act as
provided in ARTICLE II, the Registrant shall as expeditiously as possible:
(a) in the case of a registration of Registrable Securities pursuant to
Section 2.1(a), promptly prepare and as soon thereafter as is reasonably
practicable, but no later than 90 days following the date of the IPO Notice,
file with the Commission the requisite Registration Statement to effect such
registration and use its reasonable best efforts to cause such Registration
Statement to become effective as promptly as practicable after the filing
thereof; provided that all holders of Registrable Securities being registered
thereby shall have a reasonable opportunity to review and comment on such
Registration Statement prior to the filing thereof with the Commission, and
provided that the Registrant shall make all changes thereto that any such holder
may request in
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writing to the extent that such changes are required, in the judgment of the
Registrant, by the Securities Act;
(b) in the case of a registration of Registrable Securities pursuant to
Section 2.1(b), promptly prepare and as soon thereafter as is reasonably
practicable, but no later than 90 days following the date of the Demand Notice,
file with the Commission the requisite Registration Statement to effect such
registration and thereafter use its reasonable best efforts to cause such
Registration Statement to become effective as promptly as practicable after the
filing thereof; provided that all holders of Registrable Securities being
registered thereby shall have a reasonable opportunity to review and comment on
such Registration Statement prior to the filing thereof with the Commission, and
provided that the Registrant shall make all changes thereto that any such holder
may request in writing to the extent that such changes are required, in the
judgment of the Registrant, by the Securities Act;
(c) prepare and file with the Commission such amendments (including
post-effective amendments) and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement until such time as all of such securities have been
disposed of in accordance with the intended method of disposition set forth in
such registration statement or 90 days after the effective date of the
registration statement, whichever is shorter (but not before the expiration of
the applicable period referred to in Section 4(3) of the Securities Act and Rule
174 thereunder);
(d) furnish without charge to each seller of Registrable Securities
covered by such registration statement such number of conformed copies of such
registration statement and of each such amendment and supplement thereto, such
number of copies of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424, Rule 430A or Rule 464 under the Securities Act,
conforming with the requirements of the Securities Act and such other documents
as such seller of Registrable Securities may reasonably request;
(e) use its reasonable best efforts to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such other securities or blue sky laws of such jurisdictions in
the United States as each seller of Registrable Securities shall reasonably
request, keep such registration or qualification in effect for so long as such
registration statement remains in effect and take any other action that may be
reasonably necessary or advisable to enable such seller of Registrable
Securities to consummate the disposition in such jurisdictions of the securities
owned by such seller of Registrable Securities, except that the Registrant shall
not for any such purpose be required to qualify generally to do business as a
foreign corporation or other entity in any jurisdiction wherein it would not,
but for the requirements of this Section 3.1, be obligated to be so qualified or
to consent to general service of process in any such jurisdiction;
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(f) furnish to each seller of Registrable Securities and the
underwriters (if applicable) a signed copy, addressed to such seller, except as
provided in Section 3.1 below, and the underwriters, of
(i) an opinion of outside counsel for the Registrant, dated
the effective date of such registration statement (or, if such
registration involves an underwritten public offering, dated the date
of the closing under the underwriting agreement), reasonably
satisfactory in form, scope and substance to the sellers of Registrable
Securities and the underwriters, and
(ii) a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an
underwritten public offering, dated the date of the closing under the
underwriting agreement), signed by the independent public accountants
who have certified the Registrant's financial statements included in
such registration statement, addressed to the underwriters and, to the
extent the same can be reasonably obtained, to each seller, covering
substantially the same matters with respect to such registration
statement (and the prospectus included therein) and with respect to
events subsequent to the date of such financial statements, as are
customarily covered in accountants' letters delivered to underwriters
in underwritten public offerings of securities and such other
financial, tabular and statistical matters as are typically covered in
such a "comfort" letter as the underwriters may reasonably request;
(g) immediately notify each seller of Registrable Securities covered by
such registration statement, and (if requested by any such Person) confirm such
notice in writing, (i) when a prospectus or any prospectus supplement or
post-effective amendment has been filed, and, with respect to a registration
statement or any post-effective amendment, when the same has become effective
under the Securities Act and each applicable state law, (ii) of any request by
the Commission or any other Federal or state governmental authority for
amendments or supplements to a registration statement or related prospectus or
