<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
EQUITY COMPRESSION SERVICES CORPORATION
(formerly known as Hawkins Energy Corporation)
----------------------------------------------
(Name of Issuer)
Common Stock, $0.01 par value per share
- --------------------------------------------------------------------------------
(Title of Class of Securities)
420258 10 5
- --------------------------------------------------------------------------------
(CUSIP Number)
HACL, Ltd.
Energy Investors Joint Venture
8080 N. Central Expressway, Suite 1600
Dallas, Texas 75206
(214) 891-7000
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
December 19, 1996
------------------------------------------------------------
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Page 1 of __ pages
Exhibit Index appears on Page 1__
<PAGE> 2
CUSIP NO. 420258 10 5 13D Page 2 of __ Pages
<TABLE>
<S> <C>
(1) Name of Reporting Person HACL, Ltd.
S.S. or I.R.S. Identification No. of Above Person I.D. No. 75-2679736
(2) Check the Appropriate box if a Member of a Group (a)
(See instructions) (b) x
(3) SEC Use Only ___________________
(4) Source of Funds (See instructions) WC
(5) Check if Disclosure of Legal Proceedings is Not Applicable
required Pursuant to Items 2(d) or 2(e)
(6) Citizenship or Place of
Organization Texas
Number of Shares (7) Sole Voting
Beneficially Power 3,863,636
Owned by Each ------------------
Reporting Per- (8) Shared Voting
son With Power 8,000,000
------------------
(9) Sole Dispositive Power 3,863,636
------------------
(10) Shared Dispositive Power 8,000,000
------------------
(11) Aggregate Amount Beneficially Owned by Each
Reporting Person 3,863,636
------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Not applicable
Certain Shares (See Instructions)
(13) Percent of Class Represented by Amount in Row (11) 18.4%
(14) Type of Reporting Person (See Instructions) PN
</TABLE>
<PAGE> 3
CUSIP NO. 420258 10 5 13D Page 3 of __ Pages
<TABLE>
<S> <C>
(1) Name of Reporting Person Energy Investors
Joint Venture
S.S. or I.R.S. Identification No. of Above Person I.D. No. 75-2679737
(2) Check the Appropriate box if a Member of a Group (a)
(See instructions) (b) x
(3) SEC Use Only ___________________
(4) Source of Funds (See instructions) WC
(5) Check if Disclosure of Legal Proceedings is Not Applicable
required Pursuant to Items 2(d) or 2(e)
(6) Citizenship or Place of
Organization Texas
Number of Shares (7) Sole Voting 4,136,364
Beneficially Power --------------------
Owned by Each
Reporting Per- (8) Shared Voting -0-
son With Power --------------------
(9) Sole Dispositive Power 4,136,364
--------------------
(10) Shared Dispositive Power -0-
--------------------
(11) Aggregate Amount Beneficially Owned by Each 4,136,364
Reporting Person --------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Not applicable
Certain Shares (See Instructions)
(13) Percent of Class Represented by Amount in Row (11) 19.7%
(14) Type of Reporting Person (See Instructions) PN
</TABLE>
<PAGE> 4
CUSIP NO. 420258 10 5 13D Page 4 of __ Pages
The Statement relates to Common Stock, par value $0.01 per share, of
Equity Compression Services Corporation, an Oklahoma corporation a Texas Joint
Venture (the "Company") held by HACL, Ltd., a Texas limited partnership and
Energy Investors Joint Venture, a Texas joint venture.
Item 1. Security and Issuer.
The class of equity security to which this statement relates is the
Common Stock $0.01 par value per share (the "Common Stock") of Equity
Compression Services Corporation, an Oklahoma corporation (the "Company"). The
Company was formally known as Hawkins Energy Corporation. The Company has its
principal executive offices at Twenty East Fifth Street, Suite 1500, Tulsa,
Oklahoma 74103.
Item 2. Identity and Background.
The persons filing these statements are HACL, Ltd. ("HACL"), a Texas
limited partnership, and Energy Investors Joint Venture, a Texas joint venture
("Energy Investors" or the "Joint Venture"). HACL's business address is 8080
North Central Expressway, Suite 1600, Dallas, Texas 75206 and its general
partner is Six-Dawaco, Inc, a Texas corporation. HACL, Ltd. was formed to
invest in the Company.
Six-Dawaco, Inc., a Texas corporation ("Six-Dawaco"), is the sole
general partner of HACL, Ltd. Six-Dawaco's address is 8080 North Central
Expressway, Suite 1600, Dallas, Texas 75206. The Executive Officers and
Directors are Ray C. Davis and Kelcy L. Warren. Mr. Davis and Mr. Warren are
each private investors and their business address is 8080 North Central
Expressway, Suite 1600, Dallas, Texas 75601.
Energy Investors is a Texas joint venture whose business address is
8080 North Central Expressway, Suite 1600, Dallas, Texas 75206. HACL is the
managing joint venturer of Energy Investors. In addition to HACL, the
following persons hold joint venture interest in the Joint Venture:
<TABLE>
<CAPTION>
BUSINESS OR
NAME RESIDENTIAL ADDRESS
---- -------------------
<S> <C>
Lyda Hunt-Herbert, 3900 Thanksgiving Tower
Trustee for Douglas Herbert Hunt Dallas, Texas 75201
Lyda Hunt-Herbert, 3900 Thanksgiving Tower
Trustee for Barabara Ann Hunt Dallas, Texas 75201
</TABLE>
<PAGE> 5
CUSIP NO. 420258 10 5 13D Page 5 of __ Pages
<TABLE>
<S> <C>
Lyda Hunt-Herbert, 3900 Thanksgiving Tower
Trustee for Bruce William Hunt Dallas, Texas 75201
Lyda Hunt-Herbert, 3900 Thanksgiving Tower
Trustee for Lyda Bunker Hunt Dallas, Texas 75201
Lyda Hunt-Herbert, 3900 Thanksgiving Tower
Trustee for David Shelton Hunt Dallas, Texas 75201
Crain Resources, Ltd. P.O. Box 2146
Longview, Texas 79601
James D. Finley 301 Commerce St., Ste. 2400
Fort Worth, Texas 76102
Bryan Wagner 301 Commerce St., Ste. 3400
Fort Worth, Texas 76102
Duer Wagner, Jr. 301 Commerce St., Ste. 3400
Fort Worth, Texas 76102
Sklar & Phillips P. O. Box 3735
Shreveport, La 71133-3735
James Bryant 8080 N. Central Expressway,
Suite 1200
Dallas, Texas 75206
C.R. Devine c/o KCS Resources
P. O. Box 925549
Houston, Texas 77292
G. Lynn Smith 20 Scotsmore Court
Sugarland, Texas 77479
Pinewood Exploration, Inc. 4444 Westgrove Dr.
Profit Sharing Plan Dallas, Texas 75248
Jim Byrd P. O. Box 3247
Dallas, Texas 75606
Charles Williams P. O. Box 3735
Shreveport, La 71133-3735
Robert Merrill P. O. Box 3735
Shreveport, La 71133-3735
Tom Schoonover 2215B Westlake Drive
Austin, Texas 78746
</TABLE>
<PAGE> 6
CUSIP NO. 420258 10 5 13D Page 6 of __ Pages
<TABLE>
<S> <C>
Gary L. Salmon P. O. Box 52149
Lafayette, La 70505
Keith Lawyer 3310 Amherst
Houston, Texas 77052
</TABLE>
The occupation for each of the joint venture partners of the Joint
Venture is as set forth below:
<TABLE>
<CAPTION>
NAME CURRENT OCCUPATION
---- ------------------
<S> <C>
Lyda Hunt-Herbert,
Trustee for Douglas Herbert Hunt N/A
Lyda Hunt-Herbert,
Trustee for Barabara Ann Hunt N/A
Lyda Hunt-Herbert,
Trustee for Bruce William Hunt N/A
Lyda Hunt-Herbert,
Trustee for Lyda Bunker Hunt N/A
Lyda Hunt-Herbert,
Trustee for David Shelton Hunt N/A
Crain Resources, Inc. N/A
James D. Finley Vice President of
Duer Wagner & Company
Bryan Wagner Vice President of
Duer Wagner & Company
Duer Wagner, Jr. President of
Duer Wagner & Company
Sklar & Phillips N/A
James D. Bryant President of
Cardinal Resources, Inc.
C. R. Devine President of KCS Resources, Inc.
G. Lynn Smith Consultant
Pinewood Exploration, Inc. N/A
Profit Sharing
Jim Byrd Partner of Habenicht, Hasty &
Byrd
</TABLE>
<PAGE> 7
CUSIP NO. 420258 10 5 13D Page 7 of __ Pages
<TABLE>
<S> <C>
Charles Williams Secretary/Treasurer of
Sklar & Phillips
Robert Merrill Engineer at
Sklar & Phillips
Tom Schoonover Owner/President of Texas Royalty
Gary L. Salmon Owner/President of H.P.S.
Gas Properties, Inc.
Keith Lawyer Private Investor
</TABLE>
Set forth above is the business address for each of the above joint
venture partners.
Neither Mr. Davis, Mr. Warren, nor any of the joint venture partners
of the Joint Venture has, during the last five years, been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) nor
has he been a party to any civil proceeding of a judicial or administrative
body of competent jurisdiction a result of which was nor is he subject to any
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to federal or state securities laws or finding
any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
The Common Stock of the Company to which this Schedule 13D relates was
acquired pursuant to that certain Stock Purchase Agreement by and between the
Company and HACL dated October 16, 1996 (the "Stock Purchase Agreement").
Pursuant to the Stock Purchase Agreement, HACL acquired 3,863,363 shares of
Common Stock and warrants to purchase 8,000,000 shares of Common Stock (the
"Warrants") for an aggregate consideration of $2,125,000. Such purchase price
was provided by capital contributions from the limited partners of HACL. The
source of such capital contributions for each limited partner of HACL was
personal funds or working capital.
The Joint Venture acquired 4,136,364 shares of Common Stock in
exchange for a payment of $2,275,000. Such purchase price was provided by
capital contributions from the joint venture partners of the Joint Venture in
the amounts set forth below:
<TABLE>
<CAPTION>
NAME CAPITAL CONTRIBUTION
- ---- --------------------
<S> <C>
Lyda Hunt-Herbert,
Trustee for Douglas Herbert Hunt $150,000
</TABLE>
<PAGE> 8
CUSIP NO. 420258 10 5 13D Page 8 of __ Pages
<TABLE>
<S> <C>
Lyda Hunt-Herbert,
Trustee for Barabara Ann Hunt 150,000
Lyda Hunt-Herbert,
Trustee for Bruce William Hunt 150,000
Lyda Hunt-Herbert,
Trustee for Lyda Bunker Hunt 150,000
Lyda Hunt-Herbert,
Trustee for David Shelton Hunt 200,000
Crain Resources, Inc. 350,000
James D. Finley 80,000
Bryan Wagner 80,000
Duer Wagner, Jr. 40,000
Sklar & Phillips 150,000
James W. Bryant 200,000
C.R. Devine 125,000
G. Lynn Smith 100,000
Pinewood Exploration, Inc. 100,000
Profit Sharing Plan
Jim Byrd 125,000
Charles Williams 5,000
Robert Merrill 5,000
Tom Schoonover 15,000
Gary L. Salmon 50,000
Keith Lawyer 50,000
</TABLE>
The source for such capital contributions from each of the joint venture
partners was working capital or personal funds.
The Warrants are not exercisable until certain conditions are
satisfied. See Item 5 herein. A copy of the Stock Purchase Agreement with all
exhibits, including the form of the Warrant, is attached to this statement as
an exhibit.
<PAGE> 9
CUSIP NO. 420258 10 5 13D Page 9 of __ Pages
Item 4. Purpose of Transaction.
The purpose of the transactions contemplated by the Stock Purchase
Agreement is for HACL and the Joint Venture to (1) obtain a substantial equity
investment in the Company, (2) gain control over the board of directors of the
Company, and (3) participate in the growth of the Company.
In connection with the consummation of the transactions contemplated
by the Stock Purchase Agreement, five persons designated by HACL became members
of the Board of Directors of the Company. Such persons are: Ray C. Davis,
Kelcy L. Warren, Matthew S. Ramsey, Richard D. Brannon and Jon R. Stevenson.
As a result, the designees of HACL now constitute a majority of the Board of
Directors of the Company.
Pursuant to the Stock Purchase Agreement, HACL has agreed to use
reasonable efforts to provide to the Company the opportunity to engage in
transactions that would cause the Warrants to become vested; provided, however,
HACL is not obligated to expend it own funds to accomplish such actions. See
Item 5 of this Statement for a discussion of the type of transactions needed to
vest the Warrants. HACL also intends to pursue transactions that will increase
the value of the Company and the value of HACL's and the Joint Venture's
interests in the Company. As a result, HACL may engage in such transaction as
it deems to be in its best interest.
Item 5. Interest in Securities of the Issuer.
Pursuant to the Stock Purchase Agreement, HACL acquired 3,863,636
shares of Common Stock and Energy Investors acquired 4,136,364 for $4,400,000.
Such shares of Common Stock constitute approximately 37.4% of the issued and
outstanding shares of the Company's Common Stock. In addition, HACL received a
Warrant to purchase 8,000,000 shares of Common Stock at the exercise price of
$0.91 per share. The shares of Common Stock to be acquired pursuant to the
exercise of the Warrant together with the shares of Common Stock acquired
pursuant to the Stock Purchase Agreement will aggregate 16,000,000 shares or
approximately 55.1% of the total shares of Common Stock of the Company.
Six-Dawaco, as the general partner of HACL, has sole control over the
voting of the shares of Common Stock of the Company held by HACL. The Board of
Directors of Six-Dawaco consist of Ray C. Davis and Kelcy L. Warren.
Under the Joint Venture Agreement for the Joint Venture (the "Joint
Venture Agreement"), the joint venture partners of the Joint Venture has agreed
that HACL will receive 50% of all appreciation, profits or distributions
received by such joint venture partner
<PAGE> 10
CUSIP NO. 420258 10 5 13D Page 10 of __ Pages
with respect to the shares of Common Stock held by the Joint Venture after the
joint venture partners have received profits or distributions equal to 31.61%
annual return on their investment in the Joint Venture. The Joint Venture did
not receive any of the Warrants.
Under the Joint Venture Agreement, unless earlier terminated the
shares of Common Stock acquired by the Joint Venture pursuant to the Stock
Purchase Agreement will be held by the Joint Venture for four years. HACL as
the managing joint venture partner of the Joint Venture has agreed to vote the
shares of Common Stock held by the Joint Venture in accordance with the
requests of the joint venture partners in accordance with their respective
interests in the Joint Venture. Each of the joint venture partners of the
Joint Venture has an interest in the Joint Venture that would currently entitle
such joint venture partner to vote the following number of shares of Common
Stock:
<TABLE>
<CAPTION>
Name Equivalent Shares
- ---- -----------------
<S> <C>
Lyda Hunt-Herbert
Trustee for Douglas Herbert Hunt 272,727.27
Lyda Hunt-Herbert
Trustee for Barabara Ann Hunt 272,727.27
Lyda Hunt-Herbert
Trustee for Bruce William Hunt 272,727.27
Lyda Hunt-Herbert
Trustee for Lyda Bunker Hunt 272,727.27
Lyda Hunt-Herbert
Trustee for David Shelton Hunt 363,636.36
Crain Resources 636,363.64
Jim Finley 145,454.55
Bryan Wagner 145,454.55
Duer Wagner, Jr. 72,727.27
Sklar & Phillips 272,727.27
James W. Bryant 363,636.36
C.R. Devine 227,272.73
Lynn Smith 181,818.18
</TABLE>
<PAGE> 11
CUSIP NO. 420258 10 5 13D Page 11 of __ Pages
<TABLE>
<S> <C>
Pinewood Exploration, Inc. 181,818.18
Profit Sharing Plan
Jim Byrd 227,272.73
Charles Williams 9,090.91
Robert Merrill 9,090.91
Tom Schoonover 27,272.73
Gary L. Salmon 90,909.09
Keith Lawyer 90,909.09
</TABLE>
Warrants. All of the Warrants issued to HACL will expire four years
from the date of issuance (the "Expiration Date"). The Warrants will not
become exercisable until the satisfaction of the following vesting
requirements:
Providing New Business. The Warrants will vest based upon HACL,
directly or indirectly, providing to the Company contracts or agreements to
lease natural gas compressors from the Company having an aggregate horsepower
as follows:
<TABLE>
<CAPTION>
Aggregate Horsepower Percent of Warrants Vested
- -------------------- --------------------------
<S> <C>
15,000 or greater 100%
11,250 to 14,999 75%
7,500 to 11,249 50%
3,750 to 7,499 25%
</TABLE>
For purposes of satisfying the above vesting requirements, the
following transactions will be considered to be equivalent to providing
contracts or agreements for the lease of natural gas compressors:
o Any sale and lease back transaction originated by HACL,
provided that the purchase price of the compressors to the
Company does not exceed their fair market value, the lease
rentals are at not less than market rates and the transaction
is approved by directors of the Company not affiliated with or
designated by HACL.
o Any compressors provided by the Company to any oil and gas
properties acquired by the Company which were identified by
HACL and which properties satisfy any of the vesting
requirements discussed below.
There is no specified length or other required terms of the compressor
leases to be provided by HACL for these purposes. However, only the leases
provided by HACL which are in effect at
<PAGE> 12
CUSIP NO. 420258 10 5 13D Page 12 of __ Pages
the time that any vesting determination is made will be taken into account for
vesting purposes. The properties on which the compressor may be located may be
owned by affiliates of HACL or by third parties.
The Warrants will vest in the percentages reflected in column (4)
below upon HACL providing compressor leases aggregating the aggregate minimum
horsepower reflected in column (1) below if, in addition, the Company also
acquires either (i) oil and gas properties identified by HACL which have an
aggregate purchase price indicated in column (2) below or (ii) other compressor
leasing companies identified by HACL which have under lease compressors which
have an aggregate horsepower equal to at least the amounts reflected in column
(3) below:
<TABLE>
<CAPTION>
Aggregate
Horsepower Under
Minimum Aggregate Purchase Lease by Acquired Percent of
Aggregate Price of Oil and Company at Time Warrants
Horsepower Gas Properties of Acquisition Vested
<S> <C> <C> <C>
7,500 at least $4,000,000 7,500 or greater 100%
6,000 at least $3,000,000 at least 5,625 75%
4.250 at least $2,000,000 at least 3,750 50%
2,500 at least $1,000,000 at least 1,875 25%
</TABLE>
In addition, the Warrants may vest through a combination of the
methods set forth above, provided that there must be compressor leases for the
minimum aggregate horsepower reflected in Column (1) for the percentage of
Warrants indicated in Column (4) to vest. If any portion of the Warrants vest
pursuant to the immediately preceding table above, then for any contracts or
agreements, or set of contracts or agreements, provided by HACL for the lease
of natural gas compressors from the Company having an additional aggregate of
3,750 horsepower or more, then an additional 25% of the Warrants shall vest
with respect to each incremental addition of an aggregate of 3,750 horsepower.
In addition, the acquisition by the Company of producing oil and gas properties
identified by HACL in a transaction reflected in column (2) will be considered
in determining the vesting of the Warrants in combination with any acquisition
by the Company of a company in the business of owning and leasing natural gas
compressors by treating each $1,000,000 of the purchase price of such producing
oil and gas properties to be the equivalent of an aggregate horsepower of 1,875
under lease by an acquired company.
Change of Control. Upon the occurrence of certain events which result
in a "change of control" of the Company, then all
<PAGE> 13
CUSIP NO. 420258 10 5 13D Page 13 of __ Pages
unvested Warrants will become vested. A change in control will be deemed to
have taken place upon the occurrence of the following events: (i) as a result
of a proxy solicitation by a party other than the Company, the directors
serving on the Company's Board immediately prior to such action no longer
constitute a majority of the total number of directors of the Company following
such action; (ii) any person or group other than HACL or its affiliates
acquires more than 50% of the Company's outstanding voting securities; (iii)
the Company's stockholders approve the merger or consolidation of the Company
with another corporation or business organization, the sale of substantially
all of the Company's assets or the liquidation or dissolution of the Company,
unless, in the case of a merger or consolidation, the directors in office
immediately prior to such transaction constitute a majority of the directors of
the surviving entity or a majority of the disinterested of the Company approve
such transaction; or (iv) a majority of the disinterested directors of the
Company determine that any other proposed action would constitute a change in
control and such action is taken.
Other than the shares of Common Stock being acquired pursuant to the
Stock Purchase Agreement, the Reporting Persons do not own any shares of Common
Stock and have not purchased or sold any shares of Common Stock within the last
sixty days.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
to Securities of the Issuer.
HACL has acquired the 3,863,636 shares of Common Stock and the
Warrants in its own name pursuant to the Stock Purchase Agreement. The Joint
Venture has acquired the 4,136,364 shares of Common Stock pursuant to the Stock
Purchase Agreement. Each joint venture partner of Energy Investors has
acquired their interest in the Company pursuant to the Joint Venture Agreement.
The Warrants issued to HACL which was issued pursuant to the Stock Purchase
Agreement is attached thereto. The Joint Venture Agreement of the Joint
Venture is attached hereto as exhibit. Other than the documents referred to
above, there are no agreements, contracts, understandings or relationships with
regard to the securities of the Company.
Item 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit A - Agreement to file Joint Statement on Schedule 13D
Exhibit B - Stock Purchase Agreement
Exhibit C - Warrant Agreement
Exhibit D - Joint Venture Agreement of Energy Investor Joint Venture
<PAGE> 14
CUSIP NO. 420258 10 5 13D Page 14 of __ Pages
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief,
the undersigned does hereby certify that the information set forth in this
statement is true, complete and correct.
DATE: December 29, 1996
HACL, LTD.
BY: SIX-DAWACO, INC., General
Partner
BY: /s/ RAY C. DAVIS
----------------------------
RAY C. DAVIS, PRESIDENT
ENERGY INVESTORS JOINT VENTURE
By: HACL, LTD.,
Managing Joint Venture Partner
By: SIX-DAWACO, INC., General
Partner
BY: /s/ RAY C. DAVIS
------------------------------
RAY C. DAVIS, PRESIDENT
ATTENTION: INTENTIONAL MISSTATEMENTS OR OMISSIONS OF FACT CONSTITUTE FEDERAL
CRIMINAL VIOLATION (SEE 18 U.S.C. Section 1001).
<PAGE> 15
CUSIP NO. 420258 10 5 13D Page 15 of __ Pages
<TABLE>
<CAPTION>
EXHIBIT INDEX Page
------------- ----
<S> <C>
Exhibit A - Agreement to file Joint Statement on Schedule 13D
Exhibit B - Stock Purchase Agreement
Exhibit C - Warrant Agreement
Exhibit D - Joint Venture Agreement of Energy Investor Joint Venture
</TABLE>
<PAGE> 1
EXHIBIT A
AGREEMENT TO FILE JOINT STATEMENT ON SCHEDULE 13D
The parties hereto agree as follows:
Pursuant to Rule 13d-1(f)(1) of Regulation 13D-G promulgated by the
Securities and Exchange Commission, the parties hereto hereby agree to file
jointly with the Securities and EQUITY COMPRESSION SERVICES CORPORATION (the
"Corporation"), and any national securities exchange on which securities of the
Corporation may be listed, the Statement on Schedule 13D to which this
Agreement is attached as an exhibit. The parties hereto further agree to file
jointly with such entities any and all amendments to said Statement on Schedule
13D as they may deem necessary or appropriate, unless and until such time as
one party hereto shall notify the other in writing of its desire to terminate
this agreement.
DATED as of December 29, 1996.
HACL, Ltd.
BY: SIX DAWACO, INC.,
General Partner
BY: /s/ RAY C. DAVIS
-------------------------------
Ray C. Davis, President
ENERGY INVESTMENT JOINT VENTURE
BY: HALC, LTD., Managing Joint Venture Partner
BY: SIX DAWACO, INC., General Partner
BY: /s/ RAY C. DAVIS
-------------------------------
Ray Davis, President
Attention: Intentional misstatements or omissions of fact constitute federal
criminal violations (See 18 U.S.C. 1001).
<PAGE> 1
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
HAWKINS ENERGY CORPORATION,
AN OKLAHOMA CORPORATION,
AND
HACL, LTD.,
A TEXAS LIMITED PARTNERSHIP
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
1. Purchase and Sale of the Shares; Due Diligence; etc. . . . . . . . -1-
---------------------------------------------------
(a) Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
--------
(b) The Closing . . . . . . . . . . . . . . . . . . . . . . . . -1-
-----------
(c) Due Diligence . . . . . . . . . . . . . . . . . . . . . . . -2-
-------------
2. Representations and Warranties of the Company . . . . . . . . . . . -2-
---------------------------------------------
(a) Due Organization and Qualification . . . . . . . . . . . . . -2-
----------------------------------
(b) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . -2-
------------
(c) Authorization . . . . . . . . . . . . . . . . . . . . . . . -3-
-------------
(d) Capital Stock . . . . . . . . . . . . . . . . . . . . . . . -3-
-------------
(e) Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
--------
(f) SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . -4-
-----------
(g) Absence of Certain Changes . . . . . . . . . . . . . . . . . -5-
--------------------------
(h) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . -5-
----------
(i) Consents . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
--------
(j) Compliance with Laws . . . . . . . . . . . . . . . . . . . . -6-
--------------------
(k) Contracts, Agreements, Plans and Commitments . . . . . . . . -6-
--------------------------------------------
(l) Employee Benefit Matters . . . . . . . . . . . . . . . . . . -7-
------------------------
(m) Environmental Compliance . . . . . . . . . . . . . . . . . . -8-
------------------------
(n) Condition of Property . . . . . . . . . . . . . . . . . . . -9-
---------------------
3. Representations and Warranties of the Purchaser . . . . . . . . . . -10-
-----------------------------------------------
(a) Due Organization . . . . . . . . . . . . . . . . . . . . . . -10-
----------------
(b) Authorization . . . . . . . . . . . . . . . . . . . . . . . -10-
-------------
(c) Purchase for Investment . . . . . . . . . . . . . . . . . . -10-
-----------------------
4. Conditions to the Obligations of the Company . . . . . . . . . . . -11-
--------------------------------------------
(a) Representations and Warranties True . . . . . . . . . . . . -11-
-----------------------------------
(b) Performance . . . . . . . . . . . . . . . . . . . . . . . . -11-
-----------
(c) Injunctions . . . . . . . . . . . . . . . . . . . . . . . . -11-
-----------
(d) Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . -11-
-------------
(e) Officer's Certificate . . . . . . . . . . . . . . . . . . . -11-
---------------------
5. Conditions to the Obligations of the Purchaser . . . . . . . . . . -12-
----------------------------------------------
(a) Representations and Warranties True . . . . . . . . . . . . -12-
-----------------------------------
(b) Performance . . . . . . . . . . . . . . . . . . . . . . . . -12-
-----------
(c) Injunctions . . . . . . . . . . . . . . . . . . . . . . . . -12-
-----------
(d) Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . -12-
-------------
(e) Officer's Certificate . . . . . . . . . . . . . . . . . . . -12-
---------------------
(f) Shareholder Approval . . . . . . . . . . . . . . . . . . . . -12-
--------------------
(g) Information Statement . . . . . . . . . . . . . . . . . . . -12-
---------------------
6. Covenants of the Company . . . . . . . . . . . . . . . . . . . . . -12-
------------------------
(a) Interim Operations of the Company . . . . . . . . . . . . . -12-
---------------------------------
(b) Access . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
------
(c) Notification of Certain Matters . . . . . . . . . . . . . . -14-
-------------------------------
(d) Publicity . . . . . . . . . . . . . . . . . . . . . . . . . -14-
---------
(e) Board Representation . . . . . . . . . . . . . . . . . . . . -15-
--------------------
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
(f) Listing on Securities Exchanges . . . . . . . . . . . . . . -15-
-------------------------------
(g) Acquisition of Voting Securities . . . . . . . . . . . . . . -15-
--------------------------------
7. Covenants of the Purchaser . . . . . . . . . . . . . . . . . . . . -15-
--------------------------
(a) Efforts to Obtain Compressor Leases and Oil and Gas
---------------------------------------------------
Properties . . . . . . . . . . . . . . . . . . . . . . . . . -15-
----------
(b) Confidentiality . . . . . . . . . . . . . . . . . . . . . . -16-
---------------
(c) Cooperation . . . . . . . . . . . . . . . . . . . . . . . . -16-
-----------
8. Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . -16-
-------------------
(a) Right to Request Registration . . . . . . . . . . . . . . . -16-
-----------------------------
(b) Other Registrations . . . . . . . . . . . . . . . . . . . . -16-
-------------------
(c) Terms and Conditions . . . . . . . . . . . . . . . . . . . . -17-
--------------------
(d) Underwriting . . . . . . . . . . . . . . . . . . . . . . . . -18-
------------
9. Termination; Effect of Termination . . . . . . . . . . . . . . . . -18-
----------------------------------
(a) Termination . . . . . . . . . . . . . . . . . . . . . . . . -18-
-----------
(b) Effects of Termination . . . . . . . . . . . . . . . . . . . -19-
----------------------
10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
-------------
(a) Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
--------
(b) Survival of Representations, Warrants and Covenants . . . . -20-
---------------------------------------------------
(c) Successors and Assigns . . . . . . . . . . . . . . . . . . . -20-
----------------------
(d) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
-------
(e) Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
------
(f) Governing Law . . . . . . . . . . . . . . . . . . . . . . . -21-
-------------
(g) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . -21-
----------------
(h) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
--------
(i) Captions . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
--------
(j) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . -21-
------------
</TABLE>
<PAGE> 4
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of October
16, 1996, and is by and between HAWKINS ENERGY CORPORATION, an Oklahoma
corporation (the "Company") and HACL, LTD., a Texas limited partnership or its
assigns (the "Purchaser"). The Company and the Purchaser are collectively
referred to herein as the "Parties" and individually as a "Party".
W I T N E S E T H :
WHEREAS, the Company wishes to sell to the Purchaser, and the Purchaser
wishes to purchase from the Company, 8,000,000 shares (the "Shares") of common
stock, $0.01 par value per share ("Common Stock"), and warrants (the
"Warrants") which, upon exercise, will entitle the holder to purchase 8,000,000
shares of Common Stock pursuant to the form of Warrant attached hereto as
Exhibit A and incorporated herein by reference of the Company for an aggregate
cash purchase price of $4,400,000, plus the additional consideration described
herein upon the terms and subject to the conditions set forth below; and
NOW, THEREFORE, for and in consideration of the mutual covenants and
promises set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties,
intending to be legally bound, hereby contract and agree as follows:
1. Purchase and Sale of the Shares; Due Diligence; etc.
(a) Purchase. On the terms and subject to the conditions
contained herein, at the closing (the "Closing") referred to in Section 1(b)
hereof, the Company will issue and deliver to the Purchaser a certificate
registered in the name of the Purchaser evidencing the Shares, and the
Purchaser will pay to the Company, in full payment of the purchase price for
the Shares, the aggregate sum of $4,400,000 in cash (the "Purchase Price").
Payment of the Purchase Price shall be made by wire transfer of immediately
available funds to the order of the Company and/or by physical delivery of a
cashier's check.
(b) The Closing. The Closing shall occur at the offices of
the Company, or at such location as the Parties may mutually agree, at 10:00
A.M. local time, on the later to occur of (i) December 16, 1996 or (ii) the
fifth business day after all conditions to the Purchaser's obligations to close
as set forth in this Agreement have been satisfied on such other date and at
such other time as the Parties may agree (the "Closing Date"). In addition at
the Closing, the Company will issue to the Purchaser or its Designee(s) the
Warrants and each Party will also deliver such
<PAGE> 5
certificates, opinions, documents and instruments as may be necessary to
consummated the transactions contemplated hereby.