for additional information, (iii) if at any time any of the representations or
warranties of the Registrant contained in any agreement (including any
underwriting agreement) contemplated by Section 3.1(1) or Section 3.2 below
ceases to be true and correct in any material respect, (iv) of the receipt by
the Registrant of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, (v) of the Registrant's reasonable determination
that a post-effective amendment to a registration statement would be appropriate
and (vi) at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, upon discovery that, or upon the happening
of any event as a result of which, the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
under which they were made, and, in any such event, at the request of any such
seller or holder of Registrable Securities promptly prepare and furnish to such
seller or holder of Registrable Securities a reasonable number of copies of a
supplement to or an amendment of such prospectus, and use its best efforts to
cause any such amendment, if a post-effective amendment, to promptly be declared
effective, as may be necessary
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so that, as thereafter delivered to the purchasers of such securities, such
prospectus, as amended or supplemented, shall not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made;
(h) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least 12 months, but not more than 18 months,
beginning with the first full calendar month after the effective date of such
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act;
(i) in the event of the issuance or threatened issuance of any stop
order suspending the effectiveness of a Registration Statement, or any order
suspending or preventing the use of any related prospectus or suspending the
qualification of any Registrable Securities included in such Registration
Statement for sale in any jurisdiction, promptly notify each holder of
Registrable Securities of the issuance or threatened issuance of such order and
use its reasonable best efforts promptly to prevent the entry of such order or
obtain the withdrawal of such order if issued;
(j) use its reasonable best efforts to cause such Registrable
Securities covered by such Registration Statement to be registered with or
approved by such other United States governmental agencies or authorities as may
be necessary to enable the holders thereof to consummate the disposition of such
Registrable Securities;
(k) make reasonably available for any holder of Registrable Securities,
any underwriter participating in any disposition pursuant to such Registration
Statement, and any attorney, accountant or other agent retained by any such
holder or underwriter (collectively, the "Inspectors"), all relevant financial
and other records, corporate documents and properties of the Registrant
(collectively, the "Records"), and cause the officers, members of the Board of
Directors and employees of the Registrant to supply all information reasonably
requested by any such Inspector in connection with such Registration Statement
prior to its effectiveness, in each case to the extent that such Records and
Information are pertinent to the information disclosed in the Registration
Statement; provided, that each such Inspector shall execute and deliver to the
Registrant a Confidentiality Agreement in form reasonably satisfactory to the
Registrant. Records which the Registrant determines, in good faith, to be
confidential and which the Registrant notifies the Inspectors are confidential
shall not be disclosed by the Inspectors unless (i) the disclosure of such
Records is necessary to avoid or correct a material misstatement or material
omission in the Registration Statement or (ii) the release of such Records is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction. Each holder of Registrable Securities agrees that it will, upon
learning that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Registrant and allow the Registrant, at the
Registrant's expense, to undertake appropriate action to prevent disclosure of
the Records deemed confidential;
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(l) enter into such customary agreements (including, without
limitation, underwriting agreements in customary form, substance and scope) and
take all such other actions as the holders of the Registrable Securities being
sold or the underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities.
(m) use its reasonable best efforts to cause all such Registrable
Securities to be listed or quoted on a securities exchange, automated quotation
system or over-the-counter market upon which Global requests, in the case of an
IPO, or, in any other case, upon which similar securities issued by the
Registrant are then listed or quoted;
(n) cooperate with the holders of Registrable Securities being sold and
the managing underwriter or underwriters to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold,
which certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company; and enable such
Registrable Securities to be registered in such names as the managing
underwriter or underwriters may request at least one (1) business day prior to
the sale of Registrable Securities;
(o) cooperate and assist in any filing required to be made with the
National Association of Securities Dealers, Inc. and the performance of any due
diligence investigation by any underwriter, including any "qualified independent
underwriter," or any holder of Registrable Securities being sold; and
(p) cooperate with the marketing and sale of securities in accordance
with this Agreement including, without limitation, providing reasonable
marketing support and causing appropriate member(s) of management of the
Registrant to be reasonably available to participate in "road show"
presentations and attend meetings with underwriters as reasonably requested by
Global or the underwriters.