(c) Due Diligence. The Parties agree that the obligation of
the Purchaser to the close the transaction evidenced by this Agreement is
subject to Purchaser satisfactorily completing its due diligence on or before
October 30, 1996 (the "Due Diligence Expiration Date"). If, after the Due
Diligence Expiration Date, Purchaser elects not to close, it may cancel this
Agreement by mailing or otherwise sending to the Company within one business
day after the Due Diligence Expiration Date, written notice of its intent to
terminate this Agreement ("Termination Notice"). Upon mailing or otherwise
sending to the Company the Termination Notice, the Purchaser shall be deemed
released from all of its obligations, liabilities, and duties under this
Agreement and this Agreement shall be considered to be terminated and of no
further force or effect as of such date.
2. Representations and Warranties of the Company. The
Company hereby represents and warrants to the Purchaser as follows:
(a) Due Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Oklahoma, with corporate power to own its properties and
to conduct its business as now conducted. The Company is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary, except where
the failure to so qualify will not have a material adverse effect on the
Company and its subsidiaries taken as a whole.
(b) Subsidiaries. For the purposes of this Agreement, the
term "Subsidiary" means any entity of which securities or other ownership
interests are owned directly or indirectly by the Company. Equity Compressors,
Inc., an Oklahoma corporation, is the sole Subsidiary of the Company (the
"Subsidiary"). The Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority to carry on
its business as it is now being conducted. The Subsidiary is duly qualified to
do business and in good standing as a foreign corporation in each jurisdiction
where the properties owned, leased or operated, or the business conducted by it
require such qualification except where the failure to be so qualified or in
good standing would not have a material adverse effect on the Company and its
Subsidiaries taken as a whole. All the outstanding shares of capital stock of
the Subsidiary have been duly authorized and validly issued and are fully paid,
nonassessable, and were not issued in violation of the preemptive rights of any
person. All of the shares of capital stock of the Subsidiary are owned,
directly or indirectly, by the Company and there are no outstanding
-2-
<PAGE> 6
subscriptions, options, warrants, rights, convertible securities or other
agreements or commitments of any character relating to the issued or unissued
capital stock or other securities of the Subsidiary obligating the Subsidiary
to issue any securities. There are no stockholders' agreements, option
agreements, voting agreements, agreements covering the purchase or sale of
securities or other agreements to which the Company or the Subsidiary is a
party, or by which the Company or the Subsidiary is bound, which cover or
relate to the capital stock or other securities of the Subsidiary.
(c) Authorization. The Company has the requisite corporate
power to enter into this Agreement and to carry out its obligations hereunder.
This Agreement has been duly authorized, executed and delivered by the Company
and constitutes a valid and binding agreement of the Company enforceable in
accordance with its terms. Other than the approval of the stockholders of the
Company as to the amendment of the Company's certificate of incorporation to
increase the number of authorized but unissued shares of Common Stock and the
consent of the Company's lenders, neither the execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby, nor
compliance with the terms, conditions hereof will create a breach or violation
of any of the terms, conditions or provisions of the Company's charter or
bylaws or of any material agreement or instrument to which the Company or any
Subsidiary is a party or by which the Company, any Subsidiary or any of their
respective material properties may be bound, or constitute a default or create
a right of termination or acceleration thereunder, or result in the creation of
imposition of any securities interest, mortgage, lien, charge or encumbrance of
any nature whatsoever upon the Company, any Subsidiary or any of their
respective material properties or assets. Other than the approval of an
amendment of the Company's Certificate of Incorporation to increase the number
of authorized but unissued shares of Common Stock, there is no requirement
under Oklahoma corporate law or the rules of the NASDAQ small cap market that
require the vote or approval of the shareholders of the Company as to any of
the transactions contemplated by this Agreement.
(d) Capital Stock. The authorized capital stock of the
Company consists of (i) 20,000,000 shares of Common Stock, of which at
September 30, 1996, 13,040,816 shares were validly issued and outstanding,
fully paid, nonassessable and not entitled to any preemptive rights, and 9,000
shares were held in treasury, and (ii) 1,000,000 shares of preferred stock
$1.00 par value per share of which at September 30, 1996, no shares of
preferred stock were issued or outstanding, and no shares were held in
treasury. In addition, at September 30, 1996, an aggregate of approximately
1,290,000 shares of Common Stock (including authorized but unissued shares)
were reserved for issuance pursuant to presently existing options and future
options under currently existing stock option plans described on Schedule 2(d)
attached hereto. Except as set
-3-
<PAGE> 7
forth above, there are no other shares of capital stock of the Company
authorized, issued, or outstanding and there are no outstanding subscriptions,
options, warrants, rights, convertible securities, or any other agreements or
commitments of any character relating to the issued or unissued capital stock
or other securities of the Company or the Subsidiary obligating the Company or
the Subsidiary to issue, deliver, or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of the Company or the Subsidiary or
obligating the Company or the Subsidiary to grant, extend, or enter into any
subscription, option, warrant, right, convertible security or other similar
agreement or commitment. There are no outstanding obligations of the Company
or any Subsidiary to repurchase, redeem or otherwise acquire any securities of
the Company or any Subsidiary. Except as disclosed on Schedule 2(d), neither
the Company nor the Subsidiary has any obligation to issue, transfer,
contribute, or sell any shares of capital stock or other securities of the
Company or the Subsidiary pursuant to any employee benefit plan as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or any employment, severance, or other similar contract, arrangement
or policy or any plan or arrangement providing for insurance coverage, workers'
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits or for deferred compensation, profit sharing,
bonuses, stock options, stock appreciation, or other forms of compensation or
benefits (including post-retirement insurance, compensation, or benefits)
which, in each case, (i) is maintained, administered, or contributed to by the
Company or any of its affiliates, and (ii) covers any employee or former
employee of the Company or any of its affiliates or under which the Company or
any of its affiliates has any liability, or otherwise.
(e) Issuance. The Shares, when sold and delivered by the
Company to the Purchaser pursuant to this Agreement, will be duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock, free and
clear of any security interest, lien, charge or encumbrance whatsoever. The
shares of Common Stock, when issued to the Purchaser or its designee(s)
pursuant to the exercise of the Warrants, will be duly authorized, validly
issued, fully paid and nonassessable shares of Common Stock, free and clear of
any security interest, lien, charge or encumbrance whatsoever No Stockholder
or other approval is required for the valid issuance of the Shares or the
Warrants to the Purchaser pursuant to this Agreement.
-4-
<PAGE> 8
(f) SEC Reports. The Company has filed all forms, reports,
schedules, statements and registration statements required to be filed by it
with the Securities and Exchange Commission (the "Commission") since January 1,
1991 (collectively, the "SEC Reports"). As of their respective dates, the SEC
Reports did not contain any untrue statement of a 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, except for any
statement or omission in any SEC Report which was corrected in a later SEC
Report. The financial statements of the Company included in the SEC Reports
were prepared in accordance with generally accepted accounting principles
applied on a consistent basis, present fairly in accordance with generally
accepted accounting principles the consolidated financial position, results of
operations and changes in financial position of the company and its
consolidated subsidiaries as of the dates and for the periods indicated and
conform in all material respects to all applicable requirements under the
Securities Exchange Act of 1934 ("Exchange Act"). Except as reflected in the
SEC Reports, the Company as of the date of such SEC Reports has no material
liabilities, obligations, or claims of any nature (whether absolute, accrued,
contingent or otherwise and whether due or to become due), including, without
limitation, any tax liabilities or under funded pension plans, and the Company
does not have any knowledge of any basis for the existence of or the assertion
against the Company of any such liability, obligation or claim as of such date.
(g) Absence of Certain Changes. Except as disclosed in the
SEC Reports, since December 31, 1995, the Company and the Subsidiary have
conducted their respective businesses in the ordinary and usual course in all
material respects taking the Company and the Subsidiary as a whole, and there
has not been any material adverse change in the financial condition,
properties, business, results of operations or prospectus of the Company and
the Subsidiary taken as a whole. The Company has not paid any cash dividends
with respect to its Common Stock and no dividend on the Common Stock has been
declared which remains unpaid.
(h) Litigation. Except as disclosed in the SEC Reports, there
is no claim, suit, action or proceeding pending or, to the knowledge of the
Company, threatened against or affecting the Company or the Subsidiary which
can reasonably be expected to affect materially and adversely the business,
properties, financial condition or prospects of the Company and the Subsidiary
taken as whole. There is no outstanding order, writ, injunction or decree or,
to the knowledge of the Company, any claim or investigation of any court,
governmental agency or arbitration tribunal materially and adversely affecting
or which can reasonably be expected to materially and adversely affect the
Company, the Subsidiary, or their respective properties, assets or business,
franchises, licenses or permits under which they operate.
-5-
<PAGE> 9
(i) Consents. Except (i) for filings to be made pursuant to
Regulation D promulgated by the Commission under the Securities Act of 1933, as
amended, (ii) for compliance with the requirements of any applicable blue sky
laws, and (iii) as otherwise provided in this Agreement, no governmental or
other consent, approval, hearing, filing, registration or other action,
including the passage of time, is necessary for the execution and delivery of
this Agreement or consummation of the transactions contemplated hereby to occur
without material detriment to the Company and its Subsidiaries.
(j) Compliance with Laws. The Company and each Subsidiary has
complied with and is currently complying with all applicable federal, state and
local laws, rules, ordinances and regulations, the noncompliance with which
would have a material adverse effect on the Company and its Subsidiaries taken
as a whole.
(k) Contracts, Agreements, Plans and Commitments. Schedule
2(k) attached hereto sets forth a list of all material written and oral
agreements, if any, contracts, agreements, plans and commitments, including all
amendments, modifications and supplements thereto, to which the Company or the
Subsidiary is a party or by which the Company, the Subsidiary or any of their
assets or properties are bound as of the date hereof (the "Contracts"). For
the purposes of this Section 2(k), a contract shall be considered material if
such contract or any series of similar contracts involving the same subject
matter involves $50,000 or more in services to be rendered or obligations
during any twelve month period. The Company and the Subsidiary have each
complied with the provisions of all Contracts and no default or event of
default exists under any of such agreements and such agreements constitute
valid and legally binding obligations of the Company and the Subsidiary and, to
best knowledge of the Company, of each other Person that is a party thereto
enforceable against each party in accordance with their terms. To the best of
the Company's knowledge, the Contracts together with any other written or oral
agreements, contracts, plans and commitments that the Company may have in place
(whether or not listed on Schedule 2(k)) comprise all of the contracts,
agreements, plans and commitments required in order to conduct the business of
the Company and the Subsidiary as it has been and is now being conducted. The
issuance of the Shares and the Warrants at the Closing will not (a) adversely
affect the force and effect of any of the Contracts, (b) constitute a breach or
default (or a condition but for the expiration of time or the giving of notice
would constitute a breach or default) under the Contracts or (c) give any party
a right of first refusal or option to acquire any asset of the Company or the
Subsidiary.
-6-
<PAGE> 10
(l) Employee Benefit Matters.
(i) Schedule 2(l) attached hereto sets forth each
"employee benefit plan" (within the meaning of Section 3(3) of
ERISA), stock purchase plan, stock option plan, fringe benefit
plan, bonus plan and any other deferred compensation agreement or
plan or funding arrangement sponsored, maintained or to which
contributions are made (a "Plan") by the Company, any Subsidiary,
or any of their affiliates or any other organization which is a
member of a controlled group of organizations (within the meaning
of Sections 414(b), (c), (m) or (o) of the Internal Revenue Code
of 1986, as amended (the "Code") of which the Company or any of
the Subsidiaries is a member (the "Controlled Group").
(ii) The Company has delivered to the Purchaser current,
accurate and complete copies of each Plan (including all trust
agreements, funding vehicles and other instruments relating
thereto) and, to the extent applicable, copies of the most recent
(a) Internal Revenue Service determination letter and any
outstanding request for a determination letter for each Plan; (b)
Form 5500; (c) attorneys' response to an auditor's request for
information for any Plan; and (d) any ruling letter and any
outstanding request for a ruling letter with respect to the tax-
exempt status of any voluntary employees' beneficiary association
("VEBA") which is implementing any Plan.
(iii) With respect to each Plan: (a) each Plan which is
an "employee pension benefit plan" (as such term is defined in
ERISA Section 3(2)) has received a favorable determination letter
as to its qualification under the Code; (b) each VEBA which is
intended to implement any Plan has received a favorable ruling or
determination letters to its tax-exempt status; (c) all forms,
documents and other materials have been filed with the Securities
and Exchange Commission or otherwise distributed as required by
the Securities Act of 1933 or the Exchange Act or any regulation
or rule promulgated thereunder; and (d) there are no leased
employees (as such term is defined in Code Section 414(n)) that
must be taken into account with respect to the requirements set
forth under Code Section 414(n)(3).
-7-
<PAGE> 11
(iv) Neither the Company nor the Subsidiary presently
maintains, or within the last 60 months has maintained any (a)
"multiemployer plan" (within the meaning of Section 3(37) of
ERISA), or (b) defined benefit plan.
(v) With respect to any Plan which is an employee
welfare benefit plan (within the meaning of ERISA Section 3(1)):
(a) each and every Plan which is a group health plan (as such
term is defined in Code Section 5000(b) complies in all material
respects with the applicable requirements of Code Section 4980B;
and (b) each Plan (including any Plan covering former employees
of the Company) may be amended or terminated by the Company, any
Subsidiary or the Purchaser on or at any time after the Closing
Date.
(vi) Neither the Company nor the Subsidiary maintains
any post-retirement health and life insurance plans for employees
and retirees.
(m) Environmental Compliance. For purposes of this
Agreement, "Environmental Laws" shall mean laws, including without
limitation, federal, state or local laws, ordinances, rules,
regulations, interpretations and orders of courts or governmental
agencies or authorities relating to pollution or protection of the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface, and subsurface strata), including without
limitation, the Comprehensive Environmental Response Compensation and
Liability Act of 1980, the Superfund Amendments and Reauthorization Act
of 1987, the Resource Conservation and Recover Act of 1976, the
Hazardous and Solid Waste Amendment of 1984, and the Hazardous Materials
Transportation Act, and any other laws relating to pollution or
protection of the environment, or to the manufacture, processing,
distribution, use, treatment, handling, storage, disposal or
transportation or Hazardous Substances (hereafter defined). Except as
set forth on Schedule 2(m) attached hereto:
(1) The Company and the Subsidiary are in compliance in
all material respects with all applicable Environmental Laws and
has obtained and is in compliance with all permits, licenses and
other authorizations required under any Environmental Law. There
is no past or present event, condition or circumstance that is
likely to interfere with the conduct of the business of the
Company or any Subsidiary in the manner now conducted or which
would interfere in any material respect with the Company's or any
Subsidiary's compliance with Environmental Laws or constitute a
violation thereof.
-8-
<PAGE> 12
(2) Neither the Company nor the Subsidiary has leased,
operated or owned any facilities or real property with respect to
which the Company or such Subsidiary is subject to any actual or,
to the knowledge of the Company, after due inquiry, potential
action, claim, investigation, review or other proceeding before
any governmental, judicial or regulatory body, under any
Environmental Law.
(3) Neither the Company nor any Subsidiary has sent
hazardous substances as defined in the Environmental Laws
("Hazardous Substances") to any offsite commercial waste
management facilities for reuse, recycling, reclamation,
treatment, storage or disposal.
(4) Neither the Company nor the Subsidiary is subject to
any actual, or, to the knowledge of the Company, after due
inquiry, potential proceeding under any Environmental Law with
respect to any such facility presently or previously used by the
Company, the Subsidiary or their predecessors.
(5) There are no Hazardous Substances in any inactive,
closed or abandoned storage or disposal areas or facilities on
property currently or in the past leased, operated or owned by
the Company, any Subsidiary or their predecessors.
(6) No property currently, or in the past, leased
operated or owned by the Company, any Subsidiary or their
predecessors, is subject to actual or, to the knowledge of the
Company, after due inquiry, potential investigation by federal,
state or local officials or private litigation as a result of any
previous onsite management, treatment, storage or disposal of
Polluting Substances.
(7) There are no underground storage tanks located on any
property owned or leased by the Company or the Subsidiary. All
above ground storage tanks owned or lease by the Company or the
Subsidiary are in material compliance with all applicable
Environmental Laws. The Company have or will provide the
Purchaser with copies of all permits or licenses pertaining to
such above ground storage tanks.
(n) Condition of Property. The Company's compressors
and other personal property have been maintained in accordance with
industry standards and are sufficient for the Company's operations as
currently conducted.
-9-
<PAGE> 13
3. Representations and Warranties of the Purchaser. The
Purchaser hereby represents and warrants to the Company as follows:
(a) Due Organization. The Purchaser is a limited partnership
duly formed and validly existing under the laws of the State of Texas with
power to own its properties and to conduct its business as now conducted.
(b) Authorization. The Purchaser has duly authorized,
executed and delivered this Agreement and this Agreement is a valid and binding
agreement of the Purchaser enforceable in accordance with its terms.
(c) Purchase for Investment. The Purchaser is purchasing the
Shares for its own account and not with a view to or for sale in connection
with any public distribution thereof within the meaning of the Securities Act,
and any sale, transfer or other disposition of the Shares by the Purchaser will
be made in compliance with all applicable provisions of the Securities Act and
the rules and regulations promulgated thereunder. The Purchaser agrees:
(i) to the placement on the certificate representing
the Shares to be purchased by the Purchaser pursuant to this Agreement
of the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, THE TEXAS SECURITIES ACT OR THE OKLAHOMA
SECURITIES ACT. NEITHER THE RECORD NOR THE BENEFICIAL
OWNERSHIP OF SAID SHARES MAY BE SOLD OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SAID
SHARES UNDER SAID ACTS AND ANY OTHER APPLICABLE STATE
SECURITIES LAWS OR RULES UNLESS, IN THE OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY, EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF SAID ACTS ARE AVAILABLE WITH
RESPECT TO SUCH SALE OR TRANSFER AND SAID SALE OR TRANSFER
IS MADE PURSUANT TO AND IN STRICT COMPLIANCE WITH THE
TERMS AND CONDITIONS OF SAID EXEMPTIONS."
and to abide by the requirements and restrictions contained in the
foregoing legend.
(ii) to the entry of stop transfer orders with the
transfer agent (or agents) and the registrar (or registrars) of the
Company against the transfer other than in compliance with the
requirements of this Agreement of legended securities of which the
Purchaser from time to time is the Beneficial Owner.
-10-
<PAGE> 14
(d) Each of the partners of the Purchaser or its designee or
its assigns is an accredited investor, as that term is defined in Regulation D,
is an experienced and sophisticated investor knowledgeable about investments
such as the Common Stock and the Warrants and is capable of evaluating the
merits and risks of the investment contemplated hereby and has the financial
means to bear the financial risks of this investment, including the potential
loss of all of such investment and has acquired his or her interest in the
Purchaser or its designee for investment purposes only and not with a view to
distribution thereof.
(e) Purchaser has been provided with copies of the Company's
annual report on Form 10-KSB for the year ended December 31, 1995, quarterly
reports on Form 10-QSB for the fiscal quarters ended on March 31, 1996 and June
30, 1996, and the proxy statement submitted to the shareholders of the Company
in connection with its annual meeting of shareholders held May 29, 1996. Any
additional information requested by Purchaser has been provided by the Company.
4. Conditions to the Obligations of the Company. The
obligations of the Company under this Agreement are subject to the fulfillment
at the Closing referred to in Section 1(b) hereof of each of the following
conditions:
(a) Representations and Warranties True. The representations
and warranties in this Agreement made by the Purchaser shall have been true in
all material respects when made, and shall be true in all material respects on
the Closing Date as though such representations and warranties were made at
such date.
(b) Performance. The Purchaser shall have performed and
complied in all material respects with all agreements, covenants, obligations
and conditions required by this Agreement to be performed or complied with by
them prior to the closing.
(c) Injunctions. No preliminary or permanent injunction or
other final order by any United States Federal or state court shall have been
issued which prevents the purchase or sale of the shares pursuant hereto.
(d) Legal Opinion. The Company shall have received an opinion
of Schlanger, Mills, Mayer & Grossberg, LLP dated the Closing Date, as to the
matters referred to in Sections 3(a) and (b).
(e) Officer's Certificate. The Company shall have delivered a
certificate of an officer of the Purchaser, dated the Closing Date, certifying
as to the matters referred to in Sections 4(a) and (b).
-11-
<PAGE> 15
5. Conditions to the Obligations of the Purchaser. The
obligations of the Purchaser under this Agreement are subject to the
fulfillment at the Closing referred to in Section 1(b) hereof of each of the
following conditions:
(a) Representations and Warranties True. The representations
and warranties in this Agreement made by the Company shall have been true in
all material respects when made, and shall be true in all material respects on
the Closing Date as though such representations and warranties were made at
such date.
(b) Performance. The Company shall have performed and
complied in all material respects with all agreements, covenants, obligations
and conditions required by this Agreement to be performed or complied with by
them.
(c) Injunctions. No preliminary or permanent injunction or
other final order by any United States Federal or state court shall have been
issued which prevents the purchase or sale of the shares pursuant hereto.
(d) Legal Opinion. The Purchaser shall have received an
opinion of Conner & Winters, A Professional Corporation, dated the Closing
Date, as to the legal matters referred to in Sections 2(a), (b), (c) and (d).
(e) Officer's Certificate. The Purchaser shall have delivered
a certificate of an executive officer of the Company, dated the Closing Date,
certifying as to the matters referred to in Sections 5(a) and (b).
(f) Shareholder Approval. The Shareholders of the Company
shall have approved the amendment of the Company's Certificate of Incorporation
to increase the number of authorized but unissued shares of Common Stock to
40,000,000;
(g) Information Statement. The Company will have provided to
the Shareholders of the Company an information statement in compliance with
Section 14(f) of the Exchange Act.
6. Covenants of the Company. The Company covenants and
agrees with the Purchaser as follows:
(a) Interim Operations of the Company. The Company covenants
and agrees that, prior to the Closing Date (unless the Purchaser shall
otherwise agree in writing and except as otherwise contemplated by this
Agreement), except as contemplated by this Agreement:
(i) the business of the Company and its Subsidiaries
shall be conducted in all material respects only in the ordinary and
usual course and each of the Company and
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<PAGE> 16
its Subsidiaries shall use its best efforts to preserve its business
organization intact and maintain its existing relations with customers,
governmental agencies, suppliers, employees, distributors and business
associates in all material respects;
(ii) the Company shall not (a) sell or pledge or agree
to sell or pledge any stock or other ownership interest owned by it in
any of its Subsidiaries (other than in connection with the exercise of
currently outstanding stock options); (b) amend its Certificate of
Incorporation or Bylaws; (c) split, combine or reclassify the
outstanding shares of its voting securities; (d) declare, set aside or
pay any dividend payable in cash, stock or property with respect to the
Common Stock or the Preferred Stock or (e) increase the number of
members of the Board of Directors of the Company;
(iii) neither the Company nor any of its Subsidiaries
shall (a) issue, sell, pledge, dispose of or encumber any additional
shares of, or securities convertible or exchangeable for, or options,
warrants, calls, commits or rights of any kind to acquire any securities
or ownership interest in another Person, including any share of its
capital stock or other ownership interest of any class of the Company or
its Subsidiaries or any other property or assets; (b) transfer, lease,
license, sell, mortgage, pledge, dispose of or encumber any assets
material to the Company and its Subsidiaries taken as a whole, or incur
or modify any indebtedness or other liability material to the Company
and its Subsidiaries taken as a whole, except in the ordinary course of
its business; (c) acquire directly or indirectly by redemption or
otherwise any shares of the capital stock of the Company of any class;
or (d) authorize capital expenditures in excess of $100,000 in the
aggregate, except in the ordinary course of business, or make any
acquisition of, or investment in, assets or stock of any other person in
excess of $100,000 in the aggregate.
(iv) except as disclosed in Schedule 6(a)(iv) neither
the Company nor any of its Subsidiaries shall grant any severance or
termination pay to, or enter into any employment or severance agreement
with, any director, officer or other employee of the Company or its
Subsidiaries; and neither the Company nor any of its Subsidiaries shall
establish, adopt, enter into or amend any collective bargaining, bonus,
profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement
for the benefit of any directors, officers or employees;
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<PAGE> 17
(v) neither the Company nor any of its Subsidiaries
shall modify, amend or terminate any of its contracts material to the
Company and its Subsidiaries taken as a whole or waive, release or
assign any similarly material rights or claims.
(vi) neither the Company nor any of its Subsidiaries
shall take any action that will cause any representation or warranty
contained in this Agreement to become no longer true and correct; and
(vii) neither the Company nor any of its Subsidiaries
will enter into an agreement to do any of the foregoing.
(b) Access. Upon reasonable notice, the Company shall (and
shall cause each of its Subsidiaries to) afford the Purchaser's officers,
employees, counsel, accountants, financial advisors and other authorized
representatives (the "Representatives") access, during normal business hours
throughout the period prior to the Closing Date, to its properties, books,
contracts and records and, during such period, the Company shall (and shall
cause each of its Subsidiaries to) furnish promptly to Purchaser such
information concerning its business, properties and personnel as Purchaser may
reasonably request, provided that no investigation pursuant to this Section
6(b) shall affect or be deemed to modify any representation or warranty of the
Company.
(c) Notification of Certain Matters. The Company shall give
prompt notice to the Purchaser of: (i) any notice of, or other communication
relating to, a default or event which, with notice or lapse of time or both,
would become a default, received by the Company or any of its Subsidiaries
subsequent to the date of this Agreement and prior to the Closing Date, under
any contract material to the financial condition, properties, business, results
of operations or prospects of the Company and its Subsidiaries taken as a whole
to which the Company or any of its Subsidiaries is a party or is subject; (ii)
any material adverse change in the financial condition, properties, businesses,
results of operations or prospects of the Company and its Subsidiaries taken as
a whole. Each of the Company and the Purchaser shall give prompt notice to the
other Party of any notice or other communication from any third party alleging
that the consent of such third party is or may be required in connection with
the transactions contemplated by this Agreement where the failure to obtain
such consent could have a material adverse effect on the financial condition,
properties, business, results of operations or prospects of the Company and its
Subsidiaries taken as a whole or materially hinder or materially make more
burdensome the consummation of the transactions contemplated by this Agreement.
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<PAGE> 18
(d) Publicity. The initial press release by the Parties
concerning this transaction shall be a joint press release. Thereafter and
until after closing, neither the Company nor the Purchaser shall issue, or
cause the publication of, any press releases or otherwise make public
statements with respect to the transactions contemplated hereby or make any
filings with any federal or state governmental or regulatory agency or with any
national securities exchange with respect thereto, without the consent of the
other Party, which consent shall not be unreasonably withheld, provided,
however, that either Party may make such disclosures without the consent of the
other Party if advised by counsel that such disclosure is necessary under
applicable law or rule.
(e) Board Representation. As promptly as practicable
following the Closing Date, the Company will elect to its Board of Directors up
to eight persons designated by the Purchaser. Thereafter, so long as the
Purchaser or its affiliates own any of the Shares or the Warrants, the Company
will include among its Board of Directors' nominees a sufficient number of
persons designated by Purchaser such that the percentage of the Board of
Directors proposed to be composed of such designees is proportionately equal
(to the nearest whole directorship) to the percentage of outstanding Common
Stock which the Purchaser then has beneficial ownership. Notwithstanding the
foregoing, during the term of this Agreement the Purchaser will be entitled to
have always not less than three designees nominated to the Company's Board of
Directors.
(f) Listing on Securities Exchanges. The Company will list
the Shares and will maintain the listing of the Shares on each national
securities exchange on which the Common Stock may be listed.
(g) Acquisition of Voting Securities. The Company will not
oppose any action by the Purchaser to acquire shares of Common Stock, except
that, to the extent the fiduciary duties of the Board of Directors of the
Company require that they seek an offer from third persons to acquire or merge
with the Company, the Company may seek such offers.
7. Covenants of the Purchaser. The Purchaser covenants and
agrees with the Company as follows:
(a) Efforts to Obtain Compressor Leases and Oil and Gas
Properties. As additional consideration for the purchase of the Preferred
Stock and the Warrants pursuant hereto, Purchaser commits and agrees to use its
reasonable efforts to effect the actions contemplated by Section 1.5 of the
Warrant which are necessary for the Warrants to vest and become exercisable;
provided, however, that in no event shall the Purchaser be required to expend
its own
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<PAGE> 19
funds or guarantee any obligations of the Company in order to satisfy the
obligations contained in this Section (7)(a).
(b) Confidentiality. Purchaser will not, and will cause its
Representatives not to, use any information obtained pursuant to Section 6(b)
or previously obtained from the Company in contemplation of entering into this
Agreement for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement. Subject to the requirements of law, pending
consummation of the transactions herein contemplated, Purchaser will keep
confidential, and will cause its Representatives to keep confidential, all
information and documents obtained pursuant to Section 6(b) or previously
obtained from the Company in contemplation of entering into this Agreement.
Upon any termination of this Agreement, Purchaser will collect and deliver to
the Company all documents obtained by it or any of its Representatives then in
their possession and any copies thereof.
(c) Cooperation. The Purchaser shall cooperate with the
Company in consummating the transactions contemplated by this Agreement.
8. Registration Rights.
(a) Right to Request Registration. At any time after the
second anniversary of the Closing, upon the written request of the Purchaser,
the Company will use its best efforts promptly to file (but in any event within
45 days of such request) with the Commission a registration statement under the
Securities Act, on such appropriate form as the Company shall select, covering
any of the Shares not freely tradeable under Rule 144 and any shares of Common
Stock issued to the Purchaser in connection with the exercise of the Warrants
and will use its reasonable efforts to cause such registration statement to
become effective as soon as practicable following such request; provided,
however, that the Company will not be required to file any such registration
statement during any period of time when (i) the Company is contemplating a
public offering of its securities and, in the judgment of the managing
underwriter thereof (or the Company, if such offering is not underwritten) such
filing would have an adverse effect on the contemplated offering, or (ii) the
Company is possession of material information that it deems advisable not to
disclose in a registration statement, or (iii) the Company is engaged in any
program for the repurchase of Common Stock. In addition, the Company shall not
be required (i) to effect any registration pursuant to this Section 8(a) unless
at least 2,000,000 shares of Common Stock are to be sold by the Purchaser, or
(ii) to file at the request of the Purchaser more than a total of two
registration statements under this Section 8(a) or more than one such
registration statement in any twelve month period.
-16-
<PAGE> 20
(b) Other Registrations. If the Company shall at any time
propose the registration under the Securities Act of an offering of Common
Stock for its own account, the Company shall give notice as promptly as
practicable of such proposed registration to the Purchaser and the Company will
use all reasonable efforts to cause the offering of such shares of Common Stock
owned by the Purchaser as the Purchaser shall request within 15 days after the
receipt of such notice to be included, upon the same terms (including the
method of distribution) in any such offering; provided, however, that (i) the
Company shall not be required to give notice or include such Shares of Common
Stock in any such registration if the proposed registration is (A) a
registration of a stock option or compensation plan or of securities issued or
issuable pursuant to any such plan or otherwise on Form S-8 or any successor
form, or (B) a registration of securities proposed to be issued (X) in exchange
for securities or assets of, or in connection with a merger or consolidation
with, another corporation, or (Y) any issuance or any offering of Common Stock
made solely to its existing shareholders in connection with a rights offering
or solely to employees and consultants of the Company; (ii) the Company shall
not be required to include such number of Shares of Common Stock in any such
registrations to which the Company and the Purchaser are advised in writing by
the Company's investment banking firm that the inclusion of such Shares of
Common Stock would, in the opinion of such firm, unreasonably interfere with
the successful marketing of such Shares of Common stock; and (iii) the Company
may, without the consent of the Purchaser, withdraw such registration statement
and abandon the proposed offering in which the Purchaser had requested to
participate.