3.2 UNDERWRITING AGREEMENT. If requested by the underwriters for any
offering pursuant to a registration requested under Sections 2.1(a) or 2.1(b),
the Registrant shall enter into an underwriting agreement with such underwriters
for such offering, such agreement to contain such representations and warranties
by the Registrant and such other terms as are generally prevailing in agreements
of this type, including, without limitation, indemnities to the effect and to
the extent provided in ARTICLE IV below. In connection with any registration
pursuant to ARTICLE II hereof, each holder of Registrable Securities agrees, if
so required by the managing underwriter, not to effect any sale or distribution
(including any sale pursuant to Rule 144) of Registrable Securities (other than
as part of such underwritten public offering) from the date of the IPO Notice or
Demand Notice, as applicable, to 180 days after the effective date of such
registration statement. The Registrant agrees, if so required by the managing
underwriters, not to effect any public sale or distribution for its own account
of any of its equity securities or securities convertible into or exchangeable
or exercisable for any of such equity securities from the date of the IPO Notice
or Demand Notice, as applicable, to 180 days (or such other number of days as
the Registrant and such managing underwriters may agree) after the effective
date of any such registration statement, except
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in connection with a stock option plan, stock purchase plan, savings or similar
employee benefit or director plan, or in connection with an acquisition, merger
or exchange offer.
3.3 SELLER'S INFORMATION. The Registrant may require each proposed
seller of Registrable Securities as to which any registration is being effected
to promptly furnish the Registrant, as a condition precedent to including such
Person's Registrable Securities in any registration, such information regarding
such seller of Registrable Securities as the Registrant may from time to time
reasonably request in writing and as may be necessary in order for the
Registrant to comply with its obligations hereunder.
3.4 PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Registrant shall give the sellers of Registrable
Securities, their underwriters and their respective counsel and accountants, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and will give them such access to its
books and records and such opportunities to discuss the business of the
Registrant with its officers and the independent public accountants who have
certified its financial statements as shall be necessary to conduct a reasonable
investigation within the meaning of the Securities Act, including, without
limitation, as provided in Section 3.1(k) hereof.
3.5 NOMINEES FOR BENEFICIAL OWNERS. If any Registrable Securities are
held by a nominee for the holder as the beneficial owner thereof, the holder
may, upon the giving of written notice to the Registrant, at its election be
treated as the holder of such Registrable Securities for purposes of any request
or other action by it pursuant to this Agreement or any determination of any
number or percentage of shares of Registrable Securities held by the holders
contemplated by this Agreement. Without limiting the foregoing, the Limited
Partners and the Registrant understand that the Limited Partners may choose to
hold their respective shares of Common Stock in one or more corporations or
entities controlled by such Limited Partners. For the purposes of this
Agreement, such shares held by such corporations or entities shall be deemed to
be beneficially owned by the Limited Partners. The Registrant may require
assurances reasonably satisfactory to it of such owner's beneficial ownership of
such Registrable Securities.
ARTICLE IV
INDEMNIFICATION
4.1 INDEMNIFICATION BY THE REGISTRANT. In the event of any registration
of Registrable Securities under the Securities Act pursuant to this Agreement,
the Registrant shall to the fullest extent permitted by law, indemnify and hold
harmless the seller of any Registrable Securities covered by such registration
statement, its directors and officers, general and limited partners (and
directors and officers thereof), their respective agents, each other Person who
participates as an underwriter in the offering or sale of such securities, each
officer and director of each such underwriter, and each
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such other Person, if any, who controls such seller of Registrable Securities or
any such underwriter within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, against any losses, claims, damages, liabilities
and expenses, joint or several, to which such seller of Registrable Securities
or any such director or officer or other indemnified Person or underwriter or
controlling Person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any document incorporated by reference therein, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading and
any violation by the Registrant of any Federal, state or common law rule or
regulation applicable to the Registrant and relating to any action or inaction
by the Registrant in connection with any such registration, and in any such case
the Registrant shall reimburse such seller of Registrable Securities and each
such director, officer or other indemnified Person, underwriter and controlling
Person for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, liability,
action or proceeding; provided that The Registrant shall not be liable in any
such case to the extent that any such loss, claim, damage, liability (or action
or proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Registrant for use in the
preparation thereof by such seller of Registrable Securities or underwriter, as
the case may be; and, provided further, that the foregoing indemnity agreement
with respect to any preliminary prospectus shall not inure to the benefit of any
underwriter from whom the Person asserting any such losses, claims, damages or
liabilities purchased Registrable Securities, or any Person controlling such
underwriter, if a copy of the final prospectus (as then amended or supplemented
if the Registrant shall have furnished any amendments or supplements thereto)
was not sent or given by or on behalf of such underwriter to such Person, if
required by law so to have been delivered, at or prior to the written
confirmation of the sale of the Registrable Securities to such Person, and if
the final prospectus (as so amended or supplemented) would have cured the defect
giving rise to such losses, claims, damages or liabilities. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of such seller of Registrable Securities or any such director, officer,
agent, partner, underwriter or controlling Person and shall survive the transfer
of such securities by such seller of Registrable Securities.