(c) Terms and Conditions. The registration rights of the
Purchaser pursuant to this Section 8 are subject to the following terms and
conditions:
(i) The Purchaser shall provide the Company with such
information with respect to the Shares of Common Stock to be sold, the
plans for the proposed disposition thereof and such other information as
shall, in the opinion of counsel for the Company, be necessary to enable
the Company to include in such registration statement all material facts
required to be disclosed with respect to the Purchaser.
(ii) The Company shall bear the cost of the
registration, including, but not limited to, all registration and filing
fees (including Blue Sky registration and filing fees), printing
expenses (including for such number of prospectuses and other filed
material as the Purchaser shall reasonably request), and fees and
disbursements of counsel and accountants for the Company (subject,
however, to subparagraph (iii) below), except that the Purchaser shall
pay the fees and disbursements of its counsel and the underwriting fees
and
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<PAGE> 21
selling commissions applicable to the Shares of Common Stock sold by the
Purchaser.
(iii) The Company shall not be required to furnish any
audited financial statements at the request of Purchaser other than
those statements customarily prepared at the end of its fiscal year,
unless the Purchaser shall agree to reimburse the company for the out-
of-pocket costs incurred by the company in the preparation of such other
audited financial statements;
(iv) The Company shall be required to amend or
supplement and otherwise keep it effective and current such registration
statement for a period of 90 days following its effective date; and
(v) Purchaser shall not be entitled to exercise any
registration right provided for in this Section 8 after the sixth
anniversary of the Closing Date. Notwithstanding any other provision of
this Section 8 to the contrary, the registration rights granted
hereunder will terminate prior to the sixth anniversary of the Closing
Date upon the first day Purchaser is able to sell all of the shares of
Common Stock acquired pursuant to this Agreement without material
restriction and without registration under the applicable federal and
state securities laws.
(d) Underwriting. The Company and the Purchaser each agrees
in connection with any registration of shares of Common Stock contemplated by
this Section 8, (A) to enter into an appropriate underwriting agreement
containing items and provisions (including reasonable provisions as to
indemnification) customary in such agreements, (B) to permit the Company, in
its sole discretion, to select the managing underwriter(s) and (C) to provide
the Purchaser and its representatives with reasonable opportunity for due
diligence. The indemnification provisions referred to in Clause (A) above
shall include an indemnification by the Company of the underwriters and the
Purchaser, except that such selling stockholders shall indemnify the Company
and the underwriters as to information provided pursuant to Section 8(c)(i) and
the underwriters shall indemnify the Company and such selling stockholders as
to information provided by such underwriters.
9. Termination; Effect of Termination.
(a) Termination. This Agreement may be terminated:
(i) by either the Company or the Purchaser if the
Closing shall not have occurred by December 31, 1996;
(ii) by the Company if the conditions set forth in
Section 4 hereof shall not be satisfied on the Closing Date;
-18-
<PAGE> 22
(iii) by the Purchaser if the conditions set forth in
Section 5 hereof shall not be satisfied on the Closing date;
(iv) by the Purchaser if Shareholder approval of the
Amendment of the Certificate of Incorporation of the Company to increase
the authorized number of shares of Common Stock to 40,000,000 is not
obtained by December 16, 1996;
(v) by the Purchaser if on or before the Due Diligence
Expiration Date, the Purchaser has not received binding proxies from 10
or fewer Shareholders of the Company committing to vote all of their
shares of Common Stock (at least 50% of outstanding shares) held by such
person in favor of the Amendment of the Company's Certificate of
Incorporation to increase the number of shares of Common Stock as set
forth above;
(vi) Upon the mutual written consent of both Parties.
(b) Effects of Termination. The following provisions shall
apply in the event of a termination of this Agreement:
(i) If this Agreement is terminated by the Company or by the
Purchaser as permitted under Section 9(a)(i), (ii) or (iii), hereof and not as
the result of the failure of either Party to perform its obligations hereunder
without lawful justification, such termination shall be without liability to
any Party to this Agreement or any stockholder, director, officer, employee,
agent or representative of such Party.
(ii) If this Agreement is terminated under Section 9(a)(i) or
(iii) because the Company has breached or is in default under this Agreement,
the Purchaser will be entitled to specific performance or a right to pursue a
suit for damages.
(iii) If this Agreement is terminated as a result of the failure
of the Purchaser to perform its obligations hereunder under Section 9(a)(i) or
Section 9(a)(ii) because the Purchaser has breached or is in default under this
Agreement the Company will be entitled to specific performance or a right to
pursue a suit for damages.
10. Miscellaneous.
(a) Remedies. The Purchaser and the Company each acknowledge
and agree that the other Party would be irreparably damaged in the event any of
the provisions of this Agreement were not performed by the other in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that each Party shall be entitled to an injunction or injunctions to redress
breaches of this Agreement and to specifically enforce the terms
-19-
<PAGE> 23
and provisions hereof in any action instituted in any court of the United
States or any state thereof having subject matter jurisdiction, in addition to
any other remedy to which such Party may be entitled, at law or in equity. In
addition to a right for injunctive relief, the Purchaser shall also have a
right to bring a cause of action for damages if there is a breach or inaccuracy
by the Company of its representations, warranties, covenants or agreements, or
the Company has failed to comply with the conditions for closing. It is
understood that if the Purchaser elects to close this transaction in spite of
there being a breach or inaccuracy of the Company's representations,
warranties, covenants or agreements or failure to comply with the conditions
for closing, then such closing of this transaction by the Purchaser shall not
waive the Purchaser's rights to enforce a claim for damages against the
Company.
(b) Survival of Representations, Warrants and Covenants. All
representations, warranties and covenants contained herein shall survive the
execution of this Agreement and the consummation of the transactions
contemplated hereby.
(c) Successors and Assigns. This Agreement shall be binding
upon, and inure to the benefit of, the Parties and their respective heirs,
personal representatives, successors, assigns and Affiliates, but shall not be
assignable by any Party hereto without the prior written consent of the other
Party; provided, however, that the Purchaser may assign the right to purchase a
portion of the Shares to a joint venture or partnership, subject to compliance
with applicable securities laws.
(d) Notices. Any notice or other communication provided for
herein or given hereunder to a Party hereto shall be in writing and shall be
given by delivery, by telex, telecopier, recognized overnight delivery service,
or by mail (registered or certified mail, postage prepaid, return receipt
requested) to the respective parties as follows:
If to the Company:
Hawkins Energy Corporation
20 East 5th Street, Suite 1500
Tulsa, OK 74103
Attention: Thomas F. Ostrye, President
with a copy to:
Conner & Winters, A Professional Corporation
2400 First Place Tower
15 East 5th Street
Tulsa, OK 74103
Attention: Lynnwood R. Moore, Jr.
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<PAGE> 24
If to the Purchaser:
c/o Energy Transfer Corporation
8080 North Central Expressway, Suite 1600
Dallas, TX 75206
Attention: Ray Davis
with a copy to:
Schlanger, Mills, Mayer & Grossberg, L.L.P.
5847 San Felipe, Suite 1700
Houston, TX 77057
Attention: Kyle Longhofer
(e) Waiver. No Party may waive any of the terms or conditions
of this Agreement except by a duly signed writing referring to the specific
provision to be waived.
(f) Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Oklahoma.
(g) Entire Agreement. This Agreement (including the Annex
hereto) constitutes the entire agreement and supersedes all other and prior
agreements and understandings, both written and oral, between the Parties and
their affiliates.
(h) Expenses. Except as otherwise expressly contemplated
herein to the contrary, regardless of whether the transactions contemplated
hereby are consummated, each Party shall pay its own expenses incident to
preparing for, entering into and carrying out this Agreement and the
consummation of the transactions contemplated hereby.
(i) Captions. The Section and Paragraph captions herein are
for convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
(j) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument.
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<PAGE> 25
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed and delivered on the day and year first above written.
HAWKINS ENERGY CORPORATION
By:
----------------------------
Title: President and Chief
Executive Officer
HACL, LTD.
BY: SIX-DAWACO, INC., its
general partner
By:
---------------------------
Title:
------------------------
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<PAGE> 1
================================================================================
WARRANT
EQUITY COMPRESSION SERVICES CORPORATION
(FORMERLY KNOWN AS HAWKINS ENERGY CORPORATION)
an Oklahoma Corporation
(the "Company")
To Purchase 8,000,000
Shares of the Company's Common Stock
granted to
HACL, LTD.
December 19, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
EXERCISE OF WARRANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Manner of Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 When Exercise Effective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Delivery of Stock Certificates, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(a) Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(b) Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Company to Reaffirm Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 Vesting of the Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Compressor Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Oil and Gas Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Combination of Compressor Leases and Acquisitions of Oil and Gas Properties . . . . . . 5
(d) Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(e) Calculation of Leased Compressor Horsepower . . . . . . . . . . . . . . . . . . . . . . 6
(f) Acquisition of Compressor Leasing Companies . . . . . . . . . . . . . . . . . . . . . . 6
(g) Combining Producing Oil and Gas Properties and Compressor Leases Effected
Through Acquisitions of Companies . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE FOR
STOCK SPLITS, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
CONSOLIDATION, MERGER, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1 Consolidation, Merger, Sale of Assets, Reorganization, etc. . . . . . . . . . . . . . . . . . . 8
3.2 Assumption of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
OTHER PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1 No Dilution or Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2 Notices of Corporate Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 Availability of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.4 Reservation of Stock, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
RESTRICTIONS ON TRANSFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 Restrictive Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 Notice of Proposed Transfer; Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
5.3 Termination of Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.1 Ownership of Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.2 Office, Transfer and Exchange of Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(a) Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) New Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.3 Replacement of Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.1 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.2 No Rights or Liabilities as Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.4 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
<PAGE> 4
THE ISSUANCE OF THIS WARRANT AND THE ISSUANCE OF
SHARES OF COMMON STOCK UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF THE 1933, AS
AMENDED, THE TEXAS SECURITIES ACT OR THE OKLAHOMA SECURITIES
ACT. NEITHER THE RECORD OR THE BENEFICIAL OWNERSHIP OF SAID
WARRANT OR SAID SHARES MAY BE SOLD OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SAID
SECURITIES UNDER SAID ACTS AND ANY OTHER APPLICABLE STATE
SECURITIES LAWS OR RULES OR A VALID EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER SAID ACTS OR RULES CONFIRMED
BY AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
SALE OR TRANSFER IS EXEMPT UNDER SUCH ACTS OR RULES AND SUCH
SALE OR TRANSFER IS MADE PURSUANT TO AND IN STRICT COMPLIANCE
WITH THE TERMS AND CONDITIONS OF SAID EXEMPTIONS.
EQUITY COMPRESSION SERVICES CORPORATION
(FORMERLY KNOWN AS HAWKINS ENERGY CORPORATION)
Warrant
No. W-1 December 19, 1996
Equity Compression Services, Inc. (formerly known as Hawkins Energy
Corporation) (the "Company"), an Oklahoma corporation, for value received,
hereby certifies that HACL, Ltd., or registered assigns, is entitled to
purchase from the Company eight million (8,000,000) duly authorized, validly
issued, fully paid and nonassessable shares of Common Stock, $0.01 par value
(the "Common Stock") at any time or from time to time prior to 5:00 p.m.,
Houston time, on the Expiration Date, all subject to terms, conditions and
adjustments set forth in this Warrant.
This is one of the Warrants (the "Warrant") (such term to include any
warrants issued in substitution therefor) originally issued pursuant to the
Stock Purchase Agreement. The Warrants originally so issued evidence the right
to purchase an aggregate of Eight Million (8,000,000) shares of Common Stock
subject to adjustment as provided herein. Certain capitalized terms used in
this Warrant are defined in Article VII; unless otherwise specified, references
to an "Exhibit" mean one of the exhibits attached to this Warrant, references
to an "Article" mean one of the articles in this Warrant, and references to a
"Section" mean one of the sections of this Warrant.
<PAGE> 5
ARTICLE I
EXERCISE OF WARRANT
Section 1.1 Manner of Exercise. This Warrant may be exercised by the
holder hereof, in whole or in part as to any Vested Warrants, during normal
business hours on any Business Day prior to the Expiration Date, by surrender
of this Warrant to the Company at its office maintained pursuant to subdivision
(a) of Section 6.2, accompanied by a subscription in substantially the form
attached to this Warrant (or a reasonable facsimile thereof) duly executed by
such holder and accompanied by payment, in cash or by certified or official
bank check payable to the order of the Company in the amount obtained by
multiplying (a) the number of shares of Common Stock (without giving effect to
any adjustment thereof) designated in such subscription by (b) the Exercise
Price, and such holder shall thereupon be entitled to receive the number of
duly authorized, validly issued, fully paid and nonassessable shares of Common
Stock (or Other Securities) determined as provided in Articles II through IV;
provided however, in no event will the Holder of this Warrant be entitle to
exercise this Warrant as to any unvested Warrants.
Section 1.2 When Exercise Effective. Each exercise of this Warrant
shall be deemed to have been effected immediately prior to the close of
business on the Business Day on which this Warrant shall have been surrendered
to the Company as provided in Section 1.1, and at such time the Person or
Persons in whose name or names any certificate or certificates for shares of
Common Stock (or Other Securities) shall be issuable upon such exercise as
provided in Section 1.3 shall be deemed to have become the holder or holders of
record thereof.
Section 1.3 Delivery of Stock Certificates, etc. As soon as
practicable after each exercise of this Warrant as to any Vested Warrants, in
whole or in part, and in any event within five Business Days thereafter, the
Company, at its expense (including the payment by it of any applicable issue
taxes), will cause to be issued in the name of and delivered to the holder
hereof, subject to Article V, as such holder (upon payment by such holder of
any applicable transfer taxes) may direct, the following:
(a) Certificates. A certificate or certificates for the
number of duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock (or Other Securities) to which
such holder shall be entitled upon such exercise plus, in lieu of any
fractional share to which such holder would otherwise be entitled,
cash in an amount equal to the same fraction of the Market Price per
share on the Business Day next preceding the date of such exercise.
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<PAGE> 6
(b) Warrant. In case such exercise is in part only, unless
this Warrant has expired, a new Warrant or Warrants of like tenor
dated the date hereof, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock (or Other Securities)
equal (without giving effect to any adjustment thereof) to the number
of such shares called for on the face of this Warrant minus the number
of such shares designated by the holder upon such exercise as provided
in Section 1.1.
Section 1.4 Company to Reaffirm Obligations. The Company will, at
the time of each exercise of this Warrant, upon the request of the holder
hereof, acknowledge in writing its continuing obligation to afford to such
holder all rights of the Common Stock (or other Securities) issued upon such
exercise to which such holder shall continue to be entitled after such exercise
in accordance with the terms of this Warrant; provided, that if the holder of
this Warrant shall fail to make any such request, such failure shall not affect
the continuing obligation of the Company to afford such rights to such holder.
Section 1.5 Vesting of the Warrants. Notwithstanding any provision
of this Warrant to the contrary, none of the Warrants shall be exercisable
until vested in accordance with this Section 1.5 (any such warrant is
hereinafter referred to as a "Vested Warrant"). The Warrants will vest as set
forth below:
(a) Compressor Leases. If the Purchaser or its Affiliates
directly or indirectly provide to the Company contracts or agreements
committing to lease from the Company natural gas compressors having an
aggregate of 15,000 horsepower on or before the Expiration Date, then
all of the Warrants shall be fully vested. If the Purchaser or its
Affiliates directly or indirectly provide contracts or agreements for
less than 15,000 horsepower, then (i) for contract or set of contracts
for the lease of natural gas compressors with an aggregate of 3,750
horsepower delivered by the Purchaser or its Affiliates on or before
the Expiration Date, then one-fourth (25%) of the Warrants shall be
vested, (ii) for contract or set of contracts for the lease of natural
gas compressors with an aggregate of 7,500 horsepower delivered by the
Purchaser or its Affiliates on or before the Expiration Date, then
one-half (50%) of the Warrants shall be vested, and (iii) for contract
or set of contracts for the lease of natural gas compressors with an
aggregate of 11,250 horsepower delivered by the Purchaser or its
Affiliates on or before the Expiration Date, then three-fourths (75%)
of the Warrants shall be vested. All of such leases shall provide for
rentals of not less than Market Rates. For the purposes of this
Section 1.5(a) the following transactions shall be considered as being
the equivalent of the Purchaser or its Affiliates providing contracts
or agreements for lease of natural gas compressors
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<PAGE> 7
from the Company with respect to the vesting of the Warrants pursuant
to this Section 1.5, (a) any contracts or agreements for compressor
leases originated by the Purchaser or its Affiliates between October
16, 1996 and the Expiration Date (the "Vesting Period"), (b) if the
Company acquires a company or entity with compressor leases that was
identified by the Purchaser or its Affiliates, then the compressor
leases of such acquired company shall be considered as set forth in
Section 1.5(f) hereof, (c) any sale/lease back transactions provided
or originated by the Purchaser or its Affiliates so long as the
purchase price for each natural gas compressors involved in such
transaction does not exceed the fair market value thereof, the lease
rentals payable to the Company are not less than Market Rates and the
transactions are approved by a majority of the members of the Board of
Directors not affiliated with or designated by the Purchaser, and (d)
any compressors provided by the Company to oil and gas properties
acquired by the Company and for which Warrants are being vested
pursuant to Section 1.5(b) below.
(b) Oil and Gas Reserves. If the Company has entered into
contract or set of contracts for the lease of natural gas compressors
with an aggregate of 7,500 horsepower delivered by the Purchaser or
its Affiliates on or before the Expiration Date, then one hundred
percent (100%) of the Warrants shall vest if the Company acquires
during the Vesting Period producing oil and gas properties identified
by the Purchaser or its Affiliates having a purchase price paid by the
Company of at least $4,000,000 in an transaction that is approved by a
majority of the members of the Board of Directors of the Company not
affiliated with or designated by the Purchaser (an "Approved
Transaction"). If the Company acquires producing oil and gas
properties having a purchase price of less than $4,000,000 in one or
more Approved Transaction(s), then (i) if the Company acquires
producing oil and gas properties with an aggregate purchase price of
at least $1,000,000 in one or more Approved Transaction(s) and the
Company has entered into contract or set of contracts for the lease of
natural gas compressors with an aggregate of 2,500 horsepower
delivered by the Purchaser or its Affiliates on or before the
Expiration Date, then twenty-five percent (25%) of the Warrants shall
vest, (ii) if the Company acquires producing oil and gas properties
with an aggregate purchase price of at least $2,000,000 in one or more
Approved Transaction(s) and the Company has entered into contract or
set of contracts for the lease of natural gas compressors with an
aggregate of 4,250 horsepower delivered by the Purchaser or its
Affiliates on or before the Expiration Date, then fifty percent (50%)
of the Warrants shall vest, and (iii) if the Company acquires
producing oil and gas properties with an aggregate purchase price of
at least $3,000,000 in one or more Approved Transaction(s) and the
Company has entered into contract or set
4
<PAGE> 8
of contracts for the lease of natural gas compressors with an
aggregate of 6,000 horsepower delivered by the Purchaser or its
Affiliates on or before the Expiration Date, then 75% of the Warrants
shall vest. If the Company acquires a company that was identified by
the Purchaser or its Affiliates with oil and gas properties, then the
amount of the purchase price allocated to the producing oil and gas
properties of such acquired company shall be considered as oil and gas
properties acquired by the Company in determining the amount of
vesting under this Warrant.
(c) Combination of Compressor Leases and Acquisitions of Oil
and Gas Properties. It is the intent of the Parties that the
Warrants may be vested through a combination of the methods set forth
in Section 1.5(a) and (b) above. If any portion of the Warrants are
vested pursuant to Section 1.5(b), then for each set of contract or
set of contracts for the lease of natural gas compressors with an
aggregate of 3,750 horsepower delivered by the Purchaser or its
Affiliates on or before the Expiration Date with no additional
acquisition of oil and gas properties, then an additional one-fourth
(25%) of the Warrants shall be vested over and above the levels
provided in Section 1.5(b) above. For example if (i) 25% of the
Warrants have become vested pursuant to Section 1.5(b)(i) above, and
the Company has entered into contract or set of contracts for the
lease of natural gas compressors with an aggregate of additional 3,750
horsepower delivered by the Purchaser or its Affiliates on or before
the Expiration Date (i.e. leases for compressors with an aggregate of
6,250 horsepower), then an additional 25% of the Warrants shall vest
(i.e. a total of 50% of the Warrants shall then be vested), (ii) 50%
of the Warrants have become vested pursuant to Section 1.5(b)(ii)
above, and the Company and entered into contract or set of contracts
for the lease of natural gas compressors with an additional of 3,750
horsepower delivered by the Purchaser or its Affiliates on or before
the Expiration Date (i.e. leases for an aggregate of 8,000
horsepower), then an additional 25% of the Warrants shall vest (i.e. a
total of 75% of the Warrants shall then be vested), and (iii) 75% of
the Warrants have become vested pursuant to Section 1.5(b)(iii) above,
and the Company and entered into contract or set of contracts for the
lease of natural gas compressors with an aggregate of 9,750 horsepower
delivered by the Purchaser or its Affiliates on or before the
Expiration Date (i.e. leases for additional 3,750 horsepower), then an
additional 25% of the Warrants shall vest (i.e. all of the Warrants
shall then be vested).
(d) Change of Control. Upon a Change of Control that occurs
on or before the Expiration Date, all of the unvested Warrants shall
become vested.
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<PAGE> 9
(e) Calculation of Leased Compressor Horsepower. For the
purposes of the vesting provisions of this Section 1.5 as such
provisions relate to contracts providing for the lease of natural gas
compressors, only those leases in effect, and the horsepower of the
natural gas compressors that are then subject thereto, on the date on
which any vesting of the Warrants is to be determined shall be taken
in to account in determining whether any of the Warrants should vest
on that date. Once vested, the termination of any leases, or the
modification of any lease to cover compressors with less horsepower,
shall not adversely affect the vested condition of the Warrants. For
example, if the Purchaser or its Affiliates has provided contracts for
the lease of natural gas compressors with 7,500 horsepower all of
which are in effect on a certain date, then one- half of the Warrants
will be vested on such date and the subsequent termination of any of
the leases for such compressors shall not affect the vested status of
the Warrants.
(f) Acquisition of Compressor Leasing Companies. In the event
that the Company acquires another company identified by the Purchaser
or its Affiliates which is in the business of owning and leasing
natural gas compressors to third parties, any compressors being leased
by such company to others at the time of such acquisition shall be
considered for purposes of this Section 1.5 in the same manner and to
the same extent as the acquisition of producing oil and gas properties
identified by the Purchaser or its Affiliates as set forth in Section
1.5(b) above, with leases of acquired companies with an aggregate
horsepower of 1,875 being considered the equivalent of acquired
producing oil and gas properties with a purchase price of $1,000,000.
In other words, twenty-five percent (25%) of the Warrants shall vest
at any time that the Company has acquired a company or companies which
have compressor leases in effect covering an aggregate of at least
1,875 horsepower and the Company has in effect a contract or set of
contracts for the lease of natural gas compressors in accordance with
Section 1.5(a) with an aggregate of at least 2,500 horsepower, fifty
percent (50%) of the Warrants shall vest at any time that the Company
has acquired a company or companies which have compressor leases in
effect covering an aggregate of at least 3,750 horsepower and the
Company has in effect a contract or set of contracts for the lease of
natural gas compressors in accordance with Section 1.5(a) with an
aggregate of at least 4,250 horsepower; seventy-five percent (75%) of
the Warrants shall vest if at any time that the Company has acquired a
company or companies which have compressors leasing in effect covering
an aggregate of at least 5,625 horsepower and the Company has in
effect a contract or set of contracts for the lease of natural gas
compressors in accordance with Section 1.5(a) with an aggregate of at
least 6,000 horsepower. The Warrants will be one hundred percent
(100%) vested at any time that the Company has acquired a company or
companies which have
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compressor leases in effect covering an aggregate of at least 7,500
horsepower and the Company has in effect a contract or set of
contracts for the lease of natural gas compressors in accordance with
Section 1.5(a) with an aggregate of at least 7,500 horsepower.
(g) Combining Producing Oil and Gas Properties and Compressor
Leases Effected Through Acquisitions of Companies. If the Company has
acquired producing oil and gas properties identified by the Purchaser
or its Affiliates and has acquired companies identified by the
Purchaser or its Affiliates which are in the business of owning and
leasing natural gas compressors to third parties, both types of
acquisitions shall be considered in determining the vesting of the
Warrants, with each $1,000,000 of purchase price of such producing oil
and gas properties being considered to be the equivalent of compressor
leases of such acquired companies with an aggregate horsepower of 1,875
and vice versa. Notwithstanding anything in the foregoing to the
contrary, in no event shall any Warrants vest unless the compressor
leases provided by the Purchaser or its Affiliates pursuant to Section
1.5(a) above cover compressors which have an aggregate of at least
2,500 horsepower; in no event shall the percentage of Warrants that
vests exceed twenty-five percent (25%) unless the compressor leases
provided by the Purchaser or its Affiliates pursuant to Section 1.5(a)
above cover compressors which have an aggregate of at least 4,250
horsepower; in no event shall the percentage of Warrants that vests
exceed fifty percent (50%) unless the compressor leases provided by the
Purchaser or its Affiliates pursuant to Section 1.5(a) above cover
compressors which have an aggregate of at least 6,000 horsepower; and
in no event shall the percentage of Warrants that vests exceed
seventy-five percent (75%) unless the compressor leases provided by the
Purchaser or its Affiliates pursuant to Section 1.5(a) above cover
compressors which have an aggregate of at least 7,500 horsepower.
ARTICLE II
ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE FOR
STOCK SPLITS, ETC.
In case of any reclassification or change of the outstanding shares of
Common Stock (other than a change from par value to no par value or vice versa
or a change in par value, or as a result of a subdivision or combination), the
holder of this Warrant shall thereafter (but only until the Expiration Date)
have the right to purchase the kind and number of shares of stock and/or other
securities or property receivable upon such reclassification or change in
respect of the number of shares purchasable under this Warrant immediately
prior to the time of determination of shareholders of the Company entitled to
receive such shares of stock and/or other securities or property, at a purchase
price equal to the product of (x) the number of shares issuable under this
Warrant immediately prior to such determination, times (y) the Exercise
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Price, as if such holder had exercised this Warrant immediately prior to such
determination. The Company shall be obligated to retain and set aside, or
otherwise make fair provision for exercise of the right of the holder hereof to
receive, the shares of stock and/or other securities or property provided for
in this Section 2.1.
ARTICLE III
CONSOLIDATION, MERGER, ETC.
Section 3.1 Consolidation, Merger, Sale of Assets, Reorganization,
etc.
(a) In case at any time the Company shall be a party to any
transaction (including, without limitation, a merger, consolidation,
sale of all or substantially all the Company's assets, liquidation, or
recapitalization of the Common Stock) in which the previously
outstanding Common Stock shall be changed into or exchanged for common
stock or other securities of another corporation or interests in a
noncorporate entity or other property (including cash) or any
combination of any of the foregoing or in which the Common Stock (or
Other Securities) ceases to be a publicly traded security either
listed on the New York Stock Exchange or the American Stock Exchange
or quoted by the NASDAQ National Market System or the NASDAQ Small Cap
Market or any successor thereto or comparable system (each such
transaction being herein called the "Transaction", the date of
consummation of the Transaction being herein called the "Consummation
Date", the Company (in the case of a transaction in which the Company
retains substantially all of its assets and survives as a corporation)
or such other corporation or entity (in each other case) being herein
called the "Acquiring Company"), then, as a condition of the
consummation of the Transaction, lawful and adequate provisions shall
be made so that the holder of this Warrant, upon the exercise thereof
at any time on or after the Consummation Date, shall be entitled to
receive, and this Warrant shall thereafter represent the right to
receive, in lieu of the Common Stock (or Other Securities) issuable
upon such exercise prior to the Consummation Date, the highest amount
of securities or other property to which such holder would actually
have been entitled as a shareholder upon the consummation of the
Transaction if such holder had exercised this Warrant immediately
prior thereto.
(b) Notwithstanding the provisions of Section 3.1(a) hereof,
if the Common Stock (or Other Securities) is to be converted or
changed into, in whole or in part, securities of the Acquiring Company
or any affiliate thereof and the issuer of such securities does not
meet, or as a result of the
8
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transaction with the Company, will not meet the following
requirements:
(i) it is or will be a solvent
corporation organized under the laws of any state of the
United States of America having its common stock listed on the
New York Stock Exchange or the American Stock Exchange or
quoted by the NASDAQ National Market System or any successor
thereto or comparable system, and such common stock continues
to meet such requirements for such listing or quotation, and
(ii) it is or will be required to file
reports with the Securities and Exchange Commission pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended,
then, at the election of the holder of this Warrant pursuant to notice given to
the Company on or before the later of (1) the 30th day following the
Consummation Date, and (2) the 60th day following the date of delivery or
mailing to such holder of the last proxy statement relating to the vote on the
Transaction by the holders of the Common Stock, the holder of this Warrant
shall be entitled to receive, within 30 days after such election or the
Consummation Date, whichever is later, in full satisfaction of the exercise
rights and all other rights afforded to such holder under this Warrant, an
amount equal to the fair market value of such exercise rights as determined by
an independent investment banker (with an established national reputation as a
valuer of equity securities) selected by the Company, such fair market value to
be determined with regard to all material relevant factors but without regard
to the effects on such value of the Transaction. In the event that the holder
of this Warrant elects to receive payment under this Section 3.1(b), the
Company shall obtain, and deliver to the holder of this Warrant a copy of the
determination of an independent investment banker (selected by the Company and
reasonably satisfactory to the holder of this Warrant) necessary for the
valuation under this Section 3.1(b) within 30 days after the Consummation Date
of the Transaction in question.
Section 3.2 Assumption of Obligations. Notwithstanding anything
contained in this Warrant to the contrary, the Company will not effect any of
the transactions described in paragraph 3.1(a) unless, prior to the
consummation thereof, each Person (other than the Company) which may be
required to deliver any stock, securities, cash or property upon the exercise
of this warrant as provided herein shall assume, by written instrument
delivered to, and reasonably satisfactory to, the holder of this Warrant, (a)
the obligations of the Company under this Warrant (and if the Company shall
survive the consummation of such transaction, such assumption shall be in
addition to, and shall not release the Company from, any
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continuing obligations of the Company under this Warrant), and (b) the
obligation to deliver to such holder such shares of stock, securities, cash or
property as, in accordance with the foregoing provisions of this Article III,
such holder may be entitled to receive.
ARTICLE IV
OTHER PROVISIONS
Section 4.1 No Dilution or Impairment. The Company will not amend its
certificate of incorporation or consolidate, merge, reorganized, transfer
assets, dissolve, issue or sell securities or take any other voluntary action,
solely or primarily to avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the holder of
this Warrant. Without limiting the generality of the foregoing, the Company
(a) will not permit the par value of any shares of stock receivable upon the
exercise of this Warrant to exceed the amount payable thereof or upon such
exercise, (b) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock (or Other Securities) on the exercise of
the Warrant from time to time outstanding, and (c) will not take any action
which results in any adjustment of the number of shares to be issued upon the
exercise of this Warrant if the total number of shares of Common Stock (or
Other Securities) issuable after the action upon the exercise of the Warrant
would exceed the total number of shares of Common Stock (or Other Securities)
then authorized by the Company's certificate of incorporation and available for
the purpose of issuance upon such exercise.