4.2 INDEMNIFICATION BY THE SELLERS OF REGISTRABLE SECURITIES. Each
seller of such Registrable Securities, as a condition to the inclusion of their
Registrable Securities in the registration statement, shall severally (and not
jointly or jointly and severally) indemnify and hold harmless (in the same
manner and to the same extent as set forth in Section 4.1), the Registrant, each
director of the Registrant, each officer of the Registrant and each other
Person, if any, who controls the Registrant within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act, and all
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other prospective sellers of Registrable Securities and their respective
directors, officers, agents, general and limited partners (and directors and
officers thereof and their respective controlling Persons with respect to any
statement or alleged statement in, or omission or alleged omission from, such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Registrant by such seller of Registrable Securities or underwriter specifically
stating that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement. Such indemnity shall remain in full force and effect, regardless of
any investigation made by or on behalf of the Registrant or any such director,
officer, agent or controlling Person and shall survive the transfer of such
securities by such seller of Registrable Securities. No Person selling
Registrable Securities shall be liable hereunder for any amount in excess of the
product obtained by multiplying (x) the purchase price per Registrable Security
so sold by such Person by (y) the number of Registrable Securities so sold by
such Person.
4.3 CONTRIBUTION. If the indemnification provided for in this ARTICLE
IV is unavailable to the indemnified party or parties in respect of any losses,
claims, damages or liabilities referred to therein, then the Registrant, the
sellers of Registrable Securities and the underwriters shall contribute to the
amount of such losses, claims, damages or liabilities (x) as between the
Registrant and the sellers of Registrable Securities covered by a registration
statement, on the one hand, and the underwriters, on the other, in such
proportion as is appropriate to reflect the relative benefits received by the
Registrant and such sellers of Registrable Securities, on the one hand, and the
underwriters, on the other, from the offering of the Registrable Securities, or
if such allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits but also the relative
fault of the Registrant and such sellers of Registrable Securities, on the one
hand, and of the underwriters, on the other, in connection with the statements
or omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations, and (y) as between the
Registrant, on the one hand, and each seller of Registrable Securities covered
by a registration statement, on the other, in such proportion as is appropriate
to reflect the relative fault of the Registrant and of each such seller of
Registrable Securities in connection with such statements or omissions, as well
as any other relevant equitable considerations. The relative benefits received
by the Registrant and such sellers of Registrable Securities, on the one hand,
and the underwriters, on the other, shall be deemed to be in the same proportion
as the total proceeds from the offering (before underwriting discounts and
commissions and expenses) received by the Registrant and such sellers of
Registrable Securities bear to the total underwriting discounts and commissions
received by the underwriters. The relative fault of the Registrant and such
sellers of Registrable Securities, on the one hand, and of the underwriters, on
the other, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Registrant and such sellers of Registrable Securities or by the underwriters.
The relative fault of the Registrant, on the one hand, and of each such seller
of Registrable Securities, on the other, shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact relates to information supplied by such party, any action or inaction by
such party, and the parties'
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relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Registrant and the sellers of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this Section 4.3
were determined by pro rata allocation (even if the underwriters were treated as
one entity for such purpose) or by any other method of allocation that does not
take account of the equitable considerations referred to in the next preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities referred to in the next preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 4.3, no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages that
such underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no seller of
Registrable Securities shall be required to contribute any amount in excess of
the amount by which the total price at which the Registrable Securities of such
seller were offered to the public exceeds the amount of any damages that such
seller has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. Each seller's obligation to contribute pursuant to
this Section 4.3 is several in the proportion that the proceeds of the offering
received by such seller bears to the total proceeds of the offering received by
all of the sellers and not joint.