Section 4.2 Notices of Corporate Action. In the event that any of the
following occurs,
(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a regular
periodic dividend payable in cash out of earned surplus in an amount
not exceeding the amount of the immediately preceding cash dividend
for such period) or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any
other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger involving the Company and any
other Person or any transfer of all or
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substantially all the assets of the company to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company will mail to each holder of a Warrant a notice specifying (i) the
date or expected date as of which any such record is to be taken for the
purpose of such dividend, distribution or right, and the amount and character
of such dividend, distribution or right, and (ii) the date or expected date on
which any such reorganization, reclassification, recapitalization,
consolidation, merger, transfer, dissolution, liquidation or winding-up is to
take place and the time, if any such time is to be fixed, as of which the
holders of record of Common Stock (or Other Securities) shall be entitled to
exchange their shares of Common Stock (or Other Securities) for the securities
or other property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be mailed at least 20 days prior to the date
therein specified.
Section 4.3 Availability of Information. The Company will cooperate
with each holder of any Warrant or Restricted Security in supplying such
information as may be reasonably requested by such holder to complete and file
any information reporting forms presently or hereafter required by the
Commission to report such holders beneficial ownership of Common Stock or as a
condition to the availability of an exemption from the provisions of the
Securities Act for the sale of any Restricted Securities.
Section 4.4 Reservation of Stock, Etc. The Company will at all times
reserve and keep available, solely for issuance and delivery upon exercise of
the Warrants, the number of shares of Common Stock (or Other Securities) from
time to time issuable upon exercise of the Warrant. All shares of Common Stock
(or Other Securities) issuable upon exercise of the Warrant shall be duly
authorized and, when issued upon such exercise, shall be validly issued and, in
the case of shares, fully paid and non-assessable with no liability on the part
of the holders thereof.
ARTICLE V
RESTRICTIONS ON TRANSFER
Section 5.1 Restrictive Legends. Except as otherwise permitted by
this Article V, each Warrant (including each Warrant issued upon the transfer
of any Warrant) shall be stamped or otherwise imprinted with a legend in
substantially the following form:
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<PAGE> 15
"THE ISSUANCE OF THIS WARRANT AND THE ISSUANCE OF SHARES OF
COMMON STOCK UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF THE 1933, AS AMENDED, THE
TEXAS SECURITIES ACT OR THE OKLAHOMA SECURITIES ACT. NEITHER THE
RECORD OR THE BENEFICIAL OWNERSHIP OF SAID WARRANT OR SAID SHARES MAY
BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR SAID SECURITIES UNDER SAID ACTS AND ANY OTHER APPLICABLE
STATE SECURITIES LAWS OR RULES OR A VALID EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER SAID ACTS OR RULES CONFIRMED BY AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH SALE OR
TRANSFER IS EXEMPT UNDER SUCH ACTS OR RULES AND SUCH SALE OR TRANSFER
IS MADE PURSUANT TO AND IN STRICT COMPLIANCE WITH THE TERMS AND
CONDITIONS OF SAID EXEMPTIONS."
Except as otherwise permitted by this Article V, each certificate for Common
Stock (or Other Securities) issued upon the exercise of any Warrant, and each
certificate issued upon the transfer of any such Common Stock (or Other
Securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, THE TEXAS
SECURITIES ACT OR THE OKLAHOMA SECURITIES ACT. NEITHER THE RECORD NOR
THE BENEFICIAL OWNERSHIP OF SAID SHARES MAY BE SOLD OR TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SAID SHARES
UNDER SAID ACTS AND ANY OTHER APPLICABLE STATE SECURITIES LAWS OR
RULES UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY,
EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACTS ARE
AVAILABLE WITH RESPECT TO SUCH SALE OR TRANSFER AND SAID SALE OR
TRANSFER IS MADE PURSUANT TO AND IN STRICT COMPLIANCE WITH THE TERMS
AND CONDITIONS OF SAID EXEMPTIONS."
Section 5.2 Notice of Proposed Transfer; Opinions of Counsel. Prior
to any transfer of any Restricted Securities which are not registered under an
effective registration statement under the Securities Act, the holder thereof,
will give written notice to the Company of such holders intention to effect
such transfer and to comply in all other respects with this Section 5.2. Each
such notice (a) shall describe the manner and circumstances of the proposed
transfer and (b) shall include an opinion of legal counsel addressed to the
Company, in form and substance reasonably satisfactory to the Company, to the
effect that such transfer does not violate the Securities Act of 1933 and
applicable state securities laws.
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<PAGE> 16
Section 5.3 Termination of Restrictions. The restrictions imposed by
this Article V upon the transferability of Restricted Securities shall cease
and terminate as to any particular Restricted Securities when such securities
shall have been sold pursuant to an effective registration statement under the
Securities Act or otherwise become freely transferable by the holder thereof.
Whenever such restrictions shall cease and terminate as to any Restricted
Securities, the holder thereof shall be entitled to receive from the Company,
without expense (other than applicable transfer taxes, if any), new
certificates representing the securities not bearing the applicable legends
required by Section 5.1.
ARTICLE VI
OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS
Section 6.1 Ownership of Warrants. The Company may treat the person
in whose name any Warrant is registered on the register kept at the office of
the Company maintained pursuant to subdivision (a) of Section 6.2 as the owner
and holder thereof for all purposes, notwithstanding any notice to the
contrary, except that, if and when any Warrant is properly assigned in blank,
the Company may (but shall not be obligated to) treat the bearer thereof as the
owner of such Warrant for all purposes, notwithstanding any notice to the
contrary. Subject to Article V, a Warrant, if properly assigned, may be
exercised by a new holder without a new Warrant first having been issued.
Section 6.2 Office, Transfer and Exchange of Warrants.
(a) Office. The Company will maintain an office in where
notices, presentations and demands in respect of this Warrant may be
made upon it. Such office shall be maintained at until such time as
the Company shall notify each holder of the Warrant of any change of
location of such office.
(b) New Warrant. Upon the surrender of any Warrant, properly
endorsed, for registration of transfer or for exchange at the office
of the Company maintained pursuant to subdivision (a) of this Section
6.2, the Company at such holder's expense will (subject to compliance
with Article V, if applicable) execute and deliver to or upon the
order of the holder thereof a new Warrant or Warrants of like tenor,
in the name of such holder or as such holder (upon payment by such
holder of any applicable transfer taxes) may direct, calling in the
aggregate on the face or faces thereof for the number of shares of
Common Stock (or Other Securities) called for on the face or faces of
the Warrant or Warrants so surrendered.
13
<PAGE> 17
Section 6.3 Replacement of Warrants. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction of any Warrant held by a Person other than Purchaser or any
institutional investor, upon delivery of indemnity reasonably satisfactory to
the Company in form and amount or, in the case of any such mutilation, upon
surrender of such Warrant for cancellation at the office of the Company
maintained pursuant to subdivision (a) of Section 6.2 the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.
ARTICLE VII
DEFINITIONS
As used herein, unless the context otherwise requires, the following
terms have the following respective meanings:
Business Day: Any day other than a Saturday or a Sunday or a day on
which commercial banking institutions in the States of Oklahoma, Texas or New
York are authorized by law to be closed. Any reference to "days" (unless
Business Days are specified) shall mean calendar days.
Change of Control: A "Change in Control" shall be deemed to take
place on the occurrence of any of the following events:
(1) as a result of a proxy solicitation by any party other
than the Company or any other such event, the Continuing Directors no
longer constitute at least a majority of the total number of directors
of the Company;
(2) any person or group of persons (as defined in Rule 13d-5
under the Securities Exchange Act of 1934, as amended), together with
its Affiliates, become the beneficial owner, directly or indirectly,
of fifty percent (50%) or more of the Company's then outstanding
Common Stock or fifty percent (50%) or more the total voting power of
the Company's then outstanding securities entitled generally to vote
for the election of the Company's directors;
(3) the approval by the Company's shareholders of the merger
or consolidation of the Company with any other corporation or business
organization, the sale of substantially all of the assets of the
Company or the liquidation or dissolution of the Company, unless, in
the case of a merger or consolidation, (i) the Continuing Directors in
office immediately prior to such merger or consolidation will
constitute at least a majority of the directors of the surviving
corporation or business organization of such merger or consolidation
or any parent (as such term is defined in Rule
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<PAGE> 18
12b-2 under the Securities Exchange Act of 1934, as amended) of such
corporation or business organization, or (ii) a majority of the
disinterested members of the Board of Directors of the Company as it
exists immediately prior to such event approve such transaction (for
the purposes hereof, the term "disinterested" members of the Board of
Directors are those members who are not designated by or affiliated
with the Purchaser or any of its assignees or affiliates); or
(4) a majority of the "disinterested" members of the Board of
Directors in office immediately prior to any other action proposed to
be taken by the Company's shareholders or by the Company's Board of
Directors determine that such proposed action, if taken, would
constitute a change of control of the Company and such action is
taken.
Commission: The Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
Common Stock: As defined in the introduction to this Warrant, such
term to include (i) any stock into which such Common Stock shall have been
changed or any stock resulting from any reclassification of such Common Stock,
and (ii) all other stock of any class or classes (however designated) of the
Company the holders of which have the right, without limitation as to amount,
either to all or to a share of the balance of current dividends and liquidating
dividends after the payment of dividends and distributions on any shares
entitled to preference.
Company: As defined in the introduction to this Warrant, such term to
include any corporation which shall succeed to or assume the obligations of the
Company hereunder.
Continuing Director: In determining whether there has been a Change
of Control, any individual who is a member of the Company's Board of Directors
on the date immediately preceding the event or series of events that resulted
in the purported Change of Control.
Convertible Securities: Any evidences of indebtedness, shares of
stock (other than Common Stock) or other securities directly or indirectly
convertible into or exchangeable for Additional Shares of Common Stock.
Exchange Act: The Securities Exchange Act of 1934, or any similar
federal statute, and the rules and regulations of the Commission thereunder,
all as the same shall be in effect at the time.
Exercise Price: $0.91 per share.
Expiration Date: December 19, 2000.
15
<PAGE> 19
Market Price: On any date specified herein, the amount per share of
the Common Stock, equal to (a) the last sale price of such Common Stock,
regular way, on such date or, if no such sale takes place on such date, the
average of the closing bid and asked prices thereof on such date, in each case
as officially reported on the principal national securities exchange on which
such Common Stock is then listed or admitted to trading, or (b) if such Common
Stock is not then listed or admitted to trading on any national securities
exchange but is designated as a national market system security by the NASD,
the last trading price of the Common Stock on such date, or (c) if there shall
have been no trading on such date or if the Common Stock is not so designated,
the average of the closing bid and asked prices of the Common Stock on such
date as shown by the NASD automated quotation system, or (d) if such Common
Stock is not then listed or admitted to trading on any national exchange or
quoted in the over-the-counter market, the fair value thereof determined in
good faith by the Board of Directors of the Company as of a date which is
within 20 days of the date as of which the determination is to be made.
Market Rates: Either (i) a rate that has been approved by the members
of the Board of Directors not Affiliated with or designated by the Purchaser or
(ii) a rate equal to or greater than the rate (a) that the Company is charging
unrelated third parties for the lease of comparable natural gas compressors in
the same region, or (b) being charged by the competitors of the Company
according to such competitors' rate books or sheets for the lease of comparable
equipment on comparable terms in the same region.
NASD: The National Association of Securities Dealers, Inc.
Options: Rights, options or warrants to subscribe for, purchase or
otherwise acquire either Additional Shares of Common Stock or Convertible
Securities.
Other Securities: Any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or otherwise) which
the holder of the Warrant at any time shall be entitled to receive, or shall
have received upon the exercise of the Warrant, in lieu of or in addition to
Common Stock, or which at any time shall be issuable or shall have been issued
in exchange for or in replacement of Common Stock or other securities pursuant
to Article III or otherwise.
Person: Any corporation, association, partnership, joint venture,
limited liability company, trust, estate, organization, business, individual,
government or political subdivision thereof or governmental agency.
Purchaser: HACL, Ltd., a Texas limited partnership.
16
<PAGE> 20
Restricted Securities: All of the following: (a) any Warrants bearing
the applicable legend or legends referred to in Section 5.1, (b) any shares of
Common Stock (or Other Securities) which have been issued upon the exercise of
Warrants and which are evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such section and (c) unless the
context otherwise requires, any shares of Common Stock (or Other Securities)
which are at the time issuable upon the exercise of Warrants and which, when so
issued, will be evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such section.
Securities Act: The Securities Act of 1933, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
Stock Purchase Agreement: That certain Stock Purchase Agreement dated
as of October 16, 1996, by both the Company and the Purchaser.
Subsidiary: With respect to any Person, any corporation with respect
to which more than 50% of the outstanding shares of stock of each class having
ordinary voting power (other than stock having such power only by reason of the
happening of a contingency) is at the time owned, directly or indirectly, by
such Person or by one or more subsidiaries of such Person.
Transfer: Any sale, assignment, pledge or other disposition of any
security, or of any interest therein, which could constitute a "sale" as that
term is defined in section 2(3) of the Securities Act.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Remedies. The Company stipulates that the remedies at
law of the holder of this Warrant in the event of any default or threatened
default by the Company in the performance of or compliance with any of the
terms of this Warrant are not and will not be adequate and that, to the fullest
extent permitted by law, such terms may be specifically enforced by a decree
for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
Section 8.2 No Rights or Liabilities as Stockholder. The holder of
this Warrant and all subsequent holders thereof hereby agree that except to the
extent set forth herein or in the Stock Purchase Agreement, no provision of
this Warrant shall be construed as conferring upon the holder hereof any rights
as a stockholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
17
<PAGE> 21
stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
Section 8.3 Notices. All notices and other communications under this
Warrant shall be in writing and shall be mailed by registered or certified
mail, return receipt requested, addressed (a) if to any holder of any Warrant,
to the registered address of such holder as set forth in the register kept at
the principal office of the Company, or (b) if the Company, to the attention of
its President at its office maintained pursuant to subdivision (a) of Section
6.2, provided that the exercise of any Warrant shall be effective in the manner
provided in Article I.
Section 8.4 Miscellaneous.
(a) This Warrant may be amended, waived, discharged or
terminated, only if the Company shall have obtained the written
consent to such amendment, waiver, discharge or termination of the
holder or holders of Warrants entitling such holders to purchase 51%
or more by number of shares of the total number of shares of Common
Stock issuable under all Warrants at the time outstanding.
(b) This warrant shall be construed and enforced in
accordance with the laws of the State of Texas.
(c) The section headings in this Warrant are for purposes of
convenience only and shall not constitute a part hereof.
EQUITY COMPRESSION SERVICES CORPORATION
By:
--------------------------
Name:
--------------------------
Title:
-------------------------
18
<PAGE> 22
FORM OF SUBSCRIPTION
To: Hawkins Energy Corporation
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases * shares of Common
Stock of Equity Compression Services Corporation (formerly known as Hawkins
Energy Corporation) and herewith makes payment of $ therefor,
and requests that the certificates for such shares be issued in the name of,
and delivered to , whose address is
.
The undersigned further represents and warrants that it is acquiring
the shares of Common Stock for investment purposes only and not with a view to
the distribution thereof. The undersigned acknowledges that the issuance of
the shares of Common Stock has not been registered under the Securities Act of
1933, as amended, or any applicable state securities acts and such shares may
not be resold or otherwise transferred except pursuant to a registration
statement declared effective under such acts unless in the opinion of counsel
satisfactory to the Company exemptions from the registration requirements of
said acts are available with respect to such sale or transfer and said sale or
transfer is made pursuant to and in strict compliance with the terms and
conditions of said exemptions.
19
<PAGE> 23
Dated: (Signature must conform in all
respects to name of holder as
specified on the face or
Warrant)
(Street Address)
(City) (State) (Zip Code)
*Insert the number of shares called for on the face
of this Warrant (or, in the case of a partial exercise, the
portion thereof as to which this Warrant is being exercised),
in either case without making any adjustment for Additional
Shares of Common Stock or any other stock or other securities
or property or cash which, pursuant to the adjustment
provisions of this Warrant, may be delivered upon exercise. In
the case of a partial exercise, a new Warrant or Warrants will
be issued and delivered, representing the unexercised portion
of the Warrant, to the holder surrendering the Warrant.
20
<PAGE> 24
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto the
right represented by such Warrant to purchase shares of Common Stock of to
which such Warrant relates, and appoints Attorney to make such transfer on the
books of maintained for such purpose, with full power of substitution in the
premises.
Dated: (Signature must conform in all
respects to name of holder as
specified on the face or
Warrant)
------------------------------
(Street Address)
-------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
- ------------------------
21
<PAGE> 1
ENERGY INVESTORS
JOINT VENTURE AGREEMENT
This Joint Venture Agreement (this "Agreement"), dated as of the 27th
day of November, 1996, by and among the undersigned, the other persons
executing this Agreement as Joint Venturers, and HACL, Ltd., a Texas limited
partnership (the "Managing Joint Venturer"), (collectively, the parties hereto
are sometimes hereinafter referred to as the "Joint Venturers"):
W I T N E S S E T H:
1. Definitions. As used herein, the following terms have the following
meanings:
"Cash Available for Distribution" shall mean all cash dividends
received by the Joint Venture, the cash proceeds of any stock sold or otherwise
disposed of by the Joint Venture, and any other cash received by the
partnership net of any expenses incurred by the Joint Venture.
"Company" shall mean Hawkins Energy Corporation, an Oklahoma
corporation.
"Company Common Stock" shall mean the $0.01 par value per share common
stock of the Company.
"Fair Market Value of the Stock" shall mean on any date specified
herein, the average of the amount per share of the common stock of the Company
over the last 20 business days prior to the date in question, equal to (a) the
last sale price of the common stock of the Company, regular way, on such dates
or, if no such sale takes place on such dates, the average of the closing bid
and
<PAGE> 2
asked prices thereof on such dates, in each case as officially reported on the
principal national securities exchange on which such common stock is then
listed or admitted to trading, or (b) if such common stock is not then listed
or admitted to trading on any national securities exchange but is designated as
a national market system security by the National Association of Securities
Dealers, Inc. ("NASD"), the last trading price of such common stock on such
dates, or (c) if there shall have been no trading on such dates or if the
common stock of the Company is not so designated, the average of the closing
bid and asked price of the common stock of the Company on such dates as shown
by the NASD automated quotation system, or (d) the Fair Market Value of such
common stock of the Company cannot be ascertained by any of the aforementioned
methods for at least 10 of the dates in question, then the Fair Market Value
shall be established by an investment banking firm selected by the Managing
Joint Venturer.
"Joint Venture Interest" shall mean an interest in the Joint Venture,
held by the Joint Venturers or their transferees or assigns.
"Person" means an individual, firm, corporation, limited liability
company, partnership or other legal entity.
"Stock" shall mean all or any portion of the issued and outstanding
shares of common stock of the Company conveyed to the Joint Venture, to be held
pursuant to this Agreement.
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<PAGE> 3
"Stock Purchase Agreement" shall mean that certain Stock Purchase
Agreement by and between the Company and HACL, Ltd. dated as of October 16,
1996.
2. Formation of Joint Venture. The Joint Venturers hereby form,
pursuant to the Texas Revised Partnership Act, article 6132b-1.01 et. seq. of
the Civil Statutes of the State of Texas (hereinafter, as from time to time
amended, referred to as the "Act") a joint venture, which organization is
hereinafter referred to as the "Joint Venture." The rights and liabilities of
the Joint Venturers shall, except as may be hereinafter expressly stated to the
contrary, be as provided for in the Act.
3. Joint Venture Name. The business of the Joint Venture shall be
conducted under the name of Energy Investors Joint Venture.
4. Principal Office. The Joint Venture's principal office shall be at
8080 N. Central Expressway, 16th Floor, Dallas, Texas, 75206, or at such other
address as the Managing Joint Venturer may designate.
5. Term. The Joint Venture shall commence on the date hereof and shall
continue in effect until the earlier of (i) for a period of four years and 1
day from the date the Stock is purchased by the Managing Joint Venturer (the
"Settlement Date"), on which date the Joint Venture shall dissolve, or (ii)
until the occurrence of any of the following events of dissolution:
(a) the sale or other disposition of all or substantially
all of the Stock;
-3-
<PAGE> 4
(b) the unanimous election of the Joint Venturers to
dissolve the Joint Venture;
(c) a final non-appealable decree of court ordering
dissolution;
(d) in accordance with the provisions of the Act not
inconsistent with this Agreement; or
(e) the dissolution, disability or adjudication of
bankruptcy of the Managing Joint Venturer, but only if a successor does
not become a substitute Managing Joint Venturer.
6. Purpose of the Joint Venture. The purpose of the Joint Venture is
to hold title to the Stock pursuant to this Agreement.
7. Authority of the Managing Joint Venturer. To carry out its purpose
and not in limitation thereof, the Managing Joint Venturer is empowered and
authorized to do any and all acts and things necessary, appropriate, proper,
advisable, incidental to or convenient for the furtherance and accomplishment
of the purposes of this Agreement, and for the protection and benefit of this
Joint Venture, in accordance with and subject to the limitations in this
Agreement and in accordance with the Act.
8. Interests in Joint Venture. The Joint Venturers other than the
Managing Joint Venturer are and shall be the Preferred Joint Venturers. The
Preferred Joint Venturers shall be entitled to receive a priority return (the
"Priority Return") of their "Initial Contribution", as hereinafter defined,
plus 31.61% per annum, compounded annually, plus a their pro rata share of a 50
percent Joint Venture Interest. The Managing Joint Venturer shall
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<PAGE> 5
also have a 50 percent Joint Venture Interest. The Joint Venture Interests
shall be subordinate to the Priority Return. Each Preferred Joint Venturer
shall have a prorata interest in the 50 percent of the Joint Venture Interest
in the ratio that each Preferred Joint Venturer's Initial Contribution bears to
the total Initial Contributions of all Preferred Joint Venturers. For example,
if the Preferred Joint Venturer in question contributed 1/2 of the total
Initial Contributions, then he or it would own a 25% Joint Venture Interest.
9. Investment Representations. Each Joint Venturer hereby
acknowledges and agrees that the Joint Venture Interests have been acquired for
investment purposes only and have not been registered under the Securities Act
of 1933, as amended, or the securities laws of various states. Without such
registration and applicable state registration, such Joint Venture Interests
may not be sold, pledged, hypothecated or otherwise transferred, except upon
delivery to the trustee of an opinion of counsel satisfactory to the Managing
Joint Venturer that registration is not required for such transfer or the
submission to the Managing Joint Venturer of such other evidence as may be
satisfactory to the Managing Joint Venturer to the effect that any such
transfer shall not be in violation of the Securities Act of 1933, as amended,
or applicable state securities laws or any rule or regulation promulgated
thereunder. Any transfers will require the consent of the Managing Joint
Venturer.
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<PAGE> 6
10. Initial Contributions of Joint Venturers. Each Preferred Joint
Venturer will initially contribute the money (an "Initial Contribution") as set
forth on the signature page. The Subordinate Joint Venturers have contributed
a portion of their rights under the Stock Purchase Agreement to allow for the
purchase of the shares of common stock of the Company being acquired by the
Joint Venture pursuant to this Agreement.
11. Return or Withdrawal of Capital Contributions; Distributions.
Except as otherwise expressly provided in this Agreement, none of the Joint
Venturers shall be entitled to demand a refund or return of any Capital
Contributions or to withdraw any part of its Capital Account nor to receive any
distribution from the Joint Venture. No Joint Venturer shall be personally
liable for the return of any Capital Contributions, or any portion thereof, it
being expressly understood that any such return shall be made solely from Joint
Venture assets, nor shall any Joint Venturer be required to pay to the Joint
Venture or any other Joint Venturer any deficit in such Joint Venturer's
Capital Account upon dissolution or otherwise. No Joint Venturer shall have
the right to demand or receive property other than cash for his or its
Interest.
12. Capital Accounts. A Capital Account shall be established and
maintained for each Joint Venturer in accordance with the cash method of
accounting.
13. Allocations of Profits; Losses; Distributions. All Cash
Available for Distribution shall be distributed as follows:
-6-
<PAGE> 7
(a) In any fiscal year of the Joint Venture, 100 percent will be
distributed to the Preferred Joint Venturers pro rata in accordance with
their rights to the Priority Return, until the Preferred Joint Venturers
have been paid their Priority Return in full.
(b) To the extent that the Cash Available for Distribution exceeds the
amount needed to pay the Priority Return, all distributions will then be
pro rata to the Joint Venturers in accordance with their Joint Venture
Interests.
All items of income, gain, expense and loss for each fiscal year shall be
allocated in accordance with the distributions made under this provision.
14. Allocations of Profits; Losses; Distributions Upon Dissolution.
Notwithstanding anything herein to the contrary, upon dissolution and winding
up of the Joint Venture, the Managing Joint Venturer shall calculate the Fair
Market Value of the Stock upon the date of the dissolution and distribute the
Stock in kind as follows:
(a) one hundred percent (100%) to the Preferred Joint Venturers pro
rata in accordance with their rights to the Priority Return, until the
Preferred Joint Venturers have received Stock with a Fair Market Value
equal to their Priority Return (after deduction for any prior
distributions); and
(b) To the extent that the Fair Market Value of the Stock exceeds the
amount needed to provide the Preferred Joint Venturers with their
Priority Return (after deduction for any
-7-
<PAGE> 8
prior distribution) such excess stock will be distributed pro rata to
the Joint Venturers in accordance with their Joint Venture Interests.
Any income, gain, expense and loss associated with such dissolution shall be
allocated in accordance with the distributions made under this provision.
15. Managing Joint Venturer's Role. The Managing Joint Venturer
does herewith acknowledge that the title to the Stock, as acquired or to be
acquired in the name of the Joint Venture shall be held for the account of the
Joint Venture.
16. Rights of the Managing Joint Venturer. Until the termination of
this Agreement, the Managing Joint Venturer shall have the exclusive right and
duty, with the consent of the other Joint Venturers as set forth in this
Agreement, to exercise, in person or by his nominee or proxy, all the Joint
Venture's rights and powers with respect to all Stock, including the right to
vote and to take part in or consent to any corporate or shareholder action of
any kind whatsoever. The Managing Joint Venturer shall vote the Stock
proportionately as directed by each of the Preferred Joint Venturers in
accordance with the Preferred Joint Venture Interest of each.
17. Liability of Managing Joint Venturer. The Managing Joint
Venturer shall be liable for his acts hereunder only in the case of his own
willful misconduct or gross negligence, violation of the voting limitations set
out above, or failure to exercise good faith in the exercise of his acts
hereunder.
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<PAGE> 9
18. Dividends. The Managing Joint Venturer shall promptly
distribute to the Joint Venturers any proceeds of any dividend (except
dividends of Stock) in accordance with Section 13 of this Agreement. If any
dividends are declared in Stock of the Company, the Managing Joint Venturer
shall retain such Stock pursuant to the terms of this Joint Venture.
19. Compensation, Reimbursement and Expenses of the Managing Joint
Venturer. The Managing Joint Venturer shall serve hereunder without
compensation. The Managing Joint Venturer shall have the right to incur and
pay (and be reimbursed for) any reasonable expenses and charges, including, but
not limited to, the right to employ and pay such agents, attorneys and other
persons as he may deem necessary, desirable or proper for carrying out the
terms of this Agreement. Nothing herein contained shall disqualify the
Managing Joint Venturer or incapacitate him from serving the Company as an
officer or director, or in any other capacity, from receiving compensation in
any such capacity or from dealing or contracting with the Company.
20. Warrants Received By the Managing Joint Venturer. The Preferred
Joint Venturers acknowledge that, pursuant to the Stock Purchase Agreement, the
Managing Joint Venturers are entitled to receive warrants to purchase the
Company's Stock in addition to the Stock held under this Agreement. The
Preferred Joint Venturers further acknowledge that the Warrants are the
individual property of the Managing Joint Venturer and are not subject to this
Agreement.
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<PAGE> 10
21. Consent to Power of Attorney, Joint Securities Filings. The
Joint Venturers hereby grant a power of attorney to the Managing Joint Venturer
to make any necessary filings with the Securities and Exchange Commission and
hereby consent to the filing of a joint Schedule 13-D under the Securities
Exchange Act of 1934.
22. Intent of Parties. The parties hereto signify and declare that
it is not their intention by the terms of this Agreement to engage in the
conduct or operation of any business. This Agreement shall be limited to the
holding, distribution of dividends and voting of the Stock and final
distribution specifically described in and covered hereby. This Agreement is
intended as a statement of a joint venture between the parties, the sole
purpose and intent of which joint venture is the holding, distribution of
dividends and voting of the Stock specifically described herein. Neither the
Joint Venturers nor the Managing Joint Venturer have the authority to enter
into binding obligations or create any liability not consistent with this
Agreement.
23. No Partition. Each party hereto waives any right statutory or
otherwise, to partition the Stock covered by this Agreement, and severally
agrees that the same may not be partitioned either in kind or by sale and
division of the proceeds thereof save with and by the express agreement of all
Joint Venturers.
24. Miscellaneous Provisions.
(a) This Agreement shall be subject to and governed by the laws of
the State of Texas.
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(b) Whenever the context requires, the gender of all words used
herein shall include the masculine, feminine and neuter, and the number of all
words shall include the singular and plural.
(c) This Agreement shall be binding upon the Managing Joint Venturer,
the Joint Venturers, and their respective heirs, executors, administrators,
legal representatives, successors and assigns.
(d) All notices, demands, consents and reports provided for in this
Agreement shall be in writing and shall be given to the parties at the
addresses or telecopy number set forth on the signature page of this Agreement
or at such other addresses or telecopy number as a Joint Venturer may hereafter
specify in writing. Such notices may be delivered by hand (which shall
include, but not be limited to, notices by telex, telegram or telecopy) or may
be mailed, postage prepaid, by certified or registered mail, by a deposit in a
depository for the receipt of mail regularly maintained by the United States
Postal Service or by the use of Federal Express or a similar service. All
notices which are hand delivered in the manner provided above shall be deemed
given on the date of delivery. All notices which are mailed or sent in the
manner provided above shall be deemed received on the date shown on the return
receipt.
25. Separability. If a court of competent jurisdiction shall
adjudge to be invalid any clause, sentence, subparagraph, paragraph or section
of this Agreement, such judgment or decree shall not affect, impair, invalidate
or nullify the remainder of this
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<PAGE> 12
Agreement, but the effect thereof shall be confined to the clause, sentence,
subparagraph, paragraph or section so adjudged to be invalid.
26. Assignment. No Joint Venturer may assign or transfer his or its
rights or interest under this Joint Venture Agreement without the prior written
consent of the Managing Joint Venturer. Any attempt to accomplish such an
assignment or transfer, without the written consent of the Managing Joint
Venturer, shall be void.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
multiple counterparts, each of which shall be deemed an original, as of the
date and year first above written.
Preferred Joint Initial
Venturer Contributions
- --------------- -------------
- ----------------------------- -------------
[Name]
Address:
---------------------
- -----------------------------
- -----------------------------
Telephone Number:
------------
Facsimile Number:
------------
Tax I.D. Number or
Social Security No.
-------
Managing Joint Venturer Joint Venture Interest
- ----------------------- ----------------------
HACL, LTD.
by: Six-Dawaco, Inc., general partner
50%
- ----------------------------
Name:
-----------------------
Title:
----------------------
8080 No. Central Expressway,
16th Floor
Dallas, TX 75206
Telephone: (214) 891-7000
Facsimile: (214) 891-7030
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