4.4 NOTICES OF CLAIMS, ETC. In case any proceeding (including any
governmental investigation) shall be instituted involving any Person in respect
of which indemnity may be sought pursuant to Section 4.1 or 4.2, such Person
(the "indemnified party") shall promptly notify the Person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and such counsel for the
indemnified party is of the opinion that representation of both parties by the
same counsel would be inappropriate due to material differing interests between
them. It is understood that the indemnifying party shall not in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
(x) the fees and expenses of more than one separate firm (in addition to any
local counsel) for all underwriters and all Persons, if any, who control any
underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, (y) the fees and expenses of more
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than one separate firm (in addition to any local counsel) for the Registrant,
its directors, its officers who sign the registration statement and each Person,
if any, who controls the Registrant within the meaning of either such Section
and (z) the fees and expenses of more than one separate firm (in addition to any
local counsel) for all sellers of Registrable Securities and all Persons, if
any, who control any seller of Registrable Securities within the meaning of
either such Section, and that all such fees and expenses shall be reimbursed as
they are incurred. In the case of any such separate firm for the underwriters
and such control Persons of underwriters, such firm shall be designated in
writing by the managing underwriter. In the case of any such separate firm for
the Registrant, and such directors, officers and control Persons of the
Registrant, such firm shall be designated in writing by the Registrant. In the
case of any such separate firm for the sellers of Registrable Securities and
such controlling Persons of the sellers of Registrable Securities, such firm
shall be designated in writing by the sellers of a majority of the Registrable
Securities covered by the registration statement. The indemnifying party shall
not be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
ARTICLE V
MISCELLANEOUS
5.1 SALES COMPLIANCE. The Limited Partners agree, and each holder of
Registrable Securities (including Registrable Securities in any Registration
Statement filed pursuant to this Agreement) will be deemed to have agreed, as
follows:
(a) if any Registrable Securities are being registered in any
registration pursuant to this Agreement, the holder thereof will comply with all
anti-stabilization, manipulation, and similar provisions of Section 10 of the
Exchange Act, and any rules and regulations promulgated thereunder by the
Commission, and at the request of the Registrant, will execute and deliver to
the Registrant and to any underwriter participating in such offering, an
appropriate agreement to such effect; and
(b) at the end of any period during which the Registrant is
obligated to keep a Registration Statement current and effective as described
herein, the holders of Registrable Securities included in the Registration
Statement shall discontinue sales therefor pursuant to such Registration
Statement.
5.2 COMPLETE AGREEMENT; AMENDMENT. This Agreement, together with the
Formation Agreement and the LP Agreement, constitutes the entire agreement of
the Parties with respect to the subject matter hereof and supersedes all other
agreements, representations, warranties, statements, promises and
understandings, whether oral or written, with respect to the subject matter
hereof.
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5.3 NOTICES.
(a) Addresses. All notices under this Agreement shall be in
writing and shall be delivered by personal service, certified or
registered mail, postage prepaid, return receipt requested,
nationally-recognized overnight courier, courier charges prepaid, or
facsimile transmission (followed by telephone confirmation of receipt),
to WECC, the Registrant or Global, as applicable, at the addresses
herein set forth.
The addresses for notices are as follows:
Weatherford Enterra Compression Company L.P.
5 Post Oak Park, Suite 1760
Houston, Texas 77027
Attention: General Counsel
Facsimile: (713) 297-8488
Weatherford Global Compression Services, L.P.
1231 Greenway Drive, Suite 550
Irving, Texas 75038
Attention: General Counsel
Facsimile: (972) 714-0102
Global Compression Services, Inc.
c/o General Electric Capital Corporation
260 Long Ridge Road
Stamford, Connecticut 06927
Attention: General Counsel
Facsimile: (203) 357-3365
(b) Effective Date of Notices, etc. All notices, demands and
requests shall be effective upon actual receipt or, in the case of
delivery by facsimile transmission, the completion of such transmission
during the normal business hours of the recipient. Rejection or other
refusal to accept or the inability to deliver because of changed
address of which no notice was given as provided in Section 5.2(c)
shall be deemed to be receipt of the notice, demand or request sent.
(c) Changes. By giving to the other Parties at least 30 days'
prior written notice thereof, the Parties and their respective
permitted successors and permitted assigns shall have the right from
time to time and at any time during the term of this Agreement to
change their respective addresses for notices and each shall have the
right to specify as its or his address for notices any other address
within the United States of America.
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5.4 ASSIGNMENT; OTHER BENEFITS. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the Parties and their
respective heirs, executors, successors and permitted assigns. No Limited
Partner may assign its rights under this Agreement, except to Permitted
Transferees of Registrable Securities, without the prior written consent of the
Partnership or, after its formation and adoption of this Agreement, if
applicable, Newco.
5.5 AMENDMENTS AND WAIVERS. This Agreement may be amended and the
Partnership or, after its formation and adoption of this Agreement, if
applicable, Newco, may take any action herein prohibited or omit to perform any
act herein required to be performed by it, only if the Partnership or Newco, as
applicable, shall have obtained the written consent to such amendment, action or
omission to act, of each Limited Partner then holding outstanding Registrable
Securities. No waiver of any of the provisions of this Agreement shall be deemed
to or shall constitute a waiver of any other provisions hereof (whether or not
similar) or the same provision hereof at a later time. No failure by a Party to
insist upon the strict performance of any term, covenant or condition of this
Agreement, or to exercise any right or remedy upon breach of any provision, and
no acceptance of payment or performance during the continuation of any such
breach, shall constitute a waiver of any term, covenant or condition herein or a
waiver of any subsequent breach or default in the performance of any term,
covenant or condition herein.
5.6 HEADINGS. The headings of the Articles and Sections of this
Agreement are included for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof or
thereof.
5.7 SEVERABILITY OF PROVISIONS. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any Party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the Parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
5.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
5.9 GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the internal laws of the state of Texas, without reference
to or application of any conflicts of laws principles.
5.10 ADDITIONAL AGREEMENTS. From and after the date of this Agreement,
the Registrants will not, without the prior written consent of the holders of
all Registrable Securities then outstanding, enter into any agreement with
respect to its securities which is inconsistent with or violates the rights
granted to the holders of Registrable Securities in this Agreement.
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IN WITNESS WHEREOF, the Parties have hereunto executed this Agreement
as of the date first set forth in the introduction to this Agreement.
WEATHERFORD GLOBAL COMPRESSION SERVICES, L.P.,
By: Weatherford Global Compression Holding, L.L.C.,
its General Partner
By: /s/ ROBERT STILES
--------------------------------------------------
Name: Robert Stiles
------------------------------------------------
Title: President
-----------------------------------------------
WEATHERFORD ENTERRA COMPRESSION COMPANY, L.P.,
By: Enterra Compression Company, its General Partner
By: /s/ CURTIS W. HUFF
--------------------------------------------------
Curtis W. Huff
Senior Vice President
GLOBAL COMPRESSION SERVICES, INC.,
By: /s/ PAUL J. FRIESEN
--------------------------------------------------
Name: Paul J. Friesen
------------------------------------------------
Title: President and Chief Executive Officer
-----------------------------------------------
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EXHIBIT 99.1
News Release
CONTACTS:
Don Galletly, Weatherford (713) 297-8466
John Oliver, GE Capital (203) 357-4346
Weatherford International and GE Capital
Announce Compression Joint Venture
- One of the World's Largest Compression Fleets -
HOUSTON, TX and STAMFORD, CT, Feb. 3, 1999 - Weatherford International, Inc.
(NYSE: WFT) and GE Capital announced today the formation of a joint venture
between their compression groups, Weatherford Compression and Global
Compression Services, Inc. The new company, Weatherford Global Compression
Services, is 64 percent owned by Weatherford and 36 percent owned by GE
Capital.
Bernard J. Duroc-Danner, Chairman and CEO of Weatherford, stated, "The merging
of these two businesses makes industrial sense and is strategic for
Weatherford. First and foremost, the need for compression is growing in sync
with natural gas use worldwide and Weatherford Global will be a market leader.
Second, the joint venture leverages Weatherford's extensive international
infrastructure. It will be aided in that process by its strong, modern
compression fleet available in the most desirable configurations. Finally, the
combination allows for substantial savings."
The Weatherford Global joint venture brings together more than 30 years of
experience in the natural gas compression industry. In 1998, the respective
fleets generated a total of approximately $250 million in revenue and $67.5
million of EBITDA. In addition to a fleet of more than 4,000 units, which
represents 1.0 million horsepower, Weatherford Global offers a comprehensive
range of compression services, including total compression management (covering
turnkey installation and operation of compression applications of any size),
maintenance and reconditioning services.
Robert F. Stiles has been named President of Weatherford Global Compression
Services. Mr. Stiles was formerly President of Weatherford Artificial Lift
Systems. Weatherford Global Compression Services will be headquartered at 1231
Greenway Drive, Suite 990, Irving, Texas 75038.
Houston-based Weatherford International, Inc. is one of the world's largest
providers of engineered products and services to the drilling and production
segments of the oil and gas industry.
GE Capital, with assets of more than $300 billion, is a global, diversified
financial services company with 28 specialized businesses. A wholly owned
subsidiary of General Electric Company, GE Capital, based in Stamford,
Connecticut, provides equipment management, mid-market and specialized
financing, specialty insurance and a variety of consumer services, such as car
leasing, home mortgages and credit cards, to businesses and individuals around
the world. GE is a diversified manufacturing, technology and services company
with operations worldwide.